CHARLOTTE, North Carolina — Digital marketers in the hotel space are ready to dump return on ad spend as a marquee metric.
To better align with commercial strategy teams and owners, many digital marketers say the metrics they use must match what other stakeholders use. That means looking more at loyalty, occupancy and revenue per available room index, among other more universal key performance indicators.
Dan Fernandez, vice president of digital marketing and strategy at Concord Hospitality, said the digital marketing space has an issue with its key performance indicators, or KPIs. Historically, return on ad spend, or ROAS, has been the main KPI.
"Digital is the only top-line discipline that uses return on ad spend as a primary KPI," he said during the "Revolutionizing Profitability: Rethinking the ROAS Model" panel at the HSMAI Commercial Strategy Conference. "No one else uses that KPI. I think that in itself tells us that there's a bit of an issue there."
Among the issues with KPIs such as ROAS is they doesn't translate well across other disciplines. It's the responsibility of the digital marketing side of the industry to introduce new metrics that can be understood across the board, he said.
"When you're sitting in an owner's meeting and you've got other top-line disciplines at the table who are all speaking the same language, and then on the digital side you're talking about your return on ad spend and how much awareness you've generated, a lot of times there's absolutely a disconnect there," he said. "We have not had as collaborative discussions at that table when those KPIs and those goals are in play."
Another key fault in ROAS is it's hard to track, said Rory Peska, former vice president of ecommerce for Aimbridge Hospitality.
The metric leads to some advertisement contributions not getting credit. For example, people may see an ad but not click on it initially and then revisit the site later. Another example is when someone is influenced by an ad but calls in a request for proposal for group travel, another instance in which the marketing team doesn't get the credit.
"It'd be great to have systems in place where we can track all of that all the way through, but as of right now, obviously the technology is not fully there to see all that," he said. "Again, another reason why ROAS is not the most important thing."
Most people don't follow a linear booking process of clicking on the first ad they see and then booking, said Joe Spirito, vice president of demand generation advisors for hospitality technology company Amadeus. Guests will jump around from search to search before ultimately making their final decision, which makes tracking the value of those ads difficult.
To put it simply, the metric is outdated, he said.
"The purpose of ROAS was to move people away from people who work with media and make it ... a very simple conversation with finance to convince people that it's OK to invest in marketing," he said. "That's outdated. We've walked way past that now."
KPIs of the Future
The ROAS metric doesn't fully paint the picture of marketing success and efficiencies, said Noreen Henry, chief revenue officer of marketing company Sojern. Instead of focusing on that metric, marketers should instead look at ad spend in regard to its ability to create loyal customers.
A marketer's job doesn't end with converting a prospective guest into a guest, she said. After the conversion, marketers need to ensure guests have a good experience to increase the chance that they become a repeat guest, not just at that particular hotel but for the brand as well.
"When you start to pull yourself up and get away from just looking at ROAS and looking at the power of the loyalty loop, you're going to look at metrics that go much bigger and farther beyond that," she said.
Customer acquisition cost, revenue per occupied room and customer lifetime value — i.e. returning guests — are three financial metrics that help hoteliers understand how well their marketing is performing, she said.
Fernandez said a good indicator showing if a property's digital marketing is working is the occupancy and revenue per available room index compared to other hotels in the area.
"What you're really trying to gauge is, 'Hey, is this strategy that we're putting together on the digital side, is it working or is it not working?' The fact that we have a KPI in occupancy index [and] also RevPAR index, specifically for brand.com for the digital direct channel, is a pretty darn good gauge of are you beating the guy across the street," he said.
Instead of judging the return reported at each level of the marketing funnel, marketing should be viewed holistically, Peska said. Overall returns, occupancy and RevPAR are better indications of the success of marketing tactics.
"I don't think it's smart to just start removing marketing opportunities and channels because they might have a lower return based on the reporting that we are given," he said. "Just because the lower funnel tactics are returning the most, that doesn't mean we need to avoid and stop spending money at the upper funnel, because if we don't drive awareness to our properties, nobody's going to find them on the lower levels."
Spirito said one metric stands above all: profitability.
"As commercial leaders, we really need to take a step back sometimes and say, 'What is this actually producing in profit to the property, to the owners and shareholders,'" he said.