Before internet campaigns were popular, ROI started being used for hotel sales activities to help decision makers justify investment in one particular sales activity over another. This can fairly easily work well with certain traditional activities and it has been used successfully by most major chains’ sales teams over the last 10 years. I therefore want to make clear that my problem with it is not all-encompassing. In fact, it sits firmly outside this meaningful way of choosing investment and evaluating opportunity costs.
The reason the subject is making it to this page is ROI’s over-use, especially as a tool for hotels which select suppliers, at a time in the sales cycle when any talk of ROI is not – and can physically never be – anything more than a rough estimation (and in many cases, something someone pickes straight out of thin air).
So you are an e-marketing professional. You have identified the larger issues with your potential customer, managed to arrange an appointment and you have travelled to their offices to see them. You have presented your case, and with the use of solid arguments and facts, you are well on your way to convincing them that something needs to be done. Then, with almost mathematical precision, the man who is funding the operation (or he who has to do the justifying on the funds needed) will ask the inevitable question. “What is my ROI if I do this, and can you guarantee it”?
With time, I have come to believe that these people know the answer (they are far too intelligent not to), and they are only asking for two reasons. First, to see how I will respond. I am suspecting that if I were to come up with too aggressive figures, I would be dismissed as less serious than the next person bidding for the job.
The second reason is that if they like the number quoted back to them, they will hold it as a solid promise. This can be a major issue if you like to only give information that is accurate and you are not in the habit of letting people down.
Personally, I give my customers an honest view of my thoughts (as a proud cynic I have to say that I am amazed by how many potential clients appreciate honesty more than empty promises). Establishing an accurate ROI to my customer’s campaign before we start the work, would require a lot of work itself – man-hours that I am not prepared to offer for free. The only case where I w
ill indulge in guaranteed figures without having done paid-for research is when I am fairly confident I know the potential, it is a major need for my client (they have bosses too) and if (and only if) I have reasonable control of their revenue management, sales and marketing efforts, as well as web development.
Why? Because it is only fair. And because once, before I knew about CentralR, I was caught out.
You see, even if you know how much an 800 room three star hotel in Kensington should and could generate from a three thousand a month PPC, they could be working against you and themselves. They could for example be giving CentralR (in my view the arch enemy of hoteliers everywhere) better rates than they do on their own website. They could even allow CentralR to have a site that is – for all intents and purposes – a clone of the hotel’s own site, which they are also advertising on PPC using proprietary keywords. Keywords for which they are charging the hotel by the way (at which point you have to start admiring their bravado and wonder how they have been getting away with it all this time).
Or – to take a less visible example – the property may be giving a wholesale agency FIT rates WITH permission for them to be published on the agent’s website unpackaged. These static rates will always create problems when the hotel is working with the BAR model on their own website – unless they are very sharp with their lowest rate management.
All in all, it is actually unreasonable to be asked to guarantee something over which you have no control. Revenue decisions, sales decisions, and even PR activities can have a massive effect on a hotels’ performance and conversions for a specific campaign, if that campaign is approached in isolation. Taking on guaranteed work without control – or at least a reasonable amount of say – in the aforementioned areas, is a gamble which (from experience) I do not recommend.
ROI is absolutely the primary, most important ratio attached to any investment, and each campaign’s main success measurement. Although there are proven tactics which allow for greater RevPAR through diminishing ROI, its improvement should be any campaign’s main focus and overall modus operandi. We should just keep in mind that it only becomes the all important figure once the campaign has started.
Before work has started it is no more than an estimation; and when it is based on gut feeling only (without any research and analysis work) it is nothing more than a direction, mostly useful as a method of finding out information about the professional that you have in front of you presenting their solution, rather than something on which you should be setting your expectations and rateplans for next year.