Optimize The Internet

Growing demand has shifted hoteliers' online emphasis from disposing of net-rate inventory to optimizing the potential of search engines and online advertising.

By Mary Scoviak, Features Editor -- HOTELS Magazine, 3/1/2005

Two years ago, the relevant question for revenue distribution managers was, “How much are you spending on the Internet?” In 2005, the more pertinent issue is, “How much are you spending on search engine optimization (SEO)?” The potential of newly revved-up search engines offers the expanded reach and capture hoteliers can exploit to the fullest against a backdrop of growing demand. To make the most of search engines’ upside, hotels are scrambling to find the right strategies to maximize returns from organic listings, paid inclusion and keyword buys.

The first thing to recognize is that SEO is not a quick fix. Patricia Brusha, New Castle Hotels & Resorts’ director of revenue distribution management, Shelton, Connecticut, estimates that once a site is optimized, it can take four to six months to feel the full results. By contrast, the payback for a well-constructed pay-per-click (PPC) program is “almost immediate.” “Search engine marketing will always bring you more traffic. But, PPC will bring you more precise and more relevant traffic,” she adds. While natural placement rankings will vary, as will the ways in which Internet users find a hotel’s Web site, PPC keyword phrases are specific, and the hotel’s position is fixed, though not permanent. With their different patterns of reach and capture, SEO and PPC can be combined to create a powerful Internet strategy.

Any SEO program has to start from the ground up. With the competition only one click away, Web sites are being designed or re-engineered to be friendlier to search engine spiders. Next generation solutions are becoming even more targeted. Brands are launching new micro sites aimed at niche markets to get to the top of the search results. “If we have to compromise between optimization and usability, we often take the optimization route,” says Andrew Pozniak, Le Méridien Hotels & Resort’s director, e-commerce worldwide.

The Gist

In 2005, 25% of all revenues in hospitality will be generated from the Internet. PhoCusWright projects that by 2006, that figure will rise to more than 27%. That figure does not include the additional 25% of bookings “influenced” by the Internet, but actually booked offline.

Forrester Research reveals that 80% of overall Web site visits begin in a search engine or directory service. That is what is making search engine optimization the hottest topic in the Internet field. Creating the right strategy centers on maximizing organic search engine listings; paid inclusions and pay-per-click marketing.

The challenge in Internet strategies focuses on stemming revenue erosion. Increased demand has ended over-reliance on deep discounts as the primary Internet sales tool. But Booz Allen Hamilton warns that the Internet revenue gap will grow to US$1.7 billion this year as transparency continues to put pressure on price and as the Web’s share of total bookings increases.

Optimization can only get more complex as the big engines rev up their search menus with new features, and new engines seek to grab market share. Metasearch is the vehicle to watch. AOL and Yahoo made their investments already. Various independents are building scraping technology. “It will be interesting to see to what extent Google will cope with the proliferation of pure referral sites by introducing a human overview to its listings,” Pozniak adds.

Unlocking Keyword Potential
Keywords continue to be a hot topic, especially at a time when competition for customers’ attention is driving up prices. “Cheap hotels” reputedly are among the most expensive keywords on Google. City words such as New York or London can go for US$3 or US$4 per click. “Keyword buys are no longer a ‘no-brainer.’ While reach is increasing, the cost of that reach must be balanced carefully with customer acquisition cost,” says Cameron Yuill, vice president, Cendant Partner Marketing. The answer is to go where the customers are. “Message the customer as close to the point of purchase as possible,” Yuill says. “Getting your hotel above the ‘noise’ is incredibly difficult. The further you go from the point of purchase, the harder it is to convert searchers to buyers.”

Making the most of PPC as part of an integrated, multichannel strategy means thinking beyond front-page positioning. “It is not about clicks or conversion anymore. It is about return on investment (ROI),” says Caroline Larson, manager of e-marketing, Carlson Hotels Worldwide. “Key words, banner advertising, third party intermediaries—everything is measurable against ROI.”

Measurability has emerged as the acid test in the keyword/phrase buying decision. “The entire booking process is so trackable. If something is not working, you know it right away, and you can shut it down,” says Rebecca Wyatt, Hilton Hotels Corp.’s senior vice president, electronic distribution and CRM. In-depth research on which words succeed with the target market is the starting point for the keyword buy. That can be cross-checked on advertiser centers—such as the one on overture.com—which show keyword search frequency for the previous month. Competitors’ sites can yield free, useful information as well, Brusha adds. If the competition’s site is optimized, just right click on the white space of their site. Hit the view source button and look for their keyword meta-tags that describe how the competition describes what it has to sell.

Hoteliers are using this information bonanza to get more specific and more efficient in buying keywords. The mandate is to find words unique to a property or brand. As Wyatt says, “Hilton has to buy Hilton,” but it also has to find the words that “grow wallet share from existing customers” and open up well-defined incremental markets. Hard and soft brands alike are taking PPC maximization all the way through the booking process. “You have to have a new strategy for a new type of search engine. Buying Leading Hotels of the World is a given. But, there are new opportunities to showcase a specific type of hotel, such as golf hotels,” says Jeff Mirman, Leading Hotels of the Worlds’ director, e-Marketing.

As Mara Hannula, Marriott International’s senior director, marketing, points out, the aim is to sell the way customers want to buy. That is why brands such as Marriott are adding dynamic packaging components with customization features to proprietary Web sites, as well as clickable packaging concepts with popular search phrases such as “last-minute weekends.” “There will be a growth in the levels of service and specialization customers are able to receive over the Internet. Technology-enabled mass customization finally will come to online travel,” Hannula says.

Online travel companies, such as Cendant Travel Distribution Solutions’ Orbitz, are adding searches by destination and amenities to pump up volume. Kurt Weinsheimer, Orbitz vice president, Hotels, sees sites adding features that allow hoteliers to better target certain customers—whether by drilled down searches, demand-driven options for comparing price and special offers on-site, or direct approaches to consumers who have just bought airline tickets to ask if they also need to book a hotel. “The aim is to grow incremental business by adding features targeted to specific markets,” he says.

Advertising Versus Marketing
Online advertising is following the trend toward specificity. What works best is still under debate—especially in terms of buying banners. Dorothy Dowling, Best Western International’s senior vice president, marketing, forecasts growth in online advertising via banner headlines because “it is a key way to drive promotional messages and branding awareness to the online consumer.” That should become even more important this year and next as the ongoing emergence of behavioral marketing enables hotels and brands to customize their offers.

Third-party sites such as Expedia are rolling out a new generation of banners. When the mouse hovers over the banner, tabs appear for hotels, cruise lines and other travel categories. “The more interactive we can make these features, the more click-throughs there will be. More information gives the consumer more reasons to go to the hotel’s Web site,” says David Dennis, product manager for Expedia.

Not everyone is a fan. Mirman says the click-through rate on banners has fallen to less than one percent. Eric Pearson, senior vice president, InterContinental Hotels Group (IHG), points to a drop in click-through rates from what was six to seven results to two to four. “Paid placement will continue to be a critical part of our strategy, but not with banners,” Pearson says. He sees more emphasis ahead for affiliations, especially since hoteliers only pay on a transactional basis. “Affiliations and links with targeted sites are extremely effective because they capture new business.”

Even link strategies are becoming more tightly defined and measured. The most popular links continue to be with destination-specific and travel-related partners that enhance link relevance on the search engines. “Dead links are the pitfall in link strategies. Each link needs to be maintained. You have to know whether your resources would be better applied elsewhere,” says Jacques Dubois, vice president, marketing, distribution and CRM, Rezidor SAS Hospitality.

Paid inclusion also comes under fire, as does the budgetary issue of advertising versus marketing. “Paid inclusions are a bubble that will burst at some time,” says Ashok Lalla, Taj Group of Hotels’ manager, Web marketing. “After all, how much higher can people raise their bids just to come up on a search engine’s ranking report? At some point, the price-value equation will become unfavorable to markets and they will have to turn to other methods of reaching customers.” Instead, Taj and other brands are blending a sharply focused e-CRM initiative with “judicious” online/offline advertising to drive revenues.

The return on the paid inclusion investment depends on the goal. It still ranks as one of the most trackable, clearly priced media. But there is also its flexibility. John Ryan, director, hotels, Opodo, the London-based travel service, says the technology underlying paid inclusion creates a “near perfect market” with the ability to constantly adapt bid and cost structures that reflect market changes. It can accommodate the clicks delivered to hoteliers. “Like anything else in this industry, paid inclusions will live or die on the ability to deliver ROI,” Ryan says.

For most brands, e-marketing budgets will outpace advertising. Tom Griffiths, WORLDHOTELS’ vice president, the Americas, says online advertising “has never really proven to generate new or incremental business.” Results are better from marketing with subscription sites, Griffiths says, because they “create unique opportunities for hotels to deliver targeted messages to consumers looking for great deals and value.” High on growing brands’ priority lists are sites with “members” or a dedicated base of “permission-based” consumers more likely to be open to offers and promotional messages.

One of the biggest problems with advertising, hoteliers say, lies in balancing cost versus targeted reach. Mass advertising, like mass marketing, is on the decline. “We refrain from any ‘uninvited’ form of online advertising such as pop-ups because we are convinced they frequently are perceived as a nuisance. We get better results from e-mailed newsletters to signed-up subscribers and offers on our own Web site,” says Heiko Siebert, director of reservations and revenue management, Mövenpick Hotels & Resorts. Best-rate guarantees are one of the most marketable features. Siebert predicts price comparison will drive growth for comparison sites such as Kayak and Sidestep.

Costs are as much of an issue in e-marketing as advertising. The price of attracting the customer in the first instance is high, putting more pressure on Web sites to extract an e-mail address and opt-in permission. Competition is heating up to make sites more descriptive, more accurate, jargon-free and ready to be read directly by the consumer—in his or her local language. The flip side is counter-balancing ease-of-use redesigns for returning consumers. More and more data is stored so that customers do not have to re-enter any data, including credit card numbers. “It is all about personalization,” Pearson says. “In countries such as Germany and China, consumers do not want to give a credit card number. Sites need to reflect that.”

The result, says Brian Stage, Carlson Hotels Worldwide’s executive vice president, sales, distribution and reservation services, is that what defines the “best” Internet strategies has more to do with the bottom line than volume. “Optimization involves focusing on respective profitability. (Judged by raw volume), a channel may not look all that profitable. But, if it effectively reaches a new customer base and drives steady incremental revenue with good yield, it could be an effective component in the channel mix,” Stage says.

Trends To Watch
PhoCusWright reports the online U.S. leisure/unmanaged business travel market will reach US$78.5 billion in 2006 (double that of 2003) and that by next year, 37% of all travel will be booked online. PhoCusWright also projects gross Internet bookings for hotel brands’ Web sites will grow 30% this year and 18% next year—just one percent behind projected growth for online travel agencies. Germany is leading Europe’s steady online travel growth and will represent one-fifth of the European online travel industry by next year, forecasts PhoCusWright—while the UK’s share declines from 43% in 2003 to 32% in 2006. Scandinavia has the largest Internet penetration rate in Europe. France is undergoing “major growth” in online travel while Spain’s online development is “slow,” according to PhoCusWright.

Expert Advice: Hiring A Search Engine Optimization Company
In April 2004 alone, 67,000 searches were done for the term “search engine optimization.” Some hotels will need expert help in creating a strategy that truly optimizes search engines as business-building tools. Patricia Brusha, director, revenue distribution services, New Castle Hotels & Resorts, recommends asking the following questions before hiring a search engine optimization service:

How much will it cost? Some companies charge a flat, one-time fee; others, a percentage of realized revenues. The investment may range from US$5,000 to US$20,000. Be sure companies are comparing “apples to apples” when you request quotes.

Is bigger better? It depends on the individual provider. Will companies beyond page one or two provide you with less attention, focus and guidance when they are in such a competitive market for those top keyword phrases? Are the big companies spending more time on optimizing their own sites than working with clients? Don’t dismiss paid advertisers, especially those paying for keywords such as hotel Web site optimization or search engine optimization specific to your destination.

Is the company a search engine optimization specialist or is this a recent add-on to an existing business?

Is the company a specialist in the hotel field? This has its pros and cons: Pro in that someone who understands your business can help more in developing your targeted keyword list; con in that if they have numerous hotel clients in one destination, they cannot have all of their clients reach a number one ranking. Will you be competing with other clients?

What should be included in a proposal? A Web site functionality audit and ranking performance based on your targeted keywords is essential. The proposal also would include an analysis of your current Web site architecture and design to uncover problems that hamper natural placement results. Next, they should collaborate with you on a list of keywords and keyword phrases. Go to www.overture.com on its advertiser center, type in those keywords and phrases and see how many times the word/phrase was searched on their search engine the previous month. That will indicate whether you are on target.

Expert Advice: Winning The KeyWord Battle
Keyword search is expected to exceed 50% of all online advertising dollars in 2005. What strategies will deliver the best return on the keyword investment?

“Hotel planning is destination sensitive. By having a destination-focused strategy, search engines will be able to catalog and index your hotel site more effectively and drive more business to it,” says Max Starkov, chief eBusiness strategist, and Jason Price, vice president of eMarketing, Hospitality eBusiness Strategies.

“Make your hotel the ‘hero’ of its destination. Associate it with events and happenings. Identify patterns of customer purchasing habits for the destination, and leverage that to target unique and specialized markets.”

“Identify the keyword or keyword phrases that best define what you have to offer the consumer, then edit that list down to no more than about six phrases,” says Patricia Brusha, director, revenue distribution management, New Castle Hotels and Resorts, Shelton, Connecticut. “Set up paid placement with key search engines. Review all pay-per-click terms weekly and manage for optimumperformance. Send detailed monthly reports documenting weekly activity generated from paid placement program.”

“Go after the words that are unique to your property, not the words for which everyone is competing,” says Benu Aggarwal, founder and president, Milestone Internet Marketing. “You can pay US$3 or US$4 per click for words such as San Francisco and still not get the results you want. Be as specific as possible; buy terms such as ‘pet friendly’ or ‘airport hotel.’ Find out what people want, and bid for that.”