After the brutal shock to the travel industry due to the coronavirus crisis, the vast majority of hotels stopped or questioned all their investments in online marketing, mainly Google Ads and metasearch.
This decision made a lot of sense given the severity and exceptional circumstances of the moment.
Still, several weeks have already passed and perhaps now would be a good time to start reflecting on this decision and ask ourselves these questions:
- How long will this stop last?
- Does it still make sense?
- When will be a good time to consider reactivating my campaigns?
Sudden investment stop
Investment fell 80% in the second half of March, compared to the first half, and 90% when compared to the same period in 2019 – figures that correspond with those in a Cleveland Research report.
They illustrate the huge concern that hotels face and new variables to consider that did not exist before:
- Cash flow. In the current situation, one of the objectives of any company, including hotels, is maintaining the highest possible amount of cash. The vast majority of investments in online marketing are paid in advance and that is a problem now.
- Uncertainty. Most hotels have no idea yet when they can reopen. They have tentative dates that are pushed back as the days go by. It is impossible to forecast if the gradual reopening of hotels will start in June or September. Given this great uncertainty, how can we risk investing in a model such as CPC (cost per click) without a guarantee of conversion and that, above all, those reservations will not be cancelled?
- Profitability. Many hotels anticipated that their campaigns would not be profitable in this situation and, when facing this, the best thing is to pause it all.
Nevertheless, not all hotels stopped their campaigns. Were they unaware or was it the right call? Let’s analyze it.
How did hotels that did not stop the campaigns do?
Let us compare the period from March 15 to 31 (updated data including April does not reflect major changes from those shown above). with last year.
Looking at Google Ads’ numbers, we realize that although they worsen, their behaviour is better than expected (given the circumstances). Numbers are, however, discreet and, above all, low in volume.
- Impressions: -88%. As expected, there was a large drop in impressions, reflecting the brutal decrease in demand. This drop, which translates proportionally into paid web traffic decrease, has no impact on profitability (without impressions there are no clicks either and no cost), but it does have an impact on the volume generated.
- CTR (click through rate): +5%. This is a metric that presents a substantial improvement, which however, and given the low volume it represents in terms of visits, we do not consider of much relevance.
- CPC (cost per click): -63%. The absence of competition in keywords (mainly OTA) has led to a significant decrease in the cost per click. This is positive and could represent an opportunity.
- Conversion: -41%. This drop in the conversion ratio reflects in some way the uncertainty we are experiencing.
- Profitability: -11%. Profitability is worsening, as you would expect, but much less than we would have anticipated. With an equivalent commission of 6.5%, active campaigns are still profitable for the hotelier.
But what about cancellations?
There is no doubt that cancellations are the factor that generates most uncertainty and the reason most hotels —which have a good cash position and can therefore afford it— are reluctant to activate campaigns. – Read more