While 2022 seems to be going very well for most hotels, we can say that many were wrong (including us!) about how the post-covid recovery would play out. The financial pragmatism that followed the crisis resulted in an overly conservative perspective that allowed OTAs to capture more market share. The Direct/Indirect ratios have therefore returned to historically high levels, while the increase in revenue generated via direct channels has indeed increased sharply. Commissions have simply evolved faster!
In the end, the hotels that stayed open and were not afraid to invest significantly in this flourishing market were the ones that succeeded.
It is hard to know what 2023 will look like, especially since:
- The global outlook remains uncertain: Economic crisis, war in Ukraine, energy problems.
- Inflation implies an increase in expenses and a potential drop in profitability.
- An increase in average hotel prices is expected in 2023 with stagnating occupancy rates.
While it is challenging to prepare your marketing & digital budget due to the factors above, we have some tips that should help.
CAPEX is back!
As the outlook remains very favorable in the short term, it is again time to think about investing in the long term. Therefore, CAPEX expenditure will be on the rise in the first half of 2023 (or even as soon as the last quarter of 2022). Website redesigns, new CRM tools, implementation of loyalty programs... The start of the year is likely to be busy.
Really think about your brand
Hotels will once again insist that their positioning and differentiation justifies average price increases. Budgets that support identity, story, and content are likely to increase. If you need help with branding, please feel free to reach out!
Control your fixed costs
Fixed costs must represent a small part of your marketing & digital expenses. You probably recruited staff in 2022, and that's a good thing, but be careful not to overcommit. At the same time, you have to play even more with your variable costs: You can adapt them to seasonality at least, ideally to demand, but also to current events, as you already do for your rates. Do not be afraid of exceeding the planned budget if the context allows it. And if this is not possible, at least negotiate the flexibility to increase budgets during the year based on performance criteria.
Break out of the Yield/Marketing silo
Ensure that marketing is a reflection of your pricing distribution strategies, and that yield is infused with marketing knowledge. This joint process can really help stimulate demand. 2023 is therefore a good time to prepare tactical campaigns to cover the needs of your hotels in anticipation.
Move away from the shortsightedness of ROAS
The increase in the average price should indirectly increase the cost of acquisition. It is therefore necessary to provide higher budgets than in previous years to obtain a similar number of customers. As a result, it is not recommended to invest only in your brand on Google Ads – you will lose market share. Instead, prioritize all the actions which are in the middle of the conversion funnel and which are not already over-funded.
If your average price increases and so does the acquisition cost, you should not be negatively impacted on the ROAS of your campaigns. Instead, choose to analyze them with another metric, such as Cost Per Booking, which is more relevant to your analyses and a better comparison with the previous years.
Pick your battle: New customers or new employees?
If you anticipate recruitment problems (like in 2022) that will risk impacting your operations (or even your ability to welcome more customers), prioritize hiring. Secure budgets to acquire new candidates and use digital channels to help you do so. This will be an opportunity to get your HR and marketing departments to act more effectively together. The acquisition cost for a new employee is certainly higher than for a customer, but you do not need to do hire every year.
Surround yourself with talent
Efficiency will remain a common theme in the budgets of the next two years. Choose partners who can bring you real added value and make sure they are being utilized effectively. The annuity and forced commitment models are outdated; it’s time to move on to Membership.
The elements above are a first step in helping you build your marketing and digital budgets for 2023. If you want to level up with the establishment of a Digital Forecast which, in addition to helping validate of your budgets, can give you a framework of objectives to be achieved for the coming year, please reach out!