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5 best practices for budget season
August 29 2013

Hoteliers should follow these simple steps to help them navigate budget season, TravelClick’s John Hach said Wednesday during a webinar. 

Highlights
  • Localization can help hoteliers tap ancillary revenue.
  • Not all distribution channels are created equal.
  • The best budgets also tend to be the most flexible.

NEW YORK—As budget season approaches, hoteliers could benefit from a little introspection, according to John Hach, senior VP of global product management at TravelClick during the company’s recent webinar titled “Global hotel trends.” It starts with asking the right questions.

For instance, “Do you think about marketing purely as an expense?” he asked on Wednesday during a webinar on global hotel trends in the hotel industry. If marketing dollars are used in a channel that generates high average daily rates, hoteliers should factor those expenses into the distribution cost instead.

Another key question: “Do you treat mobile like any other channel?” Hoteliers shouldn’t, Hach argued. The smaller screen sizes and touch-screen capability on most smartphones requires special configuration. “It’s not something that can be overlooked,” he said.

Equally important: “Do you approach social media as a silo?”

“The key takeaway is think of this holistically and realize that any type of strong recommendation helps you with your reputation management and your online presence,” Hach said.

But asking questions isn’t always enough. To put themselves in the best shape for budget season, hoteliers also should follow the following five best practices, he said.

1. Look ahead
Forward-looking data allows hoteliers to more accurately budget for the future. “Don’t rely on last year’s numbers,” Hach said.

2. Go local
Leveraging local geo trends is a great way to unlock ancillary revenue, he said. Hoteliers can target locals to merchandize on-property offerings like spas and restaurants.

Hoteliers should also keep the local market in mind to avoid creating subjective competitive sets, Hach added. A hotel with a lot of suites in its inventory can and will compete with an all-suites product down the block, for instance.

3. Optimize distribution
“Optimize business mix on high net-ADR channels. Status quo channel mix is not a path to success,” Hach said.

Online travel agencies saw significant growth in volume during the second quarter, but the channel is not the most profitable. Hoteliers would be better off pushing more traffic through brand.com and the oft-forgotten global distribution systems. When planning budgets for 2014, the latter is especially important to consider, Hach said.

“People will say, ‘I don’t need to put any money into the GDS. It went away with the Internet,’” he said. “Not so.”

The GDS channel set a record during 2012 with 56 million bookings. “It looks like 2013 is actually going to be over the 56-million (level) and actually grow arguably by maybe a million incremental bookings,” Hach added.

It’s also relevant in every market around the world. More than 19 million bookings were made in the U.S. through the GDS channel during the second quarter, according to TravelClick data. In Europe the number was 7.1 million, followed by 3.4 million in the Asia/Pacific region, 1.8 million in Latin America, 1.2 million in Canada and 500,000 in Africa.

4. Invest in awareness media
Marketers often obsess over last-click attribution. “We think that’s a bad idea,” Hach said.

The decision-making process for hotel bookings is much more complex.

TravelClick’s data has shown that marketers are better spent investing in “awareness media”—the type of content and advertising that keeps brands top of mind with consumers. Ads that focus exclusively on a call to action (e.g., “Book now!”) can be effective, but a consumer is more likely to be swayed as they first contemplate and then research their stay.

5. Stay flexible
Even the best budgets can’t predict sudden shifts and changes in dynamic in the broader hotel industry. That’s why hoteliers must exhibit some flexibility, Hach said.

The most successful operators create detailed annual budgets and then meet to review it often as the year progresses, he said.  If opportunities arise or certain business types become less profitable, funds can be reallocated as needed.

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