HAMA Study Documents Growing Revenue Acquisition Costs Outpacing Hotel Revenue Growth
Wednesday August 20th, 2014 - 9:42AM W
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BOSTON—Hospitality Asset Managers Association (HAMA) has revealed the results of a multi-year study that demonstrates that revenue acquisition costs outpaced hotel revenue growth from 2009 through 2012. The results were presented in “The Rising Costs of Customer Acquisition,” a white paper commissioned in late 2013.
The white paper includes an analysis of the financial results of 104 upper-upscale and luxury managed properties with brand affiliations in the U.S. and Canada. According to the association, it specifically looks at both the external costs of brand allocations (for marketing, advertising, major promotions, national and global sales offices and loyalty programs) and third party commissions (for group and transient bookings), as well as the internal costs of marketing and sales programs, including local marketing, sales staffing and other expenses, including reservations staff.
From 2009 to 2012, the room revenue of this group increased by 23%, almost 7% compounded annually; the cost of customer acquisition from 2009 through 2012 grew almost as quickly as revenue, at just under 23%, according to the company.
The study also found that while total customer acquisition costs rose by 23%, brand allocations grew by 37% and third-party commissions by 34%. Meanwhile, local property marketing (including property specific Internet and paid search) increased by only 6%, or less than 2% per year.
Other findings include the following, according to the association: As a result of the disproportionate growth of external marketing and sales costs, properties now control less of their marketing spend (44% versus 49% in 2009); For the top 10 brands included in this study, cost increases during the three years ranged from a low of 10% to a high of 72%; and room revenue of franchised properties grew by just under 22% during the 2009-2012 time frame, but their total acquisition costs rose by almost 27%, driven by increases in commissions of 48% and brand allocations of 36% and mitigated by on-property spend of only 15%.
Tags: HAMA • Hospitality •
When you hear all the lodging industry projections for the months and years to come, much of the robust growth is forecast to be the result of the expected influx of travelers from China. In what could only be seen as good news for the industry, that expectation moved a little closer to reality when President Obama signed a visa waiver extension for Chinese travelers earlier this month.