Hotel performance marketing is pretty straightforward: buy clicks, get bookings.

When travel demand is high — as it is right now approaching peak summer — there’s more booking activity to capture but also steeper competition. With that in mind, hoteliers and travel marketers will want to ensure they budget effectively.

There are countless factors that go into strategizing your marketing budget, such as market demand, market competitiveness, seasonality trends, price parity, occupancy, average daily rate, user reviews, hotel ratings, cancellation rates, and dozens of other components. These factors are nuanced and require a lot of data crunching. The good news is that Koddi already incorporates this data into our forecasting models for hotels leveraging our platform.

 

A Simple Litmus Test for Budgeting

While these factors are important, there’s also an easy litmus test that can help you quickly gauge if you’re budgeting properly, even if you don’t use Koddi’s platform. And it will take you about 24 seconds to complete. We know because we timed it.

Step #1: Take your budget and turn it into a daily average.
For example: $150 (monthly budget) / 30 (days in a month) = $5 (budget per day)

Step #2: Take your average cost per click (CPC) and figure out how many clicks you can buy with that budget.
For example: $5 (budget per day) / $2.50 (average CPC) = 2 clicks per day

Step #3: Compare the two.
In the example above, a $150 budget in a fairly competitive market could only get you 2 clicks per day. That means you’d need a conversion rate (CVR) of 50% or higher just to get a booking. A more realistic conversion rate would be 5%-10%. So, if you’re lucky, you might get 3-5 bookings per month with that $150 budget. You’d be heavily relying on the hope that the 2 clicks you buy each day will convert into bookings.

 

Finding the Balance in Budgeting

When the math shows that your daily spend is too low to support the CPC, an overly conservative budget can actually become detrimental to your campaigns. Thus, a budget that initially seemed cautiously appropriate could actually be a huge risk. Such budgets undercut your ability to analyze performance and give you little room to optimize your campaigns. You can’t make informed investment decisions when you only have 2 clicks a day to figure out what works.

So, at what point is a budget too conservative? Ultimately, there is no set dollar amount that defines conservative, healthy, or aggressive. The important thing to understand is how competitive your market is (e.g., roughly understanding average CPC) and then fund enough within your budget to generate sufficient click volume, (e.g. ~20 clicks per day). Balancing these two components is the best way to ensure you’re positioned to garner bookings while also gathering enough data to make informed optimizations to improve performance.

While it sounds counterintuitive, higher investment can actually mitigate risk since it allows you to invest more intelligently and effectively.

If you’re at risk of being significantly underfunded, you’re probably better off not funding at all. Instead, launch later when you have more discretionary budget available. There’s a certain Goldilocks principle involved with marketing: fund enough to be competitive, but not so much that you end up overpaying.

So, to tweak the opening statement: buy clicks, buy enough of them, get bookings.

If you’re unsure how to budget and you’re active on our platform, use the forecast available in your media plan to help guide investment recommendations. All forecasts are available by tactic and are customizable to your needs. Have a question on hotel performance marketing? Contact our team and we’ll be in touch.