The U.S. Hotel Advertising Marketplace: Industry Sizing and Trends 2015

Transcription

1 PhoCusWright White Paper The U.S. Hotel Advertising Marketplace: Industry Sizing and Trends 2015 Sponsored by Written and Researched by Tom Powell aviano sans berling FUTURA PMS-377 PMS-2617 PMS PhoCusWright MARKET RESEARCH INDUSTRY INTELLIGENCE

2 aviano sans berling FUTURA About HSMAI PMS-377 PMS-2617 PMS The Hospitality Sales and Marketing Association International (HSMAI) is committed to growing business for hotels and their partners, and is the industry s leading advocate for intelligent, sustainable hotel revenue growth. The association provides hotel professionals & their partners with tools, insights, and expertise to fuel sales, inspire marketing, and optimize revenue through programs such as HSMAI s MEET, Adrian Awards, and Revenue Optimization Conference. HSMAI is an individual membership organization comprising more than 7,000 members worldwide, with 40 chapters in the Americas Region. Connect with HSMAI at PhoCusWright Inc. All Rights Reserved. Page 2

3 About PhoCusWright PhoCusWright is the travel industry research authority on how travelers, suppliers and intermediaries connect. Independent, rigorous and unbiased, PhoCusWright fosters smart strategic planning, tactical decision-making and organizational effectiveness. PhoCusWright delivers qualitative and quantitative research on the evolving dynamics that influence travel, tourism and hospitality distribution. Our marketplace intelligence is the industry standard for segmentation, sizing, forecasting, trends, analysis and consumer travel planning behavior. Every day around the world, senior executives, marketers, strategists and research professionals from all segments of the industry value chain use PhoCus- Wright research for competitive advantage. To complement its primary research in North and Latin America, Europe and Asia, PhoCusWright produces several high-profile conferences in the United States and Europe, and partners with conferences in China and Singapore. Industry leaders and company analysts bring this intelligence to life by debating issues, sharing ideas and defining the ever-evolving reality of travel commerce. The company is headquartered in the United States with Asia Pacific operations based in India and local analysts on five continents. PhoCusWright is a wholly owned subsidiary of Northstar Travel Media, LLC PhoCusWright Inc. All Rights Reserved. Page 3

4 JANUARY 2013 Contents Table of Contents U.S. Hotel Advertising Spending on Par With Growth 5 Online Spending Will Eclipse Offline by Offline Spending Allocation Will Slowly Shift Away From Print 6 The Mobile Juggernaut Continues Unabated 7 Search Ads Still Dominate, But Look for Significant Online Video Ad Growth 8 As With the Travel Industry at Large, the Top Attribution Model Employed by Hotels is None 10 Revenue Definition 12 Ad Products (Publishers and Technology Vendors) Covered 12 Table of Charts Figure 1 5 Hotels Primed for Continued Advertising Spending Growth Figure 2 6 Hotels Shifting Ad Dollars Online Figure 3 7 Hotels Allocate More Ad Dollars to Print Than Any Other Offline Channel Figure 4 8 Online Ad Spend by U.S. Hotels, Share by Device, Figure 5 8 Search is King of Online Advertising Channels Figure 6 9 Effectiveness of Advertising Channels in Driving Brand and Leads for Hotel Chains Figure 7 9 Effectiveness of Advertising Channels in Driving Brand and Leads for Independent Hotels Figure 8 11 Hotel Adoption of Attribution Models 2014 PhoCusWright Inc. All Rights Reserved. Page 4

5 The U.S. Hotel Advertising Marketplace: Industry Sizing and Trends 2015 Written and Researched by Tom Powell U.S. Hotel Advertising Spending on Par With Growth The U.S. hotel market has made a remarkable comeback since the 2009 recession and the weak economy that followed. While the rest of the travel industry struggled to recover, hotels posted a compound annual growth rate of 7% from This expansion has fueled consistent growth in advertising spending as well. Of all travel supplier segments, hotels report the highest growth rate plans for 2014, increasing their advertising spending by 7.3% year over year (see Figure 1). Hotels also spend more ad dollars than any other supplier segment 1 $1.8 billion in 2013, with plans to increase ad spend to $2.1 billion by On average, U.S.- based hotels spend about 1.5% of their domestic revenue on purchased media displayed or distributed in the U.S. FIGURE 1: Hotels Primed for Continued Advertising Spending Growth U.S. Ad Spend by Segment, (US$M) 7.7% Year-Over-Year Growth Rate 6.4% 7.3% 6.3% Hotels* 1,612 1,735 1,847 1,981 2, Note: *Includes U.S.-based hotels projected. 1) The U.S. Travel Advertising Marketplace: Industry Sizing and Trends 2015, PhoCusWright (June 2014) PhoCusWright Inc. All Rights Reserved. Page 5

6 Online Spending Will Eclipse Offline by 2015 Hotels continue to follow consumer behavior by allocating more of their ad dollars to online channels. As of 2011, hotels already allocated 43% of their ad dollars online (see Figure 2). However, consumers continue to shift to online media consumption and commerce, while online travel agencies (OTAs) focus 79% of their ad budgets online. To keep pace, hotels have stepped up their online game by shifting ever-greater budget dollars into online advertising. Of the $1.8 billion that hotels spent on advertising in 2013, $886 million or 48% went into online channels, while offline still attracted the majority of hotels ad dollars. Expect that ratio to reverse by In 2014, offline and online budgeted spending will be at parity, but by 2015, over $1 billion or 52% of hotel ad budgets will be allocated to online channels. Despite the shift of ad allocations to online, offline media will continue to be a significant channel for spending, inching up from $960 million in 2013 to $1 billion in FIGURE 2: Hotels Shifting Ad Dollars Online Ad Spend by U.S. Hotels, Share by Channel, (US$M) Online Spend Share (%) 43% 46% 48% 50% 52% , , Online Offline Note: projected. Offline Spending Allocation Will Slowly Shift Away From Print Hotels spend more on print advertising than other types of travel suppliers or intermediaries. In 2013, upwards of 40% of offline advertising dollars spent by hotels $384 million went towards print advertising (see Figure 3). Despite a decreasing allocation to print over time and a general shift away from offline spending, this significant advertising channel will remain stable in real dollar terms, due to growing overall hotel ad budgets PhoCusWright Inc. All Rights Reserved. Page 6

7 48% FIGURE 3: Hotels Allocate More Ad Dollars to Print Than Any Other Offline Channel Offline Ad Spend by U.S. Hotels, Share by Channel, % 44% 10% 6% 24% % 41% 10% 6% 25% 20% 40% 10% 6% 24% 21% 39% 10% 6% 24% Offline Spend (US$M) % 39% 10% 6% 23% 1,011 TV Print Out of home Radio Other offline Note: projected. Hotels see television as the best channel for reaching a mass audience quickly and reliably. As print becomes less relevant in customers lives, TV will eat away at ad dollars allocated to the print channel. In terms of types of hotels, chains and independent hotels allocate nearly identical percentages of their offline budgets to print. However, chain hotels allocate twice as much to TV advertising compared to their independent brethren. Chains tend to have larger budgets and thus are better able to produce and effectively leverage TV commercials. The Mobile Juggernaut Continues Unabated As consumers usage of mobile devices has increased, so too has spending on mobile advertising for both tablets and smartphones. Back in 2011, mobile channels represented only 5% of online ad spending; in just two years, that rate has quadrupled to 19% (see Figure 4). Expect this growth to continue through 2015, as mobile spending reaches one third of all ad dollars spent online. To illustrate the rapid growth rate of mobile advertising, consider that Facebook did not even have a mobile advertising option until the first quarter of But as of 4Q13, less than two years later, mobile advertising revenues eclipsed desktop advertising revenue at the social network PhoCusWright Inc. All Rights Reserved. Page 7

8 FIGURE 4: Online Ad Spend by U.S. Hotels, Share by Device, % 4% 1% % 75% 90% 6%4% 11% 8% 14% 11% Online Spend (US$M) % 18% 15% 1,096 Desktop/Laptop Smartphone Tablet Note: projected. Search Ads Still Dominate, But Look for Significant Online Video Ad Growth Search is still king when it comes to hotel advertising, representing 35% of all online ad spend (see Figure 5). Given the dual trends of growing overall budgets and an increasing percentage of ad budgets being allocated to online channels, there will be significant real dollar growth in search spending, up 20% between 2013 and 2015, from $319 million to $382 million. FIGURE 5: Search is King of Online Advertising Channels Online Ad Spend by U.S. Hotels, Share by Channel, % 17% 9% 8% 19% 9% 1% % 36% 35% 15% 8% 11% 19% 8% 3% 13% 8% 12% 19% 7% 5% 12% 9% 13% 18% 8% 6% Online Spend (US$M) % 12% 9% 13% 17% 8% 7% 1,096 General Search Display Metasearch Social ad Units, Native and Other Online Referral/ Listing Online Video Note: projected PhoCusWright Inc. All Rights Reserved. Page 8

9 Both independents and chains rank search engine ad spending as far and away the most effective channel for both direct response (generating leads and direct purchases) and, more surprisingly, brand building (see Figures 6 and 7). FIGURE 6: Effectiveness of Advertising Channels in Driving Brand and Leads for Hotel Chains 80% Very effective 70% SEM Lead Gen/ Direct Purchasing 60% 50% 40% 30% Display Referral/ Listing 20% Video Social 10% Not effective Very effective 10% 20% 30% 40% 50% 60% 70% 80% Brand Marketing Question: Please rate the effectiveness of the following channels for driving brand awareness and lead generation/direct purchases. Base: 25 respondents FIGURE 7: Effectiveness of Advertising Channels in Driving Brand and Leads for Independent Hotels 70% Very effective 60% Referral/ Listing SEM Lead Gen/ Direct Purchasing 50% 40% 30% Social Display 20% Video Not effective Very effective 10% 10% 20% 30% 40% 50% 60% 70% Brand Marketing Question: Please rate the effectiveness of the following channels for driving brand awareness and lead generation/direct purchases. Base: 19 respondents 2014 PhoCusWright Inc. All Rights Reserved. Page 9

10 When evaluating effectiveness, chains view referrals/listings, and display ad spending as very similar channels: About 45% listed them as very or extremely effective for brand marketing and about 40% for direct response. Independents, however, rate referrals and listings as nearly as effective as search engine marketing from a direct response perspective. The newer and rapidly evolving channels of video and social receive the lowest scores across the board. Past performance and attitudes of hotel marketers, however, do not reflect the current and future opportunities within the social and video channels. The scale, tools and capabilities associated with these two channels are clearly still developing. Hence they have not yet established their effectiveness with advertisers seeking to track brand and direct purchase uplift resulting from advertising in these media. Video will have the strongest growth rate of any channel, increasing more than sevenfold between 2011 and 2015, from $10 million to $74 million. Available video ad inventory has climbed rapidly over the last few years, while distribution and tools have improved enough to make it a more attractive method of capturing travelers attention earlier in the purchase life cycle. Hoteliers should evaluate the online video commercial not simply as a channel through which to distribute repurposed TV ads, but as a wholly new medium with opportunities to incorporate online-only features such as interactivity to heighten the impact. Thus far, hotels see social advertising as more of a brand-building exercise, with dubious direct response rewards. Collecting Likes should no longer be viewed as a success metric in isolation. Instead, smart hotel advertisers will utilize the targeting capabilities in social advertising to reach consumers across their devices, while using social spending to augment and amplify their voice and reach on social networks. As With the Travel Industry at Large, the Top Attribution Model Employed by Hotels is None Attribution models help answer the questions: Which of our advertising worked? and How much did it influence our customers? Travel customers will hit multiple touchpoints usually dozens while planning their travel. Attribution modeling aims to answer specific questions such as: If a customer clicks on a search ad and books with you today, how much should you value a video commercial they viewed a week ago about your brand? Currently, 39% of hotel marketers the largest segment either do not utilize attribution models, or are not aware of them (see Figure 8). Among specific attribution models that are used, the simplest form is the most popular: 25% of hotel marketers use the single source, post-click/last-click attribution model. This model applies all credit for a desired action (such as a purchase) to the last channel a customer clicked on. Attribution models are not perfect, and will never give hotels absolute certainty regarding the exact impact of each advertising touchpoint. But the right model can provide a clearer view. Google Analytics allows anyone to dip their toe into attribution models 2014 PhoCusWright Inc. All Rights Reserved. Page 10

11 FIGURE 8: Hotel Adoption of Attribution Models ATTRIBUTION MODELS USED Single source: post-click or last-click (the last advertising medium that the customer clicked on gets credit) Multi-device/screen (tracking touchpoints with users across devices) 20% 25% Online-offline or cross-channel (measurement of both online and offline channels) Fractional: equal or linear (each view seen by the customer before purchase gets proportional credit) Single source: first-view (the first advertising medium that the customer viewed gets credit) Single source: post-view (the first advertising medium that the customer viewed gets credit) Single source: first-click (the first advertising medium that the customer viewed gets credit) Algorithmic or probabilistic (using proprietary algorithms to assign credit) Fractional: U-curve (more weight is given to the first and last touchpoints) 16% 11% 11% 11% 9% 5% 5% Fractional: time-decay (the touchpoints closest in time get more credit) 5% We do not utilize any attribution models/don t know 39% Question: Please rate the effectiveness of the following channels for driving brand awareness and lead generation/direct purchases. Base: 19 respondents for free, with the capability to track and compare multiple simple models. Agencies and attribution vendors can create custom models for those with larger budgets and scale. STUDY BACKGROUND (Adapted from PhoCusWright s The U.S. Travel Advertising Marketplace: Industry Sizing and Trends 2015) PhoCusWright performed an analysis to size the travel advertising market in the U.S. and examine the trends, practices and budget allocations of U.S. travel industry advertising spending from 2011 through PhoCusWright Inc. All Rights Reserved. Page 11

12 How this study defines ad spend: Spend by U.S.-based travel businesses and organizations that is focused on leisure and unmanaged business travel promotion and includes purchased media displayed or distributed in the U.S. The following are not included: Ad spend for managed corporate travel B2B travel industry advertising Costs associated with content creation, social media management and company-owned assets Revenue Definition: Revenue includes U.S.-based suppliers U.S.-based gross bookings. Ad Products (Publishers and Technology Vendors) Covered: Offline: TV, print, out-of-home, radio and other (sponsorships, etc.) Online: Desktop, smartphone and tablet inventory categorized as display, general search, metasearch, referral/listing, social, online video commercials and other ( ad units, native, etc.). m 2014 PhoCusWright Inc. All Rights Reserved. Page 12