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2011 travel industry benchmarking

The study surveyed 426 marketing executives from destination marketing organizations and accommodation firms about their online marketing strategies and budgets. It found that accommodation firms on average spent over 10 times more on marketing than destination firms, at $1.35 million compared to $136,000. Accommodation firms were also more likely to outsource functions like search engine optimization and pay-per-click advertising, while destination marketers generally handled more in-house. Most respondents from both groups expected their online marketing budgets to increase in 2011.

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2011 Travel Industry Benchmarking: Marketing ROI, Opportunities, and Challenges in Online and Social Media Channels for Destination and Marketing Firms Cornell Hospitality Report Vol. 11, No. 9, April 2011 by Rohit Verma, Ph.D., and Ken McGill www.chr.cornell.edu
Advisory Board Niklas Andréen, Group Vice President Global Hospitality & Partner Marketing, Travelport GDS Ra’anan Ben-Zur, Chief Executive Officer, French Quarter Holdings, Inc. Scott Berman, Principal, Real Estate Business Advisory Services, Industry Leader, Hospitality & Leisure, PricewaterhouseCoopers Raymond Bickson, Managing Director and Chief Executive Officer, Taj Group of Hotels, Resorts, and Palaces Stephen C. Brandman, Co-Owner, Thompson Hotels, Inc. Raj Chandnani, Vice President, Director of Strategy, WATG Benjamin J. “Patrick” Denihan, Chief Executive Officer, Denihan Hospitality Group Brian Ferguson, Vice President, Supply Strategy and Analysis, Expedia North America Chuck Floyd, Chief Operating Officer–North America, Hyatt Gregg Gilman, Partner, Co-Chair, Employment Practices, The Robert A. and Jan M. Beck Center at Cornell University Davis & Gilbert LLP Back cover photo by permission of The Cornellian and Jeff Wang. Tim Gordon, Senior Vice President, Hotels, priceline.com Susan Helstab, EVP Corporate Marketing, Four Seasons Hotels and Resorts Jeffrey A. Horwitz, Chair, Lodging + Gaming, and Co-Head, Mergers + Acquisitions, Proskauer Kevin J. Jacobs, Senior Vice President, Corporate Strategy & Treasurer, Hilton Worldwide Kenneth Kahn, President/Owner, LRP Publications Cornell Hospitality Reports, Kirk Kinsell, President of Europe, Middle East, and Africa, Vol. 11, No. 9 (April 2011) InterContinental Hotels Group Radhika Kulkarni, Ph.D., VP of Advanced Analytics R&D, SAS Institute © 2011 Cornell University Gerald Lawless, Executive Chairman, Jumeirah Group Mark V. Lomanno, CEO, Smith Travel Research Cornell Hospitality Report is produced for Betsy MacDonald, Managing Director, HVS Global Hospitality the benefit of the hospitality industry by Services The Center for Hospitality Research at David Meltzer, Senior Vice President, Global Business Cornell University Development, Sabre Hospitality Solutions William F. Minnock III, Senior Vice President, Global Rohit Verma, Executive Director Operations Deployment and Program Management, Marriott International, Inc. Jennifer Macera, Associate Director Mike Montanari, VP, Strategic Accounts, Sales - Sales Glenn Withiam, Director of Publications Management, Schneider Electric North America Shane O’Flaherty, President and CEO, Forbes Travel Guide Center for Hospitality Research Thomas Parham, Senior Vice President and General Manager, Cornell University Philips Hospitality Americas School of Hotel Administration Chris Proulx, CEO, eCornell & Executive Education 489 Statler Hall Carolyn D. Richmond, Partner, Hospitality Practice, Fox Rothschild LLP Ithaca, NY 14853 Steve Russell, Chief People Officer, Senior VP, Human Resources, McDonald’s USA Phone: 607-255-9780 Michele Sarkisian, Senior Vice President, Maritz Fax: 607-254-2922 Janice L. Schnabel, Managing Director and Gaming Practice www.chr.cornell.edu Leader, Marsh’s Hospitality and Gaming Practice Trip Schneck, President and Co-Founder, TIG Global LLC Adam Weissenberg, Vice Chairman, and U.S. Tourism, Hospitality & Leisure Leader, Deloitte & Touche USA LLP
Thank you to our generous Corporate Members Senior Partners Hilton Worldwide McDonald’s USA Philips Hospitality SAS STR Taj Hotels Resorts and Palaces TIG Global Partners Davis & Gilbert LLP Deloitte & Touche USA LLP Denihan Hospitality Group eCornell & Executive Education Expedia, Inc. Forbes Travel Guide Four Seasons Hotels and Resorts Fox Rothschild LLP French Quarter Holdings, Inc. HVS Hyatt InterContinental Hotels Group Jumeirah Group LRP Publications Marriott International, Inc. Marsh’s Hospitality Practice Maritz priceline.com PricewaterhouseCoopers Proskauer Sabre Hospitality Solutions Schneider Electric Thayer Lodging Group Thompson Hotels Travelport WATG Friends American Tescor, LLC • Argyle Executive Forum • Berkshire Healthcare • Center for Advanced Retail Technology • Cody Kramer Imports • Cruise Industry News • DK Shifflet & Associates • ehotelier.com • EyeforTravel • 4Hoteliers.com • Gerencia de Hoteles & Restaurantes • Global Hospitality Resources • Hospitality Financial and Technological Professionals • hospitalityInside.com • hospitalitynet.org • Hospitality Technology Magazine • Hotel Asia Pacific • Hotel China • HotelExecutive.com • Hotel Interactive • Hotel Resource • International CHRIE • International Hotel Conference • International Society of Hospitality Consultants • iPerceptions • JDA Software Group, Inc. • J.D. Power and Associates • The Lodging Conference • Lodging Hospitality • Lodging Magazine • LRA Worldwide, Inc. • Milestone Internet Marketing • MindFolio • Mindshare Technologies • PhoCusWright Inc. • PKF Hospitality Research • Resort and Recreation Magazine • The Resort Trades • RestaurantEdge.com • Shibata Publishing Co. • Synovate • The TravelCom Network • Travel + Hospitality Group • UniFocus • USA Today • WageWatch, Inc. • The Wall Street Journal • WIWIH.COM • Wyndham Green
2011 Travel Industry Benchmarking: Marketing ROI, Opportunities, and Challenges in Online and Social Media Channels for Destination and Marketing Firms by Rohit Verma and Ken McGill Executive Summary S enior lodging and destination marketing executives often make vendor and marketing channel decisions without sufficient time to investigate the ROI of alternative strategies or emerging media choices. An internet-based survey of 426 marketing executives, drawn from the TravelCom 2011 conference and Cornell Center for Hospitality Research database, with support from Vantage Strategy and iPerceptions, found a wide range of expenditures on online marketing, as well as considerable diversity in organizational structures. Two-thirds of the sample comprised accommodation marketers, with the remainder being destination marketers or those responsible for other types of marketing. Nearly three-quarters of the respondents reported spending less than $10,000 on mobile media in 2010, about two thirds spent less than $10,000 on all social media marketing. About 80 percent of the marketers said that they produced Twitter campaigns and social promotions in-house, but such functions as search engine optimization and pay-per-click advertising are largely outsourced. Accommodation firms are more likely to outsource all social media functions, including pay-per-call, Twitter campaigns, and pay-per-click management. Destination marketers, on the other hand, generally handle more functions in-house. Two-thirds of the entire sample said the 2010 e-commerce budgets had increased with respect to 2009. Sixty percent of accommodation marketers anticipated a further increase in 2011, and 71 percent of the destination marketers said their 2011 budgets would increase. 4 The Center for Hospitality Research • Cornell University
About the Authors Rohit Verma, Ph.D., is professor of operations management and executive director of the Center for Hospitality Research at the Cornell University School of Hotel Administration (rohit.verma@cornell.edu). Among his research interests are product-and-service design and innovation, customer choice modeling, and quality process improvement of supplier selection strategies. His work has appeared in such publications as MIT Sloan Management Review, Journal of Operations Management, and Cornell Hospitality Quarterly. Ken McGill is EVP of Research for Vantage Strategy (ken.mcgill@vantagestrategy. com). He directs Vantage’s Travel & Tourism Research division where he delivers insight and intelligence to DMOs and Travel & Tourism suppliers. Prior to Vantage, he was Executive Vice President for IHS Global Insight and head of its Travel & Tourism Practice. McGill directed both existing client relationships and spearheaded new development efforts, particularly in the functional areas of market research, economic impact assessment, and resource planning. In his 30 years in economic and strategic consulting, McGill has developed an expertise in research and planning methods that has been successfully applied to business problems in a variety of corporate and government settings. He is particularly known for his work in combining primary market research with traditional economic and industry analysis. A particular focus of McGill’s work has been in tourism economic impact assessment. Moreover, McGill’s expertise has often been called upon to estimate the economic impact of specific destinations, attractions, convention facilities, resort/hotel developments, events, and tourism policy decisions. The authors gratefully acknowledge the support of the TravelCom Conference and Vantage Strategy in conducting this study. Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 5
COrnell Hospitality Report 2011 Travel Industry Benchmarking: Marketing ROI, Opportunities, and Challenges in Online and Social Media Channels for Destination and Marketing Firms by Rohit Verma and Ken McGill A s part of the planning for TravelCom 2011, conference organizers consulted the TravelCom advisory board members to identify their most pressing issues. These chief marketing officers and marketing executives identified the acceleration of online marketing forces as a common concern. The executives feel that they are being called on to make vendor and marketing channel decisions without sufficient time to investigate the ROI of alternative strategies or emerging media choices, as well as benchmarking what others are doing. Uncomfortable with ad hoc decision making, the executives requested a study that would establish benchmarks for organizational practices and decision making. 6 The Center for Hospitality Research • Cornell University
Exhibit 1 Sample composition Destination Marketing Executives Annual budget for marketing and e-commerce averaged $136,000 in 2010; two-thirds Accommodation reported that this was an increase over 2009; seven Marketing Executives of ten anticipated an increase in 2011 87 Annual budget for marketing and e-commerce averaged $1,354,000 in 2010; two- thirds reported that this was an increase over 2009; 291 six of ten anticipated an increase in 2011 Other Travel- 48 related Firms Destination Accomodation Other This study is the result of that expressed need. With the elCom databases of travel industry marketing executives. support of Vantage Strategy and iPerceptions, we developed A total of 426 industry respondents completed the survey, a questionnaire that would allow us to assess the state of and they were assured that no private or identifying infor- electronic marketing—establishing benchmarks and provide mation would be shared. The purpose of the study was only a comparison point for resources devoted to electronic to create a public benchmark and allow private compari- marketing. sons of the participants’ firms with those benchmarks. We divided the survey questions into three overarching Executive Profile themes: (1) Information that places a firm into a competitive set; Sixty-eight percent of the respondents worked in accom- (2) How dollars are spent in the online marketing space modation firms, 20 percent were destination marketers, (3) How resources are allocated and the rest worked in a variety of travel-related firms (see We categorized the responses to the survey questions to Exhibit 1). assess different aspects of online marketing initiatives in the The respondents reported a noticeable difference in following areas average annual budgets for marketing and ecommerce. At • Budget and resource allocation, $1.354 million, the average budget reported by marketers • Marketing and promotion , for accommodation firms was ten times the average for • International strategy development, destination marketers, who reported an average of $136 • Commerce and conversion, thousand dollars. Both groups reported that the electronic • Loyalty and reputation, marketing portion of those budgets was increasing year to • Analysis and research, year. • Challenges and future opportunities. The two types of organization also reported different We conducted the survey online during January and structures for deploying members of the online market- February 2011. Respondents were part of the CHR and Trav- ing services team and the ecommerce team (see Exhibit 2). Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 7
Exhibit 2 Online marketing services and e-commerce team placement Destination Firms Accommodation Firms Online Marketing Services Marketing department 75% Online Marketing Services Sales department 4% Marketing department 41% 87 eCommerce department 2% Sales department 17% Operations department 6% eCommerce department 9% Operations department 5% eCommerce Marketing department 51% 291 Sales department 6% eCommerce Web services department 11% Operations department 12% 48 Marketing department 33% Revenue management department 40% Sales department 27% Web services department 5% Operations department 3% Destination Accomodation Other Exhibit 3 Online pricing strategy and distribution team placement Destination Firms Accommodation Firms Online Pricing Strategy Team Online Pricing Strategy Team Marketing department 25% Marketing department 10% Sales department 4% Sales department 18% Revenue management department 12% Operations department 12% 87 Revenue management department 54% Operations department 5% Distribution Strategy Marketing department 53% 291 Distribution Strategy Marketing department 14% 48 Destination Accomodation Other Three-quarters of the destination marketing organizations ecommerce teams part of the revenue management depart- housed their online marketing team in the marketing de- ment, and another 17 percent were in the sales department. partment, but that was true of just 41 percent of the accom- Looking specifically at the people who determine strat- modation marketers. Instead, 17 percent of the online team egy for online pricing and distribution, we again see that the was housed in the accommodation firms’ sales department, marketing department is foremost for destination market- and another 9 percent in the ecommerce department. ing firms, but that is not true of accommodation firms (see A similar relationship occurred for the ecommerce Exhibit 3). team. Just over half of the destination marketing firms put Well over half of the accommodation firms (54%) put the ecommerce team in the marketing department, while their pricing strategists in the revenue management depart- that was true in only one-third of the accommodation firms. ment, with another 18 percent in sales. Just 10 percent of the Instead, 40 percent of the accommodation firms made their accommodation firms had their pricing strategy function 8 The Center for Hospitality Research • Cornell University
0 0 Exhibit 4 Exhibit 5 Online marketing and e-commerce budget Percentage allocation of staff time (average of 3.25 allocation staff) 60 60 60 e e Destination 50 Accomodation Destination Accomodat g Destination Firms Destination Firms g 50 50 Destination Accomodation 40 40 Destination Accomodation a a Accommodation Firms Accommodation Firms 40 60 t 30 t 50 n n 30 30 20 40 e e 20 20 10 c c 30 r 10 r 10 0 20 e e 0 0 P Accommodation 10 Destinationn Accomodation P tio n Destinationion ion ar ch on i o si on i ch r rs at t r at ea mo ve ut re se mo ve ut re s o n ep o n ep nd pr an d co an dr ics an d 0 nd pr an d co n dr sa nd ga y t ga ya tic et in rce ya lt ly et in rce ya lt ly k me Lo A na k me Lo A na ar m ar m M Co M Co Exhibit 6 Online advertising budget for 2010 Over $1,000,000 $499,999 - $1,000,000 Destination Destination Firms Average $≈80,000 Accomodation $250,000 - $499,999 $100,000 - $249,000 Destination Accomodation Accommodation Firms Average $≈60,000 $50,000 - $99,999 $25,000 - $49,999 $10,000 - $24,999 Less than $10,000 0 10 20 30 40 Accomodation in marketing. For the destination marketers, 25 percent of Destination tion, and analytics and research. The respondents reported firms put pricing strategy in marketing, and just 12 percent similar percentage allocations of staff time (Exhibit 5). For in the revenue management department. For distribution the entire sample, the average number of staff members strategy, well over half of the destination firms housed distri- involved in online marketing and ecommerce was 3.25. bution strategy in their marketing department, but that was The range of budgeted online advertising expendi- true of only 14 percent of accommodation firms. tures was remarkable, with some firms reporting budgets In terms of budget allocations, marketing and promo- of less than $10,000 and others over $1 million (Exhibit tion was by far the largest single online marketing and 6). The budgets skewed toward the lower end of the range, ecommerce category for both destination and accommoda- however, as the average online advertising budget for ac- tion firms (see Exhibit 4). Those expenditures were followed commodation firms was approximately $60,000, while for in order by commerce and conversion, loyalty and reputa- destination marketers the average was about $80,000. In Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 9
10 0 Exhibit 7 Percentage budget for online media placement More then 95% More than 95% Destination Destination Firms Average ~40% Accomodation 85% to 94% 85 to 94% 75% to 84% 75 to 84% 65% to 74% 65 to 74% Destination Accomodation Accommodation Firms Average ~45% 55% to 64% 55 to 64% 35% to 44% 45 to 54% 35% to 44% 35 to 44% 25% to 34% 25 to 34% 11% to 24% 11 to 24% Less then 10% Less than 10% 0 5 10 15 20 25 Exhibit 8 Accomodation Destination Source of online media and advertisement purchasing Not Not sure sure 5% 5% One One agency agency 21% 27% on one agency Handled internally Handled multiple agency 35% mu internally 40% handled internally ha not sure no Multiple Multiple agency agency 39% 28% Destination Accommodation Firms Firms terms of the percentage of the marketing budget, online than $10,000 on social media, and three-quarters spend less media placement also varied widely (Exhibit 7). than $10,000 on mobile media. Although the average online budget allocations repre- The breakdown of purchasing channels for advertising in sented an average of 40 percent of destination firms’ market- online media is similar for destination and accommodation ing budget, seven of the 87 destination firms and 20 of the firms (see Exhibit 8). While substantial percentages of firms 216 accommodation marketers reported online budget handle purchases internally, many also use multiple agencies. allocations of less than 10 percent of the marketing expendi- A relatively small percentage use just one agency for online tures. Two-thirds of the firms reported that they spend less media buys. Looking more specifically at how these firms 10 The Center for Hospitality Research • Cornell University
Exhibit 9 Solutions for online marketing: Percentage in-house Pay Per Click Management Search Engines Accommodation Firms Accommodation Destination Destination Firms Destination Accomo Pay Per Call 60 Ad Exchanges 50 SMS/Text Messaging Link Building 40 Branding 30 Press Release Distribution 20 Video Distribution 10 Social Influence 0 Twitter Campaigns 20 30 40 50 60 70 80 90 100 Exhibit 10 Solutions for online marketing: Percentage outsourced to specialized firms Pay Per Call Branding Twitter Campaigns Affiliate Marketing Ad Placement Destination Destination Firms Accomo Accommodation Firms SMS/Text Messaging Social Influence Video Distribution Search Engines Link Building Pay Per Click Management 0.0 20.0 40.0 60.0 80.0 100. handle the many aspects of online marketing, we see that other perspective, accommodation firms are far more likely ACCOMODATION such matters as Twitter campaigns and social influence are DESTINATION than destination firms to retain specialized firms for online largely handled in house (see Exhibit 9). marketing campaigns (see Exhibit 10). Indeed, destination marketing firms are, in gen- The difference in approaches shows up most notice- eral, more likely to handle all online marketing functions ably in pay-per-call, branding, Twitter campaigns, and in-house. On the other hand, pay-per-click management, affiliate marketing programs. Destination firms reported search engine management, and pay-per-call campaigns outsourcing these functions only 25 percent of the time, are quite frequently outsourced. Taking this issue from the while accommodation firms frequently outsource not only Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 11
30 20 20 10 10 0 0 Exhibit 11 Implementation solutions: Percentage in-house Site Hosting Social Sites Mobile Apps Destination Destination Firms Accomodatio Mobile Website Destination Accomodation Accommodation Firms Corporate Website 0 20 40 60 80 100 Exhibit 12 Accomodation Destination Content-management system Other Enterprise Enterprise Other Open 8% 18% Open 17% 12% Source None Source 28% 8% Open 29% Open None source source 28% 8% open source 29% enterprise None custom None 8% 8% none Custom Custom 34% Other Custom 38% Other Custom other 8%38% Enterprise 12%34% Enterprise 18% 17% Destination Firms Accommodation Firms those functions, but also ad placement and social influence Again, destination marketers were slightly more likely campaigns. than accommodation marketers to handle most of these The marketers were much more inclined to handle functions on their own. The breakdown of sources for the social media sites and corporate websites on their own than content management system was similar for both destination they were mobile apps and the mobile website, which were marketers and accommodation firms: just under 30 percent most typically outsourced (see Exhibit 11). were open source, not even 20 percent were enterprise sys- tems, and over one-third were custom written (see Exhibit 12 The Center for Hospitality Research • Cornell University
Exhibit 13 Average development cycle Not 60 Not Every 60 Every sure50 sure 7% two four + 15% years 50 years 40 Every 21% 6% two Every 40Every two years 30 years Ever 34% four + years 30Every year 20 Ever 15% Every year 10% 20Every three years Every three 10 Ever years 10Every 30% years four+ 0 Ever Every three 0Not sure Not years Every year 30% 23% Destination Firms Accommodation Firms Destination Firms Accommodation Firms Exhibit 14 Percentage of accommodation and destination firms that... ...use an advertising management system use an Ad mgt system Destination Destination Firms Accomodatio provide eCommerce functionality ...provide e-commerce functionality Destination Accomodation Accommodation Firms ...sellladvertising space sell advertising space have internal staff forfor social media or reputation ...have internal staff social media/reputation mgt management provide online purchasing capabilities ...provide online purchase capability ...have asocial media strategy. have social media strategy 0 25 50 75 100 12). For most firms, the development cycle on these systems Exhibit 14). Responsibility for managing social media Accommodation typically occupied two or three years (see Exhibit 13). Destination resided overwhelmingly in the marketing and sales depart- The two types of companies took relatively similar ap- ment (58% of respondents), with a small percentage in pub- proaches to social media policies and functionality, with one lic relations (15%), ecommerce (12%), or a smattering other exception. Destination firms were overwhelmingly more departments (15%). Asked which social media were most likely to sell advertising space on their sites than the accom- effective, the marketers rated Facebook at the top, followed modation firms were. As a result, the destination firms were by Twitter, YouTube, and LinkedIn (Exhibit 15, next page). somewhat more likely to maintain an advertising manage- Accommodation firms were far more likely than desti- ment system. nation marketers to report that they maintain blogs. Fifty- On the other hand, the accommodation firms were one percent of the accommodation firms reported blogging, more likely to provide online purchasing capabilities (see compared to just 31 percent of destination firms. The person Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 13
10 0 0 Exhibit 15 Percentage of accommodation and destination firms providing a rating of “very effective” for social media sites 100 80 Destination Destination Firms Accomodation 60 Destination Accomodation Accommodation Firms 40 20 0 Xanga Twitter Ning Hyves Facebook MySpace Xing Bebo Orkut Flickr Hi5 YouTube LinkedIn Foursquare Gowalla Exhibit 16 Destination Accommodation Factors cited as frustrations in online marketing by accommodation and destination marketers (percentages) Unreliable Vendors Sign-Off Progress Technology Limitations Implementation Speed Limited Market Knowledge No Strategic Plan Resource Limitations Budget Limitations 0 10 20 30 40 50 60 70 responsible for managing the blog was almost never the Frustrations CEO or president. Instead, blogging fell primarily to the As shown in Exhibit 16, the marketers cited budget and director of marketing, the social media or public relations resource limitations as their number-one issue. Other issues staff, or in some cases external partners. were the absence of a strategic plan, limited market knowl- 14 The Center for Hospitality Research • Cornell University
edge, and issues with implementation speed and technology Acknowledging the possibility of hurling money into the limitations. A few mentioned unreliable vendors. black void of the internet, it seems likely that the compa- nies that have carefully committed resources will enjoy the Discussion rewards of a vibrant electronic distribution strategy. This survey shows an industry still in transition with regard to online marketing and electronic commerce. Based on Conclusion their budget expenditures, it’s clear that some firms have Over time, we anticipate that both destination and accom- jumped wholeheartedly into online commerce, while others modation marketing firms will focus specifically on where in are still testing the waters with relatively small expenditures. their organization the online marketing services and strategy One note on the range of expenditures however, we did function will be housed. Part of that decision is a function of not normalize the budgets on a per-room basis, so it may be corporate culture, of course, but it may be that ecommerce that a company that reported a relatively small budget ex- will evolve to become a discipline of its own, as revenue penditure in absolute dollars has actually committed a large management has done in the past few years. percentage of funds in relation to its company size. The key factor is to ensure that electronic marketing That said, we were surprised to find such tiny bud- and sales strategies are congruent with the organization’s get allocations for online media. A substantial number of overall marketing approaches. While online sales and com- accommodation firms reported under $50,000 in annual merce can only grow as time goes on, the fact remains that expenditures, and a relatively large percentage of destination a substantial portion of the travel business is still sold via firms had allocated under $25,000. In this context, it’s worth traditional distribution channels. underscoring the fact that respondents cited budget and re- Perhaps the key test for accommodation and destina- source limitations as their chief frustration. Technology and tion businesses is managing the transition from traditional vendors are not standing in the way of online markeitng ini- channels to electronic channels, especially since there’s no tiatives and strategies. Apparently, money is doing so. While guarantee of a gradual change from one to another. The it is true that much can be accomplished on the internet history of the growth and development of social media has for “free,” it’s clear that several firms have determined that it been one of discontinuity, and there’s no reason to think that makes sense to commit resources to develop a comprehen- we’ve seen an end to new and unexpected communication sive electronic strategy, instead of a “bootstrap” approach. channels. n Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 15
Cornell Center for Hospitality Research Index www.chr.cornell.edu Vol. 10, No. 12 Cases in Innovative Cornell Hospitality Quarterly 2011 Proceedings Practices in Hospitality and Related http://cqx.sagepub.com/ Vol. 3, No. 4 Brave New World: Online Services, Set 4, by Cathy A. Enz, Ph.D., Hotel Distribution, by Glenn Withiam Rohit Verma, Ph.D., Kate Walsh, Ph.D. 2011 Reports Vol. 3, No. 3 Social Media and the Sheryl E. Kimes, Ph.D., and Judy A. Siguaw, D.B.A Vol 11 No 8 Search, OTAs, and Online Hospitality Industry: Holding the Tiger by Booking: An Expanded Analysis of the the Tail, by Glenn Withiam Vol. 10, No. 11 Who’s Next? An Analysis Billboard Effect, by Chris Anderson Ph.D. of Lodging Industry Acquisitions, by Vol. 3 No. 2 The Challenge of Hotel and Qingzhong Ma, Ph.D., and Peng Liu, Ph.D. Vol. 11 No. 7 Online, Mobile, and Text Restaurant Sustainability: Finding Profit in Food Ordering in the U.S. Restaurant “Being Green,” by Glenn Withiam Vol. 10, No. 10 Cases in Innovative Industry, by Sheryl E. Kimes, Ph.D., and Practices in Hospitality and Related Philipp F. Laqué Vol. 3 No. 1 Cautious Optimism: Services, Set 3: Cayuga Sustainable CHRS Examines Hospitality Industry Hospitality, Chic & Basic, JetBlue Airlines Vol. 11 No. 6 Hotel Guests’ Reactions to Trends, by Glenn Withiam Jumeirah Essex House, The Ritz-Carlton Guest Room Sustainability Initiatives, by Hotel Company, Runtriz, The Seaport Alex Susskind, Ph.D. and Rohit Verma, 2010 Reports Hotel, Thayer Lodging, TripTelevision, and Ph.D. Vol. 10 No. 18 How Travelers Use Xsense Experiential Design Consulting, by Online and Social Media Channels to Cathy A. Enz, Ph.D., Rohit Verma, Ph.D., Vol. 11, No. 5 The Impact of Terrorism Make Hotel-choice Decisions, by Laura Kate Walsh, Ph.D. Sheryl E. Kimes, Ph.D., and Economic Shocks on U.S. Hotels, by McCarthy, Debra Stock, and Rohit Verma, and Judy A. Siguaw, D.B.A. Cathy A. Enz, Renáta Kosová, and Mark Lomanno Ph.D. Vol. 10, No. 9 Building Customer Loyalty: Vol. 10 No. 17 Public or Private? The Ten Principles for Designing an Effective Vol. 11 No. 4 Implementing Human Hospitality Investment Decision, by Customer Reward Program, by Michael Resource Innovations: Three Success Qingzhong Ma, Ph.D. and Athena Wei McCall, Ph.D., Clay Voorhees, Ph.D., and Stories from the Service Industry, by Justin Zhang, Ph.D. Roger Calantone, Ph.D. Sun and Kate Walsh, Ph.D. Vol. 10 No. 16 Best Practices in Search Vol. 10, No. 8 Developing Measures for Vol. 11 No. 3 Compendium 2011 Engine Marketing and Optimization: Environmental Sustainability in Hotels: The Case of the St. James Hotel, by Greg An Exploratory Study, by Jie J. Zhang, Vol. 11 No. 2 Positioning a Place: Bodenlcos, Victor Bogert, Dan Gordon, Nitin Joglekar, Ph.D., and Rohit Verma, Developing a Compelling Destination Carter Hearne, and Chris K. Anderson, Ph.D. Brand, by Robert J. Kwortnik, Ph.D., and Ethan Hawkes, M.B.A. Ph.D. Vol. 10, No. 7 Successful Tactics for Vol. 10 No. 15 The Impact of Prix Fixe Surviving an Economic Downturn: Vol. 11 No. 1 The Impact of Health Menu Price Formats on Guests’ Deal Results of an International Study, by Insurance on Employee Job Anxiety, Perception, by Shuo Wang and Michael Sheryl E. Kimes, Ph.D. Withdrawal Behaviors, and Task Performance, by Sean Way, Ph.D., Bill Lynn, Ph.D. Vol. 10, No. 6 Integrating Self-service Carroll, Ph.D., Alex Susskind, Ph.D., and Vol. 10 No. 14 The Future of Hotel Kiosks in a Customer-service System, Joe C.Y. Leng Revenue Management, by Sheryl Kimes, byTsz-Wai (Iris) Lui, Ph.D., and Gabriele Ph.D. Piccoli, Ph.D. 2011 Hospitality Tools Vol. 2 No. 1 MegaTips 2: Twenty Tested Vol. 10 No. 13 Making the Most of Vol. 10, No. 5 Strategic Pricing in Techniques for Increasing Your Tips, by Priceline’s Name-Your-Own-Price European Hotels, 2006–2009, by Cathy Michael Lynn Channel, by Chris Anderson, Ph.D., and A. Enz, Ph.D., Linda Canina, Ph.D., and Shijie Radium Yan Mark Lomanno
Advancing Business and Personal Success Explore, develop and apply ideas with global hospitality leaders and expert Cornell professors. Professionals from around the world are invited to attend 3-day, 10-day or online courses at the world’s leading institute for hospitality management education in: • Strategic Leadership • Marketing • Finance • Operations • Foodservice • Real Estate • Human Resources Visit our website to apply. The Executive Path Hospitality Leadership Through Learning Complete program information and applications available online: www.hotelschool.cornell.edu/execed Phone + 1 607 255 4919 Email exec_ed_hotel@cornell.edu
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2011 travel industry benchmarking

  • 1.
    2011 Travel IndustryBenchmarking: Marketing ROI, Opportunities, and Challenges in Online and Social Media Channels for Destination and Marketing Firms Cornell Hospitality Report Vol. 11, No. 9, April 2011 by Rohit Verma, Ph.D., and Ken McGill www.chr.cornell.edu
  • 2.
    Advisory Board Niklas Andréen,Group Vice President Global Hospitality & Partner Marketing, Travelport GDS Ra’anan Ben-Zur, Chief Executive Officer, French Quarter Holdings, Inc. Scott Berman, Principal, Real Estate Business Advisory Services, Industry Leader, Hospitality & Leisure, PricewaterhouseCoopers Raymond Bickson, Managing Director and Chief Executive Officer, Taj Group of Hotels, Resorts, and Palaces Stephen C. Brandman, Co-Owner, Thompson Hotels, Inc. Raj Chandnani, Vice President, Director of Strategy, WATG Benjamin J. “Patrick” Denihan, Chief Executive Officer, Denihan Hospitality Group Brian Ferguson, Vice President, Supply Strategy and Analysis, Expedia North America Chuck Floyd, Chief Operating Officer–North America, Hyatt Gregg Gilman, Partner, Co-Chair, Employment Practices, The Robert A. and Jan M. Beck Center at Cornell University Davis & Gilbert LLP Back cover photo by permission of The Cornellian and Jeff Wang. Tim Gordon, Senior Vice President, Hotels, priceline.com Susan Helstab, EVP Corporate Marketing, Four Seasons Hotels and Resorts Jeffrey A. Horwitz, Chair, Lodging + Gaming, and Co-Head, Mergers + Acquisitions, Proskauer Kevin J. Jacobs, Senior Vice President, Corporate Strategy & Treasurer, Hilton Worldwide Kenneth Kahn, President/Owner, LRP Publications Cornell Hospitality Reports, Kirk Kinsell, President of Europe, Middle East, and Africa, Vol. 11, No. 9 (April 2011) InterContinental Hotels Group Radhika Kulkarni, Ph.D., VP of Advanced Analytics R&D, SAS Institute © 2011 Cornell University Gerald Lawless, Executive Chairman, Jumeirah Group Mark V. Lomanno, CEO, Smith Travel Research Cornell Hospitality Report is produced for Betsy MacDonald, Managing Director, HVS Global Hospitality the benefit of the hospitality industry by Services The Center for Hospitality Research at David Meltzer, Senior Vice President, Global Business Cornell University Development, Sabre Hospitality Solutions William F. Minnock III, Senior Vice President, Global Rohit Verma, Executive Director Operations Deployment and Program Management, Marriott International, Inc. Jennifer Macera, Associate Director Mike Montanari, VP, Strategic Accounts, Sales - Sales Glenn Withiam, Director of Publications Management, Schneider Electric North America Shane O’Flaherty, President and CEO, Forbes Travel Guide Center for Hospitality Research Thomas Parham, Senior Vice President and General Manager, Cornell University Philips Hospitality Americas School of Hotel Administration Chris Proulx, CEO, eCornell & Executive Education 489 Statler Hall Carolyn D. Richmond, Partner, Hospitality Practice, Fox Rothschild LLP Ithaca, NY 14853 Steve Russell, Chief People Officer, Senior VP, Human Resources, McDonald’s USA Phone: 607-255-9780 Michele Sarkisian, Senior Vice President, Maritz Fax: 607-254-2922 Janice L. Schnabel, Managing Director and Gaming Practice www.chr.cornell.edu Leader, Marsh’s Hospitality and Gaming Practice Trip Schneck, President and Co-Founder, TIG Global LLC Adam Weissenberg, Vice Chairman, and U.S. Tourism, Hospitality & Leisure Leader, Deloitte & Touche USA LLP
  • 3.
    Thank you toour generous Corporate Members Senior Partners Hilton Worldwide McDonald’s USA Philips Hospitality SAS STR Taj Hotels Resorts and Palaces TIG Global Partners Davis & Gilbert LLP Deloitte & Touche USA LLP Denihan Hospitality Group eCornell & Executive Education Expedia, Inc. Forbes Travel Guide Four Seasons Hotels and Resorts Fox Rothschild LLP French Quarter Holdings, Inc. HVS Hyatt InterContinental Hotels Group Jumeirah Group LRP Publications Marriott International, Inc. Marsh’s Hospitality Practice Maritz priceline.com PricewaterhouseCoopers Proskauer Sabre Hospitality Solutions Schneider Electric Thayer Lodging Group Thompson Hotels Travelport WATG Friends American Tescor, LLC • Argyle Executive Forum • Berkshire Healthcare • Center for Advanced Retail Technology • Cody Kramer Imports • Cruise Industry News • DK Shifflet & Associates • ehotelier.com • EyeforTravel • 4Hoteliers.com • Gerencia de Hoteles & Restaurantes • Global Hospitality Resources • Hospitality Financial and Technological Professionals • hospitalityInside.com • hospitalitynet.org • Hospitality Technology Magazine • Hotel Asia Pacific • Hotel China • HotelExecutive.com • Hotel Interactive • Hotel Resource • International CHRIE • International Hotel Conference • International Society of Hospitality Consultants • iPerceptions • JDA Software Group, Inc. • J.D. Power and Associates • The Lodging Conference • Lodging Hospitality • Lodging Magazine • LRA Worldwide, Inc. • Milestone Internet Marketing • MindFolio • Mindshare Technologies • PhoCusWright Inc. • PKF Hospitality Research • Resort and Recreation Magazine • The Resort Trades • RestaurantEdge.com • Shibata Publishing Co. • Synovate • The TravelCom Network • Travel + Hospitality Group • UniFocus • USA Today • WageWatch, Inc. • The Wall Street Journal • WIWIH.COM • Wyndham Green
  • 4.
    2011 Travel Industry Benchmarking: Marketing ROI, Opportunities, and Challenges in Online and Social Media Channels for Destination and Marketing Firms by Rohit Verma and Ken McGill Executive Summary S enior lodging and destination marketing executives often make vendor and marketing channel decisions without sufficient time to investigate the ROI of alternative strategies or emerging media choices. An internet-based survey of 426 marketing executives, drawn from the TravelCom 2011 conference and Cornell Center for Hospitality Research database, with support from Vantage Strategy and iPerceptions, found a wide range of expenditures on online marketing, as well as considerable diversity in organizational structures. Two-thirds of the sample comprised accommodation marketers, with the remainder being destination marketers or those responsible for other types of marketing. Nearly three-quarters of the respondents reported spending less than $10,000 on mobile media in 2010, about two thirds spent less than $10,000 on all social media marketing. About 80 percent of the marketers said that they produced Twitter campaigns and social promotions in-house, but such functions as search engine optimization and pay-per-click advertising are largely outsourced. Accommodation firms are more likely to outsource all social media functions, including pay-per-call, Twitter campaigns, and pay-per-click management. Destination marketers, on the other hand, generally handle more functions in-house. Two-thirds of the entire sample said the 2010 e-commerce budgets had increased with respect to 2009. Sixty percent of accommodation marketers anticipated a further increase in 2011, and 71 percent of the destination marketers said their 2011 budgets would increase. 4 The Center for Hospitality Research • Cornell University
  • 5.
    About the Authors Rohit Verma, Ph.D., is professor of operations management and executive director of the Center for Hospitality Research at the Cornell University School of Hotel Administration (rohit.verma@cornell.edu). Among his research interests are product-and-service design and innovation, customer choice modeling, and quality process improvement of supplier selection strategies. His work has appeared in such publications as MIT Sloan Management Review, Journal of Operations Management, and Cornell Hospitality Quarterly. Ken McGill is EVP of Research for Vantage Strategy (ken.mcgill@vantagestrategy. com). He directs Vantage’s Travel & Tourism Research division where he delivers insight and intelligence to DMOs and Travel & Tourism suppliers. Prior to Vantage, he was Executive Vice President for IHS Global Insight and head of its Travel & Tourism Practice. McGill directed both existing client relationships and spearheaded new development efforts, particularly in the functional areas of market research, economic impact assessment, and resource planning. In his 30 years in economic and strategic consulting, McGill has developed an expertise in research and planning methods that has been successfully applied to business problems in a variety of corporate and government settings. He is particularly known for his work in combining primary market research with traditional economic and industry analysis. A particular focus of McGill’s work has been in tourism economic impact assessment. Moreover, McGill’s expertise has often been called upon to estimate the economic impact of specific destinations, attractions, convention facilities, resort/hotel developments, events, and tourism policy decisions. The authors gratefully acknowledge the support of the TravelCom Conference and Vantage Strategy in conducting this study. Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 5
  • 6.
    COrnell Hospitality Report 2011Travel Industry Benchmarking: Marketing ROI, Opportunities, and Challenges in Online and Social Media Channels for Destination and Marketing Firms by Rohit Verma and Ken McGill A s part of the planning for TravelCom 2011, conference organizers consulted the TravelCom advisory board members to identify their most pressing issues. These chief marketing officers and marketing executives identified the acceleration of online marketing forces as a common concern. The executives feel that they are being called on to make vendor and marketing channel decisions without sufficient time to investigate the ROI of alternative strategies or emerging media choices, as well as benchmarking what others are doing. Uncomfortable with ad hoc decision making, the executives requested a study that would establish benchmarks for organizational practices and decision making. 6 The Center for Hospitality Research • Cornell University
  • 7.
    Exhibit 1 Samplecomposition Destination Marketing Executives Annual budget for marketing and e-commerce averaged $136,000 in 2010; two-thirds Accommodation reported that this was an increase over 2009; seven Marketing Executives of ten anticipated an increase in 2011 87 Annual budget for marketing and e-commerce averaged $1,354,000 in 2010; two- thirds reported that this was an increase over 2009; 291 six of ten anticipated an increase in 2011 Other Travel- 48 related Firms Destination Accomodation Other This study is the result of that expressed need. With the elCom databases of travel industry marketing executives. support of Vantage Strategy and iPerceptions, we developed A total of 426 industry respondents completed the survey, a questionnaire that would allow us to assess the state of and they were assured that no private or identifying infor- electronic marketing—establishing benchmarks and provide mation would be shared. The purpose of the study was only a comparison point for resources devoted to electronic to create a public benchmark and allow private compari- marketing. sons of the participants’ firms with those benchmarks. We divided the survey questions into three overarching Executive Profile themes: (1) Information that places a firm into a competitive set; Sixty-eight percent of the respondents worked in accom- (2) How dollars are spent in the online marketing space modation firms, 20 percent were destination marketers, (3) How resources are allocated and the rest worked in a variety of travel-related firms (see We categorized the responses to the survey questions to Exhibit 1). assess different aspects of online marketing initiatives in the The respondents reported a noticeable difference in following areas average annual budgets for marketing and ecommerce. At • Budget and resource allocation, $1.354 million, the average budget reported by marketers • Marketing and promotion , for accommodation firms was ten times the average for • International strategy development, destination marketers, who reported an average of $136 • Commerce and conversion, thousand dollars. Both groups reported that the electronic • Loyalty and reputation, marketing portion of those budgets was increasing year to • Analysis and research, year. • Challenges and future opportunities. The two types of organization also reported different We conducted the survey online during January and structures for deploying members of the online market- February 2011. Respondents were part of the CHR and Trav- ing services team and the ecommerce team (see Exhibit 2). Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 7
  • 8.
    Exhibit 2 Onlinemarketing services and e-commerce team placement Destination Firms Accommodation Firms Online Marketing Services Marketing department 75% Online Marketing Services Sales department 4% Marketing department 41% 87 eCommerce department 2% Sales department 17% Operations department 6% eCommerce department 9% Operations department 5% eCommerce Marketing department 51% 291 Sales department 6% eCommerce Web services department 11% Operations department 12% 48 Marketing department 33% Revenue management department 40% Sales department 27% Web services department 5% Operations department 3% Destination Accomodation Other Exhibit 3 Online pricing strategy and distribution team placement Destination Firms Accommodation Firms Online Pricing Strategy Team Online Pricing Strategy Team Marketing department 25% Marketing department 10% Sales department 4% Sales department 18% Revenue management department 12% Operations department 12% 87 Revenue management department 54% Operations department 5% Distribution Strategy Marketing department 53% 291 Distribution Strategy Marketing department 14% 48 Destination Accomodation Other Three-quarters of the destination marketing organizations ecommerce teams part of the revenue management depart- housed their online marketing team in the marketing de- ment, and another 17 percent were in the sales department. partment, but that was true of just 41 percent of the accom- Looking specifically at the people who determine strat- modation marketers. Instead, 17 percent of the online team egy for online pricing and distribution, we again see that the was housed in the accommodation firms’ sales department, marketing department is foremost for destination market- and another 9 percent in the ecommerce department. ing firms, but that is not true of accommodation firms (see A similar relationship occurred for the ecommerce Exhibit 3). team. Just over half of the destination marketing firms put Well over half of the accommodation firms (54%) put the ecommerce team in the marketing department, while their pricing strategists in the revenue management depart- that was true in only one-third of the accommodation firms. ment, with another 18 percent in sales. Just 10 percent of the Instead, 40 percent of the accommodation firms made their accommodation firms had their pricing strategy function 8 The Center for Hospitality Research • Cornell University
  • 9.
    0 0 Exhibit 4 Exhibit 5 Online marketing and e-commerce budget Percentage allocation of staff time (average of 3.25 allocation staff) 60 60 60 e e Destination 50 Accomodation Destination Accomodat g Destination Firms Destination Firms g 50 50 Destination Accomodation 40 40 Destination Accomodation a a Accommodation Firms Accommodation Firms 40 60 t 30 t 50 n n 30 30 20 40 e e 20 20 10 c c 30 r 10 r 10 0 20 e e 0 0 P Accommodation 10 Destinationn Accomodation P tio n Destinationion ion ar ch on i o si on i ch r rs at t r at ea mo ve ut re se mo ve ut re s o n ep o n ep nd pr an d co an dr ics an d 0 nd pr an d co n dr sa nd ga y t ga ya tic et in rce ya lt ly et in rce ya lt ly k me Lo A na k me Lo A na ar m ar m M Co M Co Exhibit 6 Online advertising budget for 2010 Over $1,000,000 $499,999 - $1,000,000 Destination Destination Firms Average $≈80,000 Accomodation $250,000 - $499,999 $100,000 - $249,000 Destination Accomodation Accommodation Firms Average $≈60,000 $50,000 - $99,999 $25,000 - $49,999 $10,000 - $24,999 Less than $10,000 0 10 20 30 40 Accomodation in marketing. For the destination marketers, 25 percent of Destination tion, and analytics and research. The respondents reported firms put pricing strategy in marketing, and just 12 percent similar percentage allocations of staff time (Exhibit 5). For in the revenue management department. For distribution the entire sample, the average number of staff members strategy, well over half of the destination firms housed distri- involved in online marketing and ecommerce was 3.25. bution strategy in their marketing department, but that was The range of budgeted online advertising expendi- true of only 14 percent of accommodation firms. tures was remarkable, with some firms reporting budgets In terms of budget allocations, marketing and promo- of less than $10,000 and others over $1 million (Exhibit tion was by far the largest single online marketing and 6). The budgets skewed toward the lower end of the range, ecommerce category for both destination and accommoda- however, as the average online advertising budget for ac- tion firms (see Exhibit 4). Those expenditures were followed commodation firms was approximately $60,000, while for in order by commerce and conversion, loyalty and reputa- destination marketers the average was about $80,000. In Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 9
  • 10.
    10 0 Exhibit 7 Percentage budget for online media placement More then 95% More than 95% Destination Destination Firms Average ~40% Accomodation 85% to 94% 85 to 94% 75% to 84% 75 to 84% 65% to 74% 65 to 74% Destination Accomodation Accommodation Firms Average ~45% 55% to 64% 55 to 64% 35% to 44% 45 to 54% 35% to 44% 35 to 44% 25% to 34% 25 to 34% 11% to 24% 11 to 24% Less then 10% Less than 10% 0 5 10 15 20 25 Exhibit 8 Accomodation Destination Source of online media and advertisement purchasing Not Not sure sure 5% 5% One One agency agency 21% 27% on one agency Handled internally Handled multiple agency 35% mu internally 40% handled internally ha not sure no Multiple Multiple agency agency 39% 28% Destination Accommodation Firms Firms terms of the percentage of the marketing budget, online than $10,000 on social media, and three-quarters spend less media placement also varied widely (Exhibit 7). than $10,000 on mobile media. Although the average online budget allocations repre- The breakdown of purchasing channels for advertising in sented an average of 40 percent of destination firms’ market- online media is similar for destination and accommodation ing budget, seven of the 87 destination firms and 20 of the firms (see Exhibit 8). While substantial percentages of firms 216 accommodation marketers reported online budget handle purchases internally, many also use multiple agencies. allocations of less than 10 percent of the marketing expendi- A relatively small percentage use just one agency for online tures. Two-thirds of the firms reported that they spend less media buys. Looking more specifically at how these firms 10 The Center for Hospitality Research • Cornell University
  • 11.
    Exhibit 9 Solutionsfor online marketing: Percentage in-house Pay Per Click Management Search Engines Accommodation Firms Accommodation Destination Destination Firms Destination Accomo Pay Per Call 60 Ad Exchanges 50 SMS/Text Messaging Link Building 40 Branding 30 Press Release Distribution 20 Video Distribution 10 Social Influence 0 Twitter Campaigns 20 30 40 50 60 70 80 90 100 Exhibit 10 Solutions for online marketing: Percentage outsourced to specialized firms Pay Per Call Branding Twitter Campaigns Affiliate Marketing Ad Placement Destination Destination Firms Accomo Accommodation Firms SMS/Text Messaging Social Influence Video Distribution Search Engines Link Building Pay Per Click Management 0.0 20.0 40.0 60.0 80.0 100. handle the many aspects of online marketing, we see that other perspective, accommodation firms are far more likely ACCOMODATION such matters as Twitter campaigns and social influence are DESTINATION than destination firms to retain specialized firms for online largely handled in house (see Exhibit 9). marketing campaigns (see Exhibit 10). Indeed, destination marketing firms are, in gen- The difference in approaches shows up most notice- eral, more likely to handle all online marketing functions ably in pay-per-call, branding, Twitter campaigns, and in-house. On the other hand, pay-per-click management, affiliate marketing programs. Destination firms reported search engine management, and pay-per-call campaigns outsourcing these functions only 25 percent of the time, are quite frequently outsourced. Taking this issue from the while accommodation firms frequently outsource not only Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 11
  • 12.
    30 20 20 10 10 0 0 Exhibit 11 Implementation solutions: Percentage in-house Site Hosting Social Sites Mobile Apps Destination Destination Firms Accomodatio Mobile Website Destination Accomodation Accommodation Firms Corporate Website 0 20 40 60 80 100 Exhibit 12 Accomodation Destination Content-management system Other Enterprise Enterprise Other Open 8% 18% Open 17% 12% Source None Source 28% 8% Open 29% Open None source source 28% 8% open source 29% enterprise None custom None 8% 8% none Custom Custom 34% Other Custom 38% Other Custom other 8%38% Enterprise 12%34% Enterprise 18% 17% Destination Firms Accommodation Firms those functions, but also ad placement and social influence Again, destination marketers were slightly more likely campaigns. than accommodation marketers to handle most of these The marketers were much more inclined to handle functions on their own. The breakdown of sources for the social media sites and corporate websites on their own than content management system was similar for both destination they were mobile apps and the mobile website, which were marketers and accommodation firms: just under 30 percent most typically outsourced (see Exhibit 11). were open source, not even 20 percent were enterprise sys- tems, and over one-third were custom written (see Exhibit 12 The Center for Hospitality Research • Cornell University
  • 13.
    Exhibit 13 Average development cycle Not 60 Not Every 60 Every sure50 sure 7% two four + 15% years 50 years 40 Every 21% 6% two Every 40Every two years 30 years Ever 34% four + years 30Every year 20 Ever 15% Every year 10% 20Every three years Every three 10 Ever years 10Every 30% years four+ 0 Ever Every three 0Not sure Not years Every year 30% 23% Destination Firms Accommodation Firms Destination Firms Accommodation Firms Exhibit 14 Percentage of accommodation and destination firms that... ...use an advertising management system use an Ad mgt system Destination Destination Firms Accomodatio provide eCommerce functionality ...provide e-commerce functionality Destination Accomodation Accommodation Firms ...sellladvertising space sell advertising space have internal staff forfor social media or reputation ...have internal staff social media/reputation mgt management provide online purchasing capabilities ...provide online purchase capability ...have asocial media strategy. have social media strategy 0 25 50 75 100 12). For most firms, the development cycle on these systems Exhibit 14). Responsibility for managing social media Accommodation typically occupied two or three years (see Exhibit 13). Destination resided overwhelmingly in the marketing and sales depart- The two types of companies took relatively similar ap- ment (58% of respondents), with a small percentage in pub- proaches to social media policies and functionality, with one lic relations (15%), ecommerce (12%), or a smattering other exception. Destination firms were overwhelmingly more departments (15%). Asked which social media were most likely to sell advertising space on their sites than the accom- effective, the marketers rated Facebook at the top, followed modation firms were. As a result, the destination firms were by Twitter, YouTube, and LinkedIn (Exhibit 15, next page). somewhat more likely to maintain an advertising manage- Accommodation firms were far more likely than desti- ment system. nation marketers to report that they maintain blogs. Fifty- On the other hand, the accommodation firms were one percent of the accommodation firms reported blogging, more likely to provide online purchasing capabilities (see compared to just 31 percent of destination firms. The person Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 13
  • 14.
    10 0 0 Exhibit 15 Percentage of accommodation and destination firms providing a rating of “very effective” for social media sites 100 80 Destination Destination Firms Accomodation 60 Destination Accomodation Accommodation Firms 40 20 0 Xanga Twitter Ning Hyves Facebook MySpace Xing Bebo Orkut Flickr Hi5 YouTube LinkedIn Foursquare Gowalla Exhibit 16 Destination Accommodation Factors cited as frustrations in online marketing by accommodation and destination marketers (percentages) Unreliable Vendors Sign-Off Progress Technology Limitations Implementation Speed Limited Market Knowledge No Strategic Plan Resource Limitations Budget Limitations 0 10 20 30 40 50 60 70 responsible for managing the blog was almost never the Frustrations CEO or president. Instead, blogging fell primarily to the As shown in Exhibit 16, the marketers cited budget and director of marketing, the social media or public relations resource limitations as their number-one issue. Other issues staff, or in some cases external partners. were the absence of a strategic plan, limited market knowl- 14 The Center for Hospitality Research • Cornell University
  • 15.
    edge, and issueswith implementation speed and technology Acknowledging the possibility of hurling money into the limitations. A few mentioned unreliable vendors. black void of the internet, it seems likely that the compa- nies that have carefully committed resources will enjoy the Discussion rewards of a vibrant electronic distribution strategy. This survey shows an industry still in transition with regard to online marketing and electronic commerce. Based on Conclusion their budget expenditures, it’s clear that some firms have Over time, we anticipate that both destination and accom- jumped wholeheartedly into online commerce, while others modation marketing firms will focus specifically on where in are still testing the waters with relatively small expenditures. their organization the online marketing services and strategy One note on the range of expenditures however, we did function will be housed. Part of that decision is a function of not normalize the budgets on a per-room basis, so it may be corporate culture, of course, but it may be that ecommerce that a company that reported a relatively small budget ex- will evolve to become a discipline of its own, as revenue penditure in absolute dollars has actually committed a large management has done in the past few years. percentage of funds in relation to its company size. The key factor is to ensure that electronic marketing That said, we were surprised to find such tiny bud- and sales strategies are congruent with the organization’s get allocations for online media. A substantial number of overall marketing approaches. While online sales and com- accommodation firms reported under $50,000 in annual merce can only grow as time goes on, the fact remains that expenditures, and a relatively large percentage of destination a substantial portion of the travel business is still sold via firms had allocated under $25,000. In this context, it’s worth traditional distribution channels. underscoring the fact that respondents cited budget and re- Perhaps the key test for accommodation and destina- source limitations as their chief frustration. Technology and tion businesses is managing the transition from traditional vendors are not standing in the way of online markeitng ini- channels to electronic channels, especially since there’s no tiatives and strategies. Apparently, money is doing so. While guarantee of a gradual change from one to another. The it is true that much can be accomplished on the internet history of the growth and development of social media has for “free,” it’s clear that several firms have determined that it been one of discontinuity, and there’s no reason to think that makes sense to commit resources to develop a comprehen- we’ve seen an end to new and unexpected communication sive electronic strategy, instead of a “bootstrap” approach. channels. n Cornell Hospitality Report • April 2011 • www.chr.cornell.edu 15
  • 16.
    Cornell Center forHospitality Research Index www.chr.cornell.edu Vol. 10, No. 12 Cases in Innovative Cornell Hospitality Quarterly 2011 Proceedings Practices in Hospitality and Related http://cqx.sagepub.com/ Vol. 3, No. 4 Brave New World: Online Services, Set 4, by Cathy A. Enz, Ph.D., Hotel Distribution, by Glenn Withiam Rohit Verma, Ph.D., Kate Walsh, Ph.D. 2011 Reports Vol. 3, No. 3 Social Media and the Sheryl E. Kimes, Ph.D., and Judy A. Siguaw, D.B.A Vol 11 No 8 Search, OTAs, and Online Hospitality Industry: Holding the Tiger by Booking: An Expanded Analysis of the the Tail, by Glenn Withiam Vol. 10, No. 11 Who’s Next? An Analysis Billboard Effect, by Chris Anderson Ph.D. of Lodging Industry Acquisitions, by Vol. 3 No. 2 The Challenge of Hotel and Qingzhong Ma, Ph.D., and Peng Liu, Ph.D. Vol. 11 No. 7 Online, Mobile, and Text Restaurant Sustainability: Finding Profit in Food Ordering in the U.S. Restaurant “Being Green,” by Glenn Withiam Vol. 10, No. 10 Cases in Innovative Industry, by Sheryl E. Kimes, Ph.D., and Practices in Hospitality and Related Philipp F. Laqué Vol. 3 No. 1 Cautious Optimism: Services, Set 3: Cayuga Sustainable CHRS Examines Hospitality Industry Hospitality, Chic & Basic, JetBlue Airlines Vol. 11 No. 6 Hotel Guests’ Reactions to Trends, by Glenn Withiam Jumeirah Essex House, The Ritz-Carlton Guest Room Sustainability Initiatives, by Hotel Company, Runtriz, The Seaport Alex Susskind, Ph.D. and Rohit Verma, 2010 Reports Hotel, Thayer Lodging, TripTelevision, and Ph.D. Vol. 10 No. 18 How Travelers Use Xsense Experiential Design Consulting, by Online and Social Media Channels to Cathy A. Enz, Ph.D., Rohit Verma, Ph.D., Vol. 11, No. 5 The Impact of Terrorism Make Hotel-choice Decisions, by Laura Kate Walsh, Ph.D. Sheryl E. Kimes, Ph.D., and Economic Shocks on U.S. Hotels, by McCarthy, Debra Stock, and Rohit Verma, and Judy A. Siguaw, D.B.A. Cathy A. Enz, Renáta Kosová, and Mark Lomanno Ph.D. Vol. 10, No. 9 Building Customer Loyalty: Vol. 10 No. 17 Public or Private? The Ten Principles for Designing an Effective Vol. 11 No. 4 Implementing Human Hospitality Investment Decision, by Customer Reward Program, by Michael Resource Innovations: Three Success Qingzhong Ma, Ph.D. and Athena Wei McCall, Ph.D., Clay Voorhees, Ph.D., and Stories from the Service Industry, by Justin Zhang, Ph.D. Roger Calantone, Ph.D. Sun and Kate Walsh, Ph.D. Vol. 10 No. 16 Best Practices in Search Vol. 10, No. 8 Developing Measures for Vol. 11 No. 3 Compendium 2011 Engine Marketing and Optimization: Environmental Sustainability in Hotels: The Case of the St. James Hotel, by Greg An Exploratory Study, by Jie J. Zhang, Vol. 11 No. 2 Positioning a Place: Bodenlcos, Victor Bogert, Dan Gordon, Nitin Joglekar, Ph.D., and Rohit Verma, Developing a Compelling Destination Carter Hearne, and Chris K. Anderson, Ph.D. Brand, by Robert J. Kwortnik, Ph.D., and Ethan Hawkes, M.B.A. Ph.D. Vol. 10, No. 7 Successful Tactics for Vol. 10 No. 15 The Impact of Prix Fixe Surviving an Economic Downturn: Vol. 11 No. 1 The Impact of Health Menu Price Formats on Guests’ Deal Results of an International Study, by Insurance on Employee Job Anxiety, Perception, by Shuo Wang and Michael Sheryl E. Kimes, Ph.D. Withdrawal Behaviors, and Task Performance, by Sean Way, Ph.D., Bill Lynn, Ph.D. Vol. 10, No. 6 Integrating Self-service Carroll, Ph.D., Alex Susskind, Ph.D., and Vol. 10 No. 14 The Future of Hotel Kiosks in a Customer-service System, Joe C.Y. Leng Revenue Management, by Sheryl Kimes, byTsz-Wai (Iris) Lui, Ph.D., and Gabriele Ph.D. Piccoli, Ph.D. 2011 Hospitality Tools Vol. 2 No. 1 MegaTips 2: Twenty Tested Vol. 10 No. 13 Making the Most of Vol. 10, No. 5 Strategic Pricing in Techniques for Increasing Your Tips, by Priceline’s Name-Your-Own-Price European Hotels, 2006–2009, by Cathy Michael Lynn Channel, by Chris Anderson, Ph.D., and A. Enz, Ph.D., Linda Canina, Ph.D., and Shijie Radium Yan Mark Lomanno
  • 17.
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    w w w.c hr.cornell.edu