Revenue Management @en

The Billboard Effect in Hotel Distribution

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14 May 2012 at 10:00, by

El-efecto-Billboard1

Billboard Effect

I am fully aware that half the money I spend on advertising is wasted; the trouble is, I don’t know which half.

So said John Wanamaker, New York retail magnate from 1900, about the difficulties in identifying the true return on his marketing efforts.

The worry over ROI (Return on Investment) has become an obsession in all marketing-intensive businesses, in which the correlation between those efforts and the customer’s decision to buy is ultimately the only valid indicator.

The first generation of key indicators in online tourism distribution already fit naturally with most areas of e-commerce: terms such as “single-user cost acquisition,” “conversion,” “customer acquisition costs” or “average costs by distribution channel” have become habitual and give us an initial picture of investment and returns.

However even in today’s purely online environment where measurement is more apparent, it would not be easy to answer Wanamaker question about which was the good half of our marketing efforts.

The concept of click attribution is becoming increasingly common in the more advanced measurements of marketing actions, both in OTAs (Open Travel Alliances) and in the large hotel chains in the US and UK, where margin pressures and the continued increases in customer acquisition costs make the use of more sophisticated measurement techniques a growing priority.

Click attribution seeks to define the customer’s last click, just before hitting the reservation button, as well as the entire journey of clicks from search to information and decision through to purchase.

As Jason Harper, VP of Organic in New York, put it recently, “Attribution would be the measure of true value generated by all the marketing actions that we do. It lets us know what actions we need to increase. And the most important thing. What we have to stop doing.”

In short, it is a question of bringing the analysis of the sources and quality of traffic not only towards our own page, but towards any web where one can make a reservation of our product.

This would also allow for a definition of customer behavior patterns, both in relation to search channels and those that provide information and connections, especially the social networks.

The billboard effect is associated in this context with the study carried out by Cornell´s Center for Hospitality over two periods in 2009 to 2011, in which they tried to focus on last-click attribution before a reservation is booked on a hotel website. The study was carried out with the hotels of the Intercontinental Group and came to some surprising conclusions – almost as surprising as they were disputed – including that for every booking generated on an OTA website, between 3 and 9 reservations were generated on the hotel website with the OTA as a last click (*). Based on this, the billboard effect would mean that the cost of the OTA presence would amortize the costs of distribution and investment in marketing.

In addition to this, one could draw the conclusion that certain investments towards buying traffic would be pointless since the billboard effect would be much more effective and would make it more worthwhile to invest in improving one’s positioning in the OTA site.

However, the fact that Expedia was the sponsor of these studies does not exactly banish all doubts.

The billboard effect and the application last-click attribution also have to be framed in the typical search route to the reservation, usually involving:

  1. Search engine (Google)
  2. OTA (Expedia and another two?)
  3. Hotel website (melia.com)
  4. Buyer forum (TripAdvisor and other forums or networks?)
  5. Reservation on OTA or hotel website

In short, the billboard effect is an attempt at a first, probably premature, conclusion on the application of the click attribution model to tourist distribution, but it suffers from a number of inconsistencies that negate many of its conclusions.

Nevertheless, the click attribution model, as it is progressively improved, will prove to be the best means for measuring the return on investment of all marketing actions along with their real impact on generating reservations through all channels.

And what remains increasingly clear is that everything will be measurable and that the value of each action will be increasingly transparent.

With all this we are confident that very soon we will be able to determine which half of our marketing we can do without, although getting here cost us more than 100 years of effort.

(*) It is clear that this effect is mathematically impossible because it would imply that the traffic from the OTAs to the hotel websites would generate more than 100% of their reservations.

TRWBlog – Related links http://www.blogtrw.com/2012/02/hoteleros-hablando-sobre-otas/

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