Hotel Budget Planning: Budget Allocation Recommendations, The Truth About ROI and Your Annual Hotel Budget Template

Vizergy’s Guide to Resort and Hotel Budget Planning Season. – Avoid the headache and optimize your digital marketing budget this year. Your Hotel Budget Template Included

Part Three – In this part of the series, we delve into important topics and online channels on which you should focus your budget in 2018 to set your property up for further success in the future.   Additionally, we provide budget allocation recommendations for important marketing channels, give some guidance around calculating ROI and give you a Hotel Budget Template for laying out your digital marketing budget for the year ahead. 

Download the Budget Template Now! 

Recap from part 1 & part 2 – In the first part of this Guide Resort and Hotel Budget Planning Season series, we helped you familiarize yourself with the current state of digital marketing and trends looking forward to 2018. 

Parts 1 and 2 of this series set us up to discuss two crucial items that are a constant debate amongst hoteliers, especially when developing digital marketing budgets – allocating budget dollars and measuring ROI.  Specifically, what percentage of your total digital marketing budget should be devoted to each channel, and what total return on investment (ROI) you should expect from your efforts.

These recommended percentages are not one size fits all properties.  They are based on Vizergy research, proprietary data, third-party research, and various industry projections.

While it’s impossible to speak directly to any one property budget, the ranges we provide should be thought of as general rules of thumb.  Recommendations will vary depending on your property’s size, seasonality, business mix, demand generators, stay patterns, occupancy, etc.

hotel budget planning Budget Season Is Here, Remain Calm

It is very important that you take the time for thorough introspection, an honest review of what has been working for your property and what has not been working.  Have open conversations with your property owners, management, sales staff, other colleagues, your guests and even your comp set.

Your due diligence will help you lay a real, honest foundation on which to build your 2018 budget.

As tempting as it might seem, do not simply rely on your gut.  Hard, measurable data, honest reviews, unbiased research, professional industry projections and proven results of your marketing efforts from the previous year should provide the solid foundation you need to build on your successes in the coming year.

Expand on Your Successes

What worked in 2017?  What fell flat?  What could you do better to drive more successful marketing in 2018?

Before planning your budget for 2018, take a step back and look at your performance in 2017, reflect on your most successful initiatives and build on that.  What channels and tactics produced the most ROI?

Ignore temptation to drop things that have worked in the past for new and innovative tactics.  Though it is important to stay current with marketing trends and optimize your marketing spend in the highest performing channels, don’t abandon your bread and butter.  Focus your efforts on the “cash cows” of your marketing toolkit, those that drive the most conversions and ultimately the most revenue.

Focus on Quality, Not Quantity

Keep it simple.  Complicated budgets don’t often create profits.  Creating a budget that is difficult to manage will leave you weighed down and frustrated throughout the year.

Instead of basing your budget on a wide variety of disjointed marketing strategies, build your budget on a handful of quality initiatives that create a steady flow of revenue to your business.

Keeping your budget simple, will allow you to remain flexible in your marketing strategies and allow you to make easy adjustments throughout the year to optimize for the most success.

Percentage Allocations

Now let’s get right to it.  Below is a chart with primary digital infrastructure, channels and initiatives, including the six that we highlighted in part two of this series, along with our recommended percentage allocations (of total digital marketing budget):

 

Digital Infrastructure, Channels, & Initiatives
Budget Allocation
Capital Investments, Consulting & Operations
 
Account Management Strategy, Consulting & Project Management 6-10%
Website Design, Development & Ongoing Optimization (hosting, design, copy, video, photography, user experience, reservation abandonment recapture) 8-20%
Web Analytics, Campaign Tracking & Call Tracking (Vizergy Digital Marketing System) 4-6%
SSL Certificate/Website Security (setup, configuration, ongoing maintenance) 1-2%
Core Digital Marketing Channels & Campaigns
Search Engine Optimization (analysis, setup, ongoing management, keyword research/targeting, copywriting, meta data, link building) 8-10%
Local Search (setup & optimization – Google My Business Listings, Bing Local, etc.) 2-4%
Pay-Per-Click Advertising (Google & Bing Setup, management, ongoing optimization & ad spend) 20-30%
Display Retargeting/Remarketing (setup, management, ongoing optimization & ad spend) 10-12%
Social Media (setup, design modifications, posting, ongoing engagement) 10-12%
Email Marketing & eCRM (setup, management and optimization of design, creative, copy & distribution) 4-6%
Paid Links (Convention & Visitors Bureaus, Destination Marketing Organizations, local hotel directories) 2-4%
Need Period Marketing Campaigns & Initiatives
Limited Time Offers (Private Sales) with promotion codes via email, onsite messaging, PPC, Display, Social (based on seasonality & booking pace) 4-6%
Note: “Percentage Allocation” is the percentage of total annual digital marketing budget.

 

To show why this is not one size fits all properties, consider the following example.  A 10-room bed and breakfast with a consequently small digital marketing budget may have to spend more than 20% of their budget for a new responsive website.

On the other hand, a large destination resort with a budget to match may spend much less than 10-20% of their digital marketing budget on website design and development.

In contrast, if your property has a recently designed website (less than two years), you likely don’t need to immediately invest in a new website.

Other Items to Consider in Your Budget Planning

These items weren’t detailed in parts one and two, and we’d be remiss if we skip over them now, so here you go:

Pay special attention to Need Period and Seasonal Marketing Campaigns.

All hotels and resorts have slow, off season times – or need periods – that cover different time frames, from 1-2 days a week to 2-3 months a year.  There are ways to counter these sluggish times though with intelligent and creative marketing campaigns with promotional codes.

For example, limited time offers and private sales with promotional rates and/or packages (capitalizing on local events and attractions) delivered via email marketing, social media, search marketing and onsite messaging can shift demand and generate incremental revenue.

Photographer with professional photo camera and backpack on the top of the mountain on the beautiful sunset.

Don’t overlook professional photography and videos.

Photography can make or break an entire website design (let alone the visitor experience), especially since supersized header imagery is now a best practice.

Imagery is directly where visitors’ eyes migrate upon landing on your site.  A vacant lobby photo taken with your smartphone vs. a busy lobby photo taken by a professional photographer in the right resolution will make a far better impression.

The first step is investing in a professional photo shoot with a thoughtful shot list highlighting your property’s key attributes and amenities that are most compelling to your target audience.

Once you have these quality digital assets in a dedicated folder, it’s easier to update your website and marketing campaigns to maximize engagement.

The Truth about ROI and What You Should Expect

There are deceiving ways to calculate ROI by manipulating the costs of and/or inaccurately attributing revenue to certain campaigns or efforts, so be careful when calculating your ROI or verifying ROI numbers that are presented to you.

The bottom line is this – 10:1 should be a minimum overall goal.  This means $10 in revenue is gained from every $1 spent.  Now 20:1, 40:1 and even higher can happen in certain business situations, but 10:1 is a good starting point.

So next time you read some outrageous ROI claim, think twice.  If you’re performance data shows that you’re consistently underachieving (less than 10:1), it may be time for different resources and strategies altogether.

ROI can also be expressed as a percentage, which looks better.  Check out this example:

Revenue = $110,000

Total Cost (capital, operational, strategy, etc.) = $10,000

ROI Calculation: $110,000 – $10,000/$10,000 = 10:1 ROI

To express a 10:1 ROI as a percentage, you simply multiply by 100 to make it 1,000%.  So, when companies say “2,782% ROI,” it could also be expressed as “28:1 ROI.”

Like we mentioned earlier, a 10:1 ROI should be your minimum initial goal.  Gradually increasing 10:1 to 12:1 to 15:1, and so and so forth, is reasonable.

As far as return on ad spend (ROAS) goes, remember that ROAS by definition, unlike ROI, does not include total cost (capital, operational, strategy, etc.).  It only includes your actual ad spend.  This means that ROAS will generally be even higher when expressed as a percentage.  For example, $35,000 revenue/$1,000 ad spend = 35:1 or 3,500% ROAS.

Last but not least… The Template

Hotel Budget TemplateFrom part 1 and part 2, to the percentage allocations, we’ve provided you almost everything we planned.  But perhaps the most important and useful takeaway from this series – your budgeting template – is all that remains.

The following template is fully editable, with formulas that sum the columns and rows as you manipulate them.

Like already mentioned, we plugged in some sample costs (that stay true to our percentage allocations), which may or may not be close to your hotel’s or resort’s budget.

You may also have unique costs associated with certain tools that we don’t include, but the template should be an excellent starting point for you to break down your monthly costs and form a well-organized and revenue driven digital marketing budget.

Click here to get your 2018 digital marketing budget template! 

Thank you for reading our Guide to Resort and Hotel Budget Planning Season series and good luck in 2018!  For continued education and resources on the latest in hotel Internet marketing, please visit our blog.  To contact our team about your property’s 2018 digital marketing, click here.

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