From Agency to Hospitality: Bridging the Gap Between Search and Revenue Strategies

Recently, I had an enlightening conversation with a former client servicing professional from an ad agency who is transitioning into hotels. With bright eyes and a busy tail, he confidently said, "It's pretty much the same as what I was doing earlier." While at a high level, the skills and strategies from the ad world do translate into the hotel industry, there are nuances. My point has always been that these two functions—search pricing and distribution—need to be in direct control of the commercial department, with heavy leverage from the revenue manager. Happy to discuss further, as I've spent at least 12 months working on the agency side.

Revenue Management: The Strategic Levers

In the hospitality industry, revenue management revolves around three strategic levers:

1. Duration: This involves differentiating customers based on length of stay. A deep understanding of consumer behavior (Arrival lists & reservation reports!! ) and to some degree segments and their preferences can significantly enhance the duration of stays, thereby maximizing revenue.
2. Price: Essentially, if the average daily rate is equal to or higher than that of comp set, the hotel will achieve a higher Revenue Per Available Room compared to always /consistently having a lower ADR. Question is can product and reputation and product support it? So a revenue manager is always moving between Internal pricing Vs External pricing!.
3. Distribution & Reach: The other part to this is how a brand attracts, interacts, and transacts with its customers. Here, the expertise from the ad agency world, particularly in digital marketing, can be incredibly valuable. The other side of this is the complexity of distribution. It evolves with technology, but the real challenge arises when this technological paradigm operates in a distributed manner. Sales and marketing must coordinate to ensure the right distribution channels and technology reach the critical micro-segments. No central authority can achieve this independently without inputs from the Revenue management and Sales. In this context, technology and innovative distribution, viewed through this lens, offer massive benefits. However, it requires C-level intervention and direct engagement with dashboards (no PowerPoints, please!) to achieve a large-scale understanding and foster cooperation.

Leveraging Search Engine Marketing

Search Engine Marketing is a critical component and its industry agnostic, yet its application in hospitality requires a nuanced approach:

• SEO Strategies: Just like in advertising, SEO in the hotel industry focuses on improving visibility. However, the content must be tailored to attract potential guests, emphasizing unique selling points such as location, amenities, and customer reviews. Technical SEO varies as well - for example the use of Schema.org, or the focus on Local SEO Drive map link insertions, and more, much more.
• PPC Advertising: While ad agencies often use PPC to drive traffic to various clients, hotels use PPC to attract direct bookings. Effective keyword selection, competitive bidding, and compelling ad copy are vital to standing out in a crowded marketplace. Hotels are particularly well poised to leverage smart bidding, given their strong focus on e-commerce. Increase your e-commerce volume by using smart bidding with a focus on ROAS (Return on Ad Spend). Agency professionals often prefer CPC (Cost Per Click) metrics, largely because they don't have access to booking engines. However, if you are using automated bidding strategies, focus on ROAS, not CPC.

Understanding Other channels and their consumer behaviors

Both channels, their focused segments, and consumer behavior in the hospitality industry are multifaceted. The journey from search to booking involves multiple touchpoints, and it varies significantly among different consumer segments.

• Online Travel Agencies (OTAs): OTAs play a dual role in product discovery and transaction facilitation. look at OTAs for your TOFU, top of the funel. and benefit LTV from the "billboard effect," dont forget Billboard effect drives direct bookings as well.
• Meta and Social Sites: Platforms that aggregate prices (meta sites) and customer reviews (social sites) significantly influence booking decisions. Kayak, Google Hotel Finder, TripAdvisor, Trivago, and Skyscanner. Other notable meta sites are HotelsCombined, Momondo, and Wego

The Role of Google Hotel Ads and Google Local Ads

Google Hotel Ads and Google Local Ads are powerful tools in the hospitality marketing arsenal:

• Google Hotel Ads: These ads appear in Google Search, Maps, and Google Hotel Search, providing potential guests with real-time availability, pricing, and booking options directly within the Google interface. By participating in Google Hotel Ads, hotels can increase their visibility and drive more direct bookings, bypassing higher commission fees from OTAs.
• Google Local Ads: These ads help hotels reach potential guests who are searching for accommodations in a specific area. By leveraging Google Local Ads, hotels can target nearby travelers who are more likely to book last-minute stays, filling rooms that might otherwise remain vacant.

Commercial strategy / Leveraging CTR Stream Data Volumes & Smart Bidding

Revenue managers can greatly benefit from the data and tools provided by Google Ads:

• CTR Stream Data Volumes: Click-through rate (CTR) data provides insights into how well ads are performing and engaging potential guests. By analyzing CTR stream data, revenue managers can identify high-performing keywords, optimize ad copy, and adjust bidding strategies to maximize ROI.
• Smart Bidding: This automated bidding strategy uses machine learning to optimize bids for each auction. Revenue managers can leverage smart bidding to set performance goals, such as maximizing conversions or achieving a target return on ad spend (ROAS). By using real-time data, smart bidding ensures that hotels bid the right amount for each click, improving the efficiency and effectiveness of their advertising spend.

Why Smart Bidding is a Game Changer for Revenue Managers

While general marketers traditionally focus on cost-per-click (CPC) metrics, revenue managers have a deeper understanding of cost-per-acquisition (CPA) and conversions. This shift in focus is where smart bidding becomes a game changer:

Control Over Pricing Strategies: Revenue managers can directly influence and control pricing strategies such as anchor pricing, fencing, and market mix. Smart bidding allows them to align these pricing strategies with advertising spend to optimize overall revenue.

• Anchor Pricing: By setting a reference price point, marketing can play a significant role in influencing consumer perceptions. For example, consider how Rolls Royce sets a high reference price for their luxury cars. This high anchor price makes other high-end products from the same brand or even other brands seem more affordable in comparison. In the hospitality industry, hotels can use anchor pricing by highlighting premium suites or exclusive packages first, setting a high reference point that makes their standard rooms appear more affordable and attractive in comparison.
• Fencing: This involves creating different pricing tiers based on customer segments. Smart bidding can dynamically adjust bids to target the most profitable segments, ensuring that each ad spend is directed towards the highest potential return.
• Market Mix: Revenue managers can use smart bidding to balance their market mix, targeting different customer segments and distribution channels to maximize overall revenue. By leveraging smart bidding, they can ensure that their ads are always positioned to attract the right customers at the right time.

Moving Up the Funnel: Expanding Skill Sets

Revenue managers must move higher up the funnel and include SEO and SEM as part of their skill set, not just focus on the bottom of the funnel. Traditionally, revenue management has concentrated on conversion and transaction optimization, but today’s competitive landscape requires a broader approach. By understanding and implementing top-of-the-funnel strategies, revenue managers can attract more potential guests earlier in their decision-making process, creating a more robust and effective revenue management strategy. Integrating SEO and SEM into their expertise enables revenue managers to drive awareness, engagement, and ultimately, more conversions, making them invaluable assets to their organizations.

Pricing Strategies in the Digital Age

Pricing strategies in the hospitality industry are as dynamic as the industry itself:

• Price Parity: Maintaining consistent pricing across all distribution channels avoids consumer confusion and ensures brand integrity. This strategy is crucial for building trust and encouraging direct bookings.
• Opaque Selling and Membership Models: Blending distribution with pricing, offering discounted rates through opaque channels (where hotel names are revealed post-purchase) or exclusive prices to loyalty program members are effective ways to attract price-sensitive customers while maintaining profitability.
• User-Generated Content: Positive customer reviews can boost a hotel's reputation and directly impact revenue. Engaging with guests and encouraging reviews on platforms like TripAdvisor is essential for long-term success.

In Summary

We need outside in thinking for sure! but transitioning from an ad agency to the hotel industry is not straightforward, one must dig in, start with OTAs its a great reference point to mastering a new set of strategies and tools.

There are very few industries where you bridge and converge manufacturing, services, delight, emotional marketing, revenue, perishability, revenue management, digital strategies, and personalized guest experiences. For anyone immersed in this business, let me warn you—it's addictive.