What is the story about?
What's Happening?
The hospitality industry is currently engaged in a debate over the appropriate level of marketing investment, as highlighted in a recent Hospitality Net Viewpoint. Max Starkov has pointed out a significant disparity in marketing expenditures between U.S. hotels and Online Travel Agencies (OTAs). While U.S. hotels typically allocate less than 2.5% of room revenue to marketing, OTAs like Expedia spend billions, with Expedia alone dedicating 54% of its 2024 revenue, amounting to $6.9 billion, to marketing efforts. This discrepancy has sparked discussions among industry experts about the need for hotels to increase their marketing budgets to remain competitive. Suggestions include allocating 4-6% of total revenue to marketing, excluding payroll, and investing in enabling technologies such as CRM and online reputation management.
Why It's Important?
The debate over marketing spend is crucial for the hospitality industry as it faces increasing competition from OTAs, which have significantly larger marketing budgets. This underinvestment in marketing by hotels is seen as a threat to their direct booking channels, potentially leading to a loss of market share to OTAs. By increasing marketing budgets and investing in technology, hotels can enhance their direct booking capabilities and reduce reliance on OTAs. This shift could lead to improved profitability and customer engagement, as well as a stronger brand presence in the market. The discussion also highlights the need for hotels to redefine what constitutes marketing and to focus on smarter, outcome-driven spending.
What's Next?
Industry experts suggest that hotels should focus on channels where OTAs cannot compete, such as social media, influencers, and partnerships. There is also a call for hotels to align their marketing spend with corporate goals and market conditions, taking advantage of opportunities arising from renovations or management changes. The emphasis is on creativity and context, with a need for hotels to invest in direct relationship-building and PR. As the budgeting season approaches, hotels may need to reassess their marketing strategies and consider increasing their budgets to remain competitive.
Beyond the Headlines
The ongoing debate underscores the importance of redefining marketing within the hospitality industry. There is a need for clarity on what falls under marketing, as technology platforms should not be considered marketing investments in themselves. The focus should be on the programs executed on these platforms. Additionally, the industry must embrace AI-driven engagement and data-driven strategies to maximize the impact of marketing spend. This shift towards smarter spending could lead to long-term benefits for hotels, including increased guest engagement and improved revenue metrics.
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