It's Budget Time! So, What's Coming Up for Marketing Next Year?

October 18, 2021

Each year it seems budgets are different than the last– and that’s if there’s even time to plan a budget. 


Operational issues often take precedence over taking a step back and making decisions. However, if hotels take the time to properly plan their budget, they’d likely save money. 


This is especially true in recent years, when priorities (and the associated budgets) have changed, while the objectives for digital marketing have remained the same: translating the sales strategy into a marketing and digital strategy, content creation, website optimization, social network management, acquisition (SEO, advertising campaigns, etc.), conversion funnel optimization, e-reputation, loyalty actions (CRM/Email), etc.



How do I establish my marketing budget?


First of all, make sure that your budget is aligned with your strategy (you’ve already defined that, right?), and your strategy involves long-term decisions. So it’s best to focus your resources on achieving this strategy’s objectives. For example, if budget lines from past years do not correspond to any of your strategic orientations for the following year, it makes no sense to keep them. You will easily save several thousands with this one step. 


Secondly, remember to define your budgets according to the objectives and results expected in 2022, and not on the historical data of your hotel. On the one hand, some data is not comparable to today's, and on the other hand, you probably did not stick to the defined budgets for recent years, either. Rest assured, this is the case for everyone! 


Assume that you can allocate between 3% and 7% of your estimated revenue to your marketing and digital budget, including your human resources and contractors. 


If you need to rationalize expenses, consider the added value created and the impact on the business. Often there is a significant difference between the value proposition and the actual value added. Also, take the time to dust off old contracts, their terms and conditions and their effectiveness. 


It is entirely possible to do many things without a budget, but still be sure to plan a budget that accounts for the real cost of these actions: the possible time or materials cost such as free nights for an influencer. This will help you both to define the real value in comparison to other channels and monitor performance. 


Finally, although the recovery seems to be underway, budgets have become less accurate due to the volatility of the market. Use this budget process as a guideline to support your strategic priorities, not as a template to be followed to the letter. Flexibility has become a necessity. 



What should I prioritize in my marketing budget?


First of all, make a distinction between your OpEx and CapEx expenses. If you have decided to redesign your website or to deploy a mini-loyalty program (investment expense), you will be able to amortize the cost over at least two years. It is therefore an expense to consider in relation to the overall amount of your marketing budget.

On the other hand, if you want to maximize your operational expenses to keep flexibility (and cash flow), insist on high impact actions in the short term and postpone your investment expenses to the following year.


Then, if your budgets are limited (for cash flow reasons or simple cost control), focus on actions that are low in the conversion funnel, i.e. those for which the acquisition cost will be lower. In many cases, it is better to target someone who already has a need or already knows you, rather than a complete stranger, even in one of your target markets.


A mistake we often see is underestimating the investment required for content creation (photos, videos and texts). Your hotel, restaurant, or spa may not have changed, but the clientele has changed, as have their needs and the way they use your spaces. It is essential to represent these new expectations or experiences in all formats by regularly renewing your content. Content is still king.


For seasonal hotels or hotels with high seasonality, take these variations into account to anticipate the dates of highest demand and position your budgets when they have the most potential to generate value. Even if the booking window has changed, the searching window has not: speak up when the audience is most likely to listen.



How do I estimate my advertising budgets for the coming year?


First of all, think about defining the financial objectives you want to reach for each of your products (accommodation, restaurant, bar, spa, seminars). Then, consider their real impact on your business to define the main budget lines. For example, if your restaurant generates 50% of your revenues, logic would dictate that your investments in the restaurant business should be 50% (even if the acquisition cost is lower). But if 80% of your restaurant revenue comes from lodging customers, then allocate a portion of that amount to lodging. 


Next, take into account the varying cost of the targeted audiences and markets, the seasonality and the share of the turnover you have for each product. It is generally defined that a reasonable proportion of advertising investment is between 2 and 3% of the direct sales for each product.


Once these amounts have been defined, you need to think about the amount to be allocated to each level of the conversion funnel. If you wish to prioritize the acquisition of new, qualified traffic to your website, plan a more important budget for the related channels. On the other hand, if you are in a more ROI-oriented mode, put a large part of your budget towards conversion or loyalty actions. However, be careful: you should never allocate 100% of your investments to the bottom of the conversion funnel, as you risk quickly exhausting your prospect pipeline. 


In the case of an aggressive external distribution strategy, investment amounts must still be planned, either to capitalize on loyalty actions or to invest directly in acquisition on the distributors. But first calculate if it makes sense from a profitability point of view. 



How can I optimize the cost of my internal and external resources? Should I plan new hires?


The most important thing is that you are able to have the entire value chain at your disposal. Having the resources internally or externally was a real issue before the pandemic. Today you simply need to seize all opportunities at the best price, regardless of the model.

 

If you're lucky enough to have a senior resource in-house, work with external providers to develop operational actions. If you only have juniors in-house, try to minimize the risks of lack of experience by using strategic coaching and encourage a rapid development of skills. 

Finally, if you don't have an in-house team (for budgetary or organizational reasons), ask yourself which link in the digital value chain is most strategic to internalize.


If you are asking yourself these questions, we can help you answer them: www.influence-society.com/membership



Other things to consider?


If you have a hotel opening, you need to look at things from a radically different angle. First of all, because your digital value chain is almost non-existent, but also because we know that the fundamentals (positioning, time-to-market, product quality, projection and reassurance...) will be much more crucial than any budget line.


In the case of a group of hotels, you have a fantastic opportunity: that of pooling costs, resources and performance. The group logic should lead you to allocate part of the marketing budgets to each of your hotels, but another significant part to multi-hotel actions. And this should be the case regardless of the management model: full ownership, management contract, or franchise.


In conclusion


Whether you like the exercise or not, no matter how much effort you put into creating your budgets, the essential point is to monitor them, at least on a monthly basis. 


You'd be surprised how effective marketing and digital controlling can be! 


Camille Broussin
Head of Strategy @influencesociety