Setting a Digital Marketing Budget during Covid-19

Investment should be a fluid and constantly adjusting figure

During budgeting season, teams of executives will pour over financial data, forecasts, and historical metrics to determine how much to spend and project for the upcoming year. Taking into account that 2020 has been anything but unprecedented, this budgeting season was nothing short of an exercise in planning for the unforeseen. In light of these obstacles, digital marketing budgets need to be a timely response to the changing projections of 2021 and beyond.

STR currently projects the lodging sector will be impacted by the effects of the pandemic for the next three years. Their most prevalent metrics of Occupancy, Average Daily Rate (ADR), and Revenue Per Available Room (RevPAR) are set to level off somewhere in the late part of 2023. This extended period allows for a good amount of adjustment depending on the pandemic response, a resurgence of infection levels, and legislative restrictions on travel. In other words, hotels will need to continuously rethink their fiscal approach in order to meet their demand with proper marketing techniques.

In order to respond to this fluid projection on the industry, William Carroll, a Clinical Professor for the School of Hotel Administration at Cornell University, wrote a whitepaper that describes the approach in three phases; While Travel is on Pause, Initial Travel Recovery and Strong Travel Demand. These faces, Carroll, explains can be sequential or cyclical depending on various factors that are out of the control of decision-makers in hospitality. The manner in which governments respond to the pandemic, the availability and distribution of a vaccine, application of quarantine restrictions, and the speed of economic recovery to name a few.

According to NextGuest, an industry technology consulting organization, the recommended Sales and Marketing budget is 5% of the projected total room revenue with 40% of that going to digital marketing. The issue here is that unlike previous years where this projection remains stable for the most part, room revenue is based on a demand that may change with every passing week.

Therefore hoteliers need to continuously readjust their spending based on the marketing funnel described by Carroll. He states that each phase of the recovery period brings its own actions and Key Performance Indicator (KPI). For example: during the Pause in Travel organizations should concentrate marketing efforts on engagement by "maintaining awareness of the enterprise and what it is doing to ensure the safety and security of guests when they do return." During the Recovery Phase, organizations should encourage bookings by "targeting likely guests with marketing activities that assure guests of a safe and secure hospitality experience and a flexible reservation cancellation policy." Finally when Travel Demand Strengthens organizations should promote loyalty and advocacy by reaching out to guests and resolving any issues especially those caused due to changes created by the pandemic.

It is important to remember that as unprecedented as 2020 was, the recovery of the travel industry will be heavily influenced by global economics and legislation. This will undoubtedly create a cyclical change in demand for hotel rooms. Hotel marketing teams should continue to adjust their expenditures in order to match these ongoing changes and maximize their return and exposure. After all, marketing is 100% about being at the right place at the right time. The other 10% is luck.