Achieving a balance between strategic ad spend and revenue generation remains a pivotal challenge for hotels. A partner of ours, a full-service, branded hotel in Lubbock, Texas undertook an ambitious initiative in Q1 2024 aimed at targeted revenue increases and enhancing its RevPar (Revenue per Available Room)
Objectives
The primary goals set forth in Q1 were clear and quantifiable:
- Significantly increase targeted revenue streams.
- Enhance RevPar to achieve a leading position within the Lubbock market.
Methodology
To accomplish these objectives, the Lubbock hotel adopted a strategic approach to its advertising expenditure:
- Increased Ad Spend: The hotel significantly increased its advertising budget by 176% year-over-year. This bold move was aimed at capturing a larger market share and reaching potential customers more effectively.
- Targeted Allocation: More crucial than the increased budget was how it was allocated. The strategy involved an analysis of market trends and identifying periods and channels where the hotel had “holes” or opportunities for improvement. Funds were then deployed in a targeted fashion to these identified areas. One hole we discovered was that in Q1 2023, the hotel was not participating in metasearch advertising, so that channel was activated. We then utilized targeting tools within Expedia and Booking Network to focus ad spend on the biggest areas of need. There was no need to waste the budget on periods of high occupancy.
- Channel Optimization: By analyzing performance data, the hotel was able to optimize spending across various advertising channels, ensuring that each dollar spent was maximized for impact. The Prosper team watched the bids and daily spend extremely closely to ensure ads were active throughout the day and the CPCs were competitive.
Results
The strategic reallocation and increase in ad spend yielded outstanding results for the full-service property.
- Room Nights: There was a significant increase in room nights booked, which grew by 222%.
- Revenue Growth: The hotel saw a remarkable revenue increase of 188%, directly attributable to the targeted ad spend strategy.
- Return on Ad Spend (ROAS): Despite the substantial increase in ad budget, the hotel experienced a 4% improvement in return on ad spend, indicating a higher efficiency in ad spend utilization.
- RevPar Leadership: In the first quarter of 2024, the full-service property achieved the number one position in RevPar within the city, fulfilling one of its core objectives and marking a significant milestone.
The case of this hotel demonstrates the efficacy of a targeted, data-driven advertising strategy. By leveraging a substantial increase in ad spend in a precise and strategic manner, the hotel not only achieved, but exceeded its revenue and performance objectives. This approach highlights the importance of not just increasing budgets, but judiciously optimizing and targeting spend based on detailed market analysis and identified opportunities. By adopting similar strategic considerations, hotels can enhance their market positions, drive revenue efficiently, and achieve notable successes in their respective markets.
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