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Hotel Marketing Budgets

Three Pillars To Help You
Get What You Want

Hotel Marketing Budget Pillars

Hotel marketing budgets have many criteria but the three pillars that we cover here will help get your ideas approved. The topics include: Goals, Financial Metrics and Sensitivity and Stress Tests. 

Hotel Marketing Budget
Have Clearly Defined Goals

Metrics help to define and measure things. The goal really is the destination. The job of the metrics is to show how well we did in reaching the destination or business objective. For example, imagine that you’re going to take a trip. The destination of your trip is the goal. Now just getting to the destination is not a true measure of success, that is where the metrics come in. For example, suppose you spent every dollar you had, and it took 10 years to get across town. You may have reached the destination but in the end, the cost may not have been worth the price paid.

Just because people are not in the same place doesn’t mean they are making progress.
Like walking in the forest without a good map or a compass.
You may take a lot steps and thinking that you are moving forward but may just be going around in circles. 

Shows how you can get lost without a good hotel marketing budget strategy

Having a clear destination in mind where you want your hotel or restaurant to go is important. Knowing what it looks like when you arrive will help you know when you have gotten there. There are many components in marketing, one of the largest, and the one most people think of is promotion. Because promotion is such a large part of marketing we will use this as the area we are setting marketing goals for. Having a map and other information lets you know when you have arrived at your destination. When you are doing an advertising campaign you also need informational tools to help you know when you have arrived. D.A.G.M.A.R. is one such tool. D.A.G.M.A.R is an acronym that stands for Defined Advertising Goal Measuring Advertising Results. Likewise, you can also use the 5 W’s, who, what, when, where, and why?

Defining your Target Audience – Who


  • Users
  • Non-Users
  • Past Users

The more clearly you can segment your audience the more likely you will be at developing creative content that appeals to them. We can use the Customer Lifetime Value metrics to help in determining which market we should pursue in our goal.

Who ? 

What ? 

Defining Desired Outcome. – What

  • Is this to generate or increase awareness?
  • Is it to provide information?
  • Is it to encourage them to act?

Incorporating financial metrics when defining the goal needs
to be established early in the goal development stage. Having financial
outcomes will help shape the strategy and will be welcomed by the owner GM or
the CFO. 

When will this results be realized ?

Setting timelines for the outcome to be achieved. As we will
briefly touch upon in the metrics section, the NPV (Net Present Value) can help in determining how long and what the financial reward for the campaign could be.

When ? 

Where ?

Where are the resources coming from?

This could be the financial resources as well as human resources. Is the marketing budget properly allocated to make the best use of its current resources? Nicholls
Hospitality Marketing when doing a marketing audit for a hotel helps clarify this so that better decisions are made about hotel marketing budget allocation.

Elon Musk once said in an interview that one of the ways he is able to produce such extraordinary results is because he knows why he is doing what he is doing. He said that companies often spend more time over-engineering things that shouldn’t even exist. Asking yourself why you are taking are setting this goal will help prevent you from building a swimming pool on a spaceship.

Why ?

Hotel Marketing Budget Have Clear Financial Metrics

Metrics are the way that we can measure the success of goals. It is frustrating when you have spent a lot of time developing an idea that you believe will help your hotel move forward and be a leader through some brilliant marketing strategy only to walk into the meeting and have it shot down in minutes because you don’t have the right numbers and right approach to getting your project approved. Having the right metrics can help you move your idea from concept to application.

There are both financial and non-financial marketing metrics that will help you prepare your budget presentation knowing when to use which will make all the difference in your presentations.

This short snippet regarding marketing metrics is best viewed as the tip of an iceberg that you can get very deep into especially with big data becoming a larger component of developing marketing budgets and strategies.

As we are talking about your hotel marketing budget, we will focus on some of the financial metrics that will help you when you present to people whose world is financial numbers. I have noticed that there is a natural hostility between marketing people with ideas and financial officers with money. This doesn’t have to be the case. Disagreements often occur when communication is unclear. So, if you can learn to speak their language, the language of finance you will find friendships and alliances can more easily occur. You don’t have to be fluent to have a friendly and productive conversation but having the basics will go a long way. Just imagine the foreign visitor in your hotel lobby trying to ask for directions to a beautiful attraction near your hotel. You want to help them; it is your job and your passion but if they can’t communicate both of you lose out.

Here are three financial metrics that will help you to have better conversations

Net Present Value (NPV)
Customer Lifetime Value (CLTV)

Profit is a simple calculation that will help to position one proposal for financial resources against another. Something to consider when presenting your marketing budget and using profit is the ability to develop scale. Even though your proposal can produce a higher profit the total cash that results may not be enough to sway opinions. For example, if your marketing idea produces a profit margin of 30% but only results in 100,000 of actual cash, and by cash, I don’t mean bills and coins but the money that ends up in the bank, and another idea produces a 10% profit margin but results in 150,000 in cash your project may not be selected for funding if risk remains constant between the two projects that are vying for approval. 

Profit = Revenue – Costs 

Net Present Value (NPV)

The goal of using NPV is to provide context around different
marketing initiatives that have different costs and may take place over
different periods of time with different expected rates of return. With so many different variables NPV helps to tell the story about what to expect and why so that the best decision can be made for your hotel.

Co = the start up cost of the marketing
B= the cash benefits
C = the cost of ongoing marketing activities
r = the discounted rate, because money today does not have the same value as it does in the future

Note About The Discounted Rate

If you are competing internally the discounted rate will be
compared to other departments and the rate of return expected from allocating
funds to their department rather than yours. So, make good friends with the
accounting department so that you have accurate information and develop a
campaign that will produce better results than the other departments
historically have produced.

Using NPV can be further used to help show the impact that a
marketing initiative can have on the hotels’ valuation by affecting share
price, this topic though is too detailed for this blog, but can be a great win
by showing the impact that excellent marketing can have on a hotel.


Customer Lifetime Value

Customer lifetime value is one of my personal favourite
metrics because it helps keep the hotel focused on being guest-centric while
being financially responsible so that it can continue to operate and provide
excellent service.

Not all guests behave the same way, you know this because
you have to often block rooms to help ensure that the loud and rowdy sports
team is not in the same hallway as the business travelers that have a big
account with you. In the same way that not all guests behave the same way, not
all guests produce the same financial value to the hotel. When we refer to
customer lifetime value we are only looking at their financial contribution to
the business.

Customer lifetime value is the economic value that a customer can produce over time. To be reasonable the timeline should be no longer than 5 years as there are many variables that impact business and lives. Going beyond this timeframe external factors such as competition and or inflation can severely impact the forecasts and cause unintended negative consequences.

To do a customer lifetime value calculation you will need to have clearly defined customer segments. This could be your M.I.C.E. segment, your F.I.T. market, or your business travel market. Working with the revenue management team, if you have one, can help add clarity to the value of each market if you need help.

 Hotels need to be careful when starting their CLTV calculations. A tendency among firms is to just look at the total sales volume each segment produces over a period of time and stop there.  The danger here is that the cost of acquiring and maintaining the guest or account is not always considered or tracked very accurately. Not considering the acquisition and maintenance of the guest segment can lead to false positives. This if taken to the extreme and left unchecked can put a hotel at risk of insolvency because of the misleading belief that all this cash flow means profitability and business strength when in actuality it could be a death spiral. 

Side Note
If you are in a position of leadership of a sales team be it one or 21 people you can sway the results quite easily once you have determined the most profitable guests. You can do this by creating incentives that reward profit over volume. 


Hotel Guest Lifetime Value

When You Change the Goals You Change the Results 

Customer Lifetime Value Formula 

AC = Acquisition cost
M is the margin produced by the guest or account
n is the time period
C is the cost of marketing and serving that account
r is the discounted rate   The estimated future value of the current dollar.
P is the probability that the guest will churn within a year  p= 1-c

Note being able to determine the account churn rate will
impact risk and so even an account with a lower total financial value may hold  more strategic value if increased stability is required. 

Hotel Marketing Budget
Sensitivity and Stress Testing

While all your financial work will be helpful, one way to see it all unravel very quickly is for them to ask you a question that changes your economic forecasts. Such as what if costs go up, or sales are less than projected. To help turn this around you can have some spreadsheets prepared that you will be able to adjust on the fly. This is known as sensitivity or stress testing. This will give them the confidence that is needed because you will be speaking their love language, numbers, and quantifiable proof. This will make them feel all warm and fuzzy. Well maybe they won’t feel warm and fuzzy, but it will help you show that your ideas and strategy are sound and can weather changes in the marketplace.

Funding Sources For Your Hotel

If you are looking for sources of funding the companies below specialize in hotel and hospitality funding. 
Nicholls Hospitality Marketing receives no commission for any funding that is received from any of the sources listed below. 
Description of Company 
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Part 2

In part two we will cover 3 additional pillars to help you
win the hotel marketing budget that you are asking for. These three topics will

  1. Developing a strategic perspective, not just one budget but
  2. Using Industry Benchmarks, leveraging various industry
    information and setting realist expectation
  3. Hospitality Marketing Mix to help with allocation decisions

Having well defined goals helps you increase the odds of achieving them and
knowing how to present your marketing objective with financials that owners,
CFO’s and the people who write the cheques value helps them to value your

Would you like to know more, contact Nicholls Hospitality Marketing.

Nicholls Hospitality Marketing serves hotels, restaurants, and tour companies
through marketing, consulting, and investment. We offer a pay for performance
compensation and money-back guarantees for various services. One of our core services is our hotel marketing audit which helps you optimize your marketing budget.  If you would like
to schedule an introductory call we would love to hear from you.