The pandemic has changed the dynamics of hotel marketing, sales, distribution, franchising, SEO tactics and social media. And how productive are these historical channels in an age where hotels may not see any signs of recovery comparable to pre-COVID-19 levels anytime soon? Recently ALHA reported that 21 out of 25 hotel markets are either in a depression or a recession. Urban hotels rely on business travel, corporate meetings, conventions and trade shows, and recovery in these market segments is not expected until the latter part of 2023 and 2024. Luxury Hotel Advisors has been watching these trends and sees a change on the horizon!

Recovery in Waves

The order of recovery will be domestic leisure, initially, and regional drive markets. This will be followed by national air markets, domestic corporate travel and domestic meetings, and events within the international market being last to recover.
Historically sales and marketing has been the sacred cow of hotel expenses. It is an area few hoteliers want to cut expenses.

In fact, more often the tendency is to increase these costs to maintain or improve market share. But now is the time to dissect all marketing and distribution costs and to develop a fresh sales and marketing approach to reach consumers directly. The focus must be on ROI, and hotel marketing and sales teams need to have clear goals, strategies, tactics and execution. Too often the sales and marketing staff are managing many tasks but have no idea how these activities tie back to the goals of the property and, ultimately, drive revenue.

If hoteliers cannot measure marketing and sales performance, how can they possibly know if they have succeeded?

Cost to Develop Group Business

With six to twelve months’ lead time and no sign of recovery in the group markets until 2023, can a hotel with 200 rooms really justify three corporate and group sales managers, a catering manager and a director of marketing? Payroll costs alone could be $700,000 to $800,000 per year.

How much of the sales team’s efforts are dedicated to developing group business versus servicing requests from CVent, HelmsBriscoe, Conference Direct, ALHI and others – maybe 20%, 40% or 60%? Can a sales coordinator be just as effective in booking and servicing that business? Isn’t it time for a reality check?

Most meeting managers prefer to work directly with third-party planners and travel agents in selecting a meeting site. It saves them time and multiple calls from the comp set. In this scenario, the hotel will have to compensate the group planner 5% and the travel agent another 10% of room sales.

A recent audit of a hotel that hosts 80 meetings per year found as many as 60% of group bookings were generated by a third party or a booking agent and not directly through the on-property sales team.

This is not to imply an onsite sales team should be eliminated, but it is important to zero in and determine the value each sales executive brings to the bottom line and at what cost. How much time is their daily routine invested in business development versus hotel servicing?

An ROI analysis must be applied to each direct sales effort within the context of the overall hotel marketing and sales plan. This makes the case for a strong mentor/leader to direct the sales effort and to develop junior team members with potential for future growth.

Hotel Maketing & Revenue Management

How many specialists are really needed to manage revenue management initiatives? A property with an on-property revenue manager, regional franchise revenue manager, general manager and director of sales may find their ADR is not any better than comparable properties with fewer personnel. How many people does a hotel really need to optimize ADR, and who is contributing?

Now is the time to apply a holistic approach to revenue management – not simply setting prices, but understanding segments, lead times, cancellation trends, demand and distribution costs to produce optimal GOP. The strategy component is important so as to not simply follow the lead property in the market and undercut it by $10.

Digital Marketing, Social Media, Search Engine Marketing & Content Marketing

As one of the primary methods for increasing awareness and securing bookings, all elements of digital marketing should be thoroughly investigated – starting with the property website. And, it is not just website content. It is also the structure, design, navigation and performance that engages website visitors.

Focus on sales conversions and upselling legitimately higher value experiences. It is important to understand not every visitor is ready to buy. A conversion could be a sign up for a newsletter, entry into a contest or interest in a program that engages the local community.

Reinforce product differentiation on the website with current visuals that promote local and regional experiences, activities and experiential hospitality versus the boring bedroom and lobby photography that is the norm of the industry. Use photography to communicate the experience and set expectations – not a series of dramatically lit architectural shots of empty spaces.

The website must also integrate seamlessly with the booking engine. Many hotels create a jarring transition where the booking engine provides a generic vanilla experience – destroying the carefully nurtured relationship that created the desire to book in the first place.

There must be a strong alignment between digital marketing, revenue management and social media. The best way to waste money and resources is to have those three teams siloed and working at cross purposes.

Measure the Results and Make Sure Agencies Live Up to Their Promisees

The industry has been exploited with agencies that claim they have social media and SEO capabilities that will drive bookings, but tracking is rarely satisfactory. There is an enormous opportunity to overpay for these services, but if properly structured, they can all have costs, engagements and booking productivity tracked.

Social media campaign expenditures supposedly trigger guest responses, but hotels are so bombarded with messaging that such strategies are no longer effective unless there is a unique value proposition. Messaging must stand out and offer news on a signature restaurant opening, take-out service, a new lobby bar or offer various experience packages that include outdoor activities such as hiking, sailing or architectural tours.

The question is often asked, “For a 200-room property, is it necessary to spend $40,000 to $50,000 per month for SEO initiatives, social media campaigns, content marketing and public relations counsel that have little to no effect on occupancy, especially in these market conditions. Where is the ROI?”

The Group Market is Under Tremendous Pressure

Zoom and similar applications have provided excellent options for in person meetings of all sizes. It is anticipated these types of meetings will continue for years to come, and internal corporate meetings may be impacted indefinitely. Experts in the field are not forecasting a recovery until late 2023 and 2024.

To be responsible, managers need to be highly selective in determining which trade shows and travel are essential and productive versus out of habit. Trips and trade shows should be targeted and purposeful – the prospecting, drop-in and nebulous “regular” quarterly trips should be replaced by more efficient video or phone contact.

The mentality needs to be “must have” as opposed to “nice to have” trips. Again, if success can’t be measured, why spend the money to attend a show?

A robust rebound in this sector is not expected anytime soon, with a booking lead time of six to 12 months. Group sales expenses is an area where costs can be very substantial with few metrics to measure effectiveness and ROI. Very close scrutiny of these costs is essential.

International Travel May Take Years to Recover

International leisure and business travel is expected to take at least two years to recover. Airlines and major brands are now projecting a long recovery period. OTAs are not going to drive the international travel segment as consumers will opt to fly less frequently and instead visit/drive to destination resorts and focus on outdoor activities for recreation and experiential holidays.

Focus instead on an interim marketing plan that will drive occupancy in the local and regional drive markets by creating experience value packages with outdoor activities directed at the leisure market.

In Conclusion

Don’t treat hotel marketing expenses as sacred and don’t count on the past as a plan for the future. Now is the time to rethink the sales and marketing budget, strategy and tracking mechanisms. Work with marketing and sales teams to ensure strategic alignment across all marketing disciplines and implement measurements for costs and results.

Focus on working smartly and efficiently. Develop key staff to lead high performance roles while delegating tactical work to junior staff to develop core skills and enhance bench strength.

Visit the LHA library for more articles on hotel acquisition and ownership.

About the Author

Prior to becoming a Managing Principal for Luxury Hotel Advisors, Inc, Carlos served as Vice President & Managing Director of Hotel Bel-Air and the Palace in New York as well as EVP and COO of Olympus Hospitality responsible for directing hotel operations, marketing, and branding strategies for eight Rock Resort properties.

Carlos co-founded Unique Hotels and the Bel-Air Hotel Company. Over a period of five years with partner Eric Prevette, he successfully repositioned and managed over 50 luxury hotels and assisted in the sale of properties valued in excess of $500 million.

Previous to that, he served as Senior Vice President at Rosewood Hotels and responsibilities included operations, branding, centralizing marketing, and distribution initiatives. He also served as Sr. Vice President of Marketing of Four Seasons Hotels during their primary expansion which included new hotels in Washington, San Francisco, Vancouver, Newport Beach and New York.

Recently, Carlos redeveloped the new iconic Hotel Californian, one of the newest luxury lifestyle hotels on the west coast.