Tracking Acquisition Costs in the Real World

Cost of Acquisition = Room Rate – (Commission + SEM + SEO + Blood + Sweat + Tears)

Much has been said and written about the importance of understanding, measuring, and controlling a hotel’s expenses associated with securing guests. But HSMAI’s Revenue Management Advisory Board has not seen wide-spread evidence that many hotels or hotel companies are having great success at the actual tracking, measuring, or controlling.

It recently led to a generous exchange of best practices and lessons learned in an attempt to tackle some hard questions:

Is anyone really tracking acquisitions costs now?  If so, how are you going about it? Does it tell you anything you can use?

  • You have to have someone on your team who is super passionate and knowledgeable who can drive it. It would be extremely difficult to accomplish without a solid personnel resource to put against it.
  • We’re getting started by talking about it…a lot.

When you get to a number, is that number meaningful to people? Are you able to take action on it right away or you are still trying to figure out “now that I have this number, what do I do with it? How do I know if it’s ‘good’?

  • That’s the tricky part, and the piece that’s going to be the most difficult, because it’s a totally different way of setting your strategy.
  • When I got my first set of data it was not surprising to me that hotels with strong revenue directors who know how to balance the right mix of business for their hotel had cost of acquisition results that were pretty decent.
  • From our early results, obviously there are always opportunities, but we didn’t see anything surprising. That was my first “Aha!” moment, realizing that there’s not necessarily going to be “buried treasure” in your data.

Which measurements should be included, and which should not (e.g., OTA costs, commissions, marketing fees, brand fees, salaries, etc.)?

  • For those deep into tracking costs, 100% of every single cost gets allocated somewhere.
  • There is a lot to think about on the front end of setting up a system to track acquisition costs. For example, early in the process you have to think carefully about whether you’ll allocate salaries, and what kind of tracking and allocations to make.
  • You have to create standards across the board up front in order to have consistent and usable data in the end.
  • NetRevPar metrics have been added to short term incentives this year. While the set up process is a bit cumbersome, the upkeep is very easy.
  • One of the hardest things is that many hotels still have last room availability with the OTAs. One solution is dynamic pricing and the Kalibri data was a big supporter for this move.

Is this a revenue management thing or a marketing thing or an accounting thing?

  • For the companies that shared their stories, revenue management is the driver and owns it “because we are in it.”
  • Some believe that it will stay with revenue management: “They (Finance) are great at numbers but they don’t often know what sits behind those numbers.” It has to be someone who is closer to, and understands, how and where sales, marketing, and revenue management staff spend their time and resources. Finance is involved but should not lead this.
  • The devil’s advocates argued that, eventually, this is going to end up with accounting and perhaps be something that USALI takes on, as there is an increasing need on the accounting side to get control of that cost in a systematic manner.

What else should I think about?

  • It definitely requires a shift in thinking at all levels and across all disciplines of the operation.
  • It takes a tremendous amount of time and effort to set up, and a tremendous amount of cooperation with your finance department, front office team, reservations team, and revenue management.
  • We have a portal that helps with tracking and making sure that partners we are working with are known.
  • For senior executives who are comfortable with the STR report, it is seen as a risk and a shift in thinking to look at different metrics that are sometimes uncomfortable. This will take some time.
  • For the data to be usable and believable, there has to be standardization in terms of what is tracked and how to use the systems and processes.
  • At some point we have to look at not just RevPar, but NetRevPar.
  • Revenue managers and the strategy they employ have to be the drivers of this change.

About HSMAI’s Revenue Management Advisory Board

HSMAI’s Revenue Management Advisory Board is advancing the revenue management discipline by providing leading education, a best practices exchange, thought leadership, and networking for revenue management professionals, other sales and marketing professionals, and senior management in the hospitality industry.

  • CHAIR: Linda Gulrajani, CRME, Vice President, Revenue Strategy & Distribution, Marcus Hotels
  • Chris K. Anderson, Academic Director, Cornell University
  • Veronica Andrews, CRME, Director, Digital Data Solutions, STR
  • Christian Boerger, CRME, CHDM, Corporate Director of Revenue Strategy, Pacific Hospitality Group
  • Denise Broussard, CHDM, SVP, Revenue Management & eCommerce, Interstate Hotels & Resorts
  • Rosemary Browning, President, Global Career Horizons
  • Kathleen Cullen, CRME, Senior Vice President Revenue & Distribution, Two Roads Hospitality
  • Tammy Farley, President, Rainmaker
  • Monte Gardiner, Sr. Director, Revenue Management Services, Best Western Hotels & Resorts
  • Eric Gravelle, CRME, Vice President of Revenue Management, North America, Diamond Resorts International
  • Renee Haddad, CRME, Director, Revenue Account Management, Preferred Hotels & Resorts
  • Adam Hayashi, CRME, Vice President of Revenue Management, Accor Hotels
  • Mohamed Khanat, CRME, Regional Director – Americas Account Management, IDeaS – A SAS COMPANY
  • Michael Klein, Executive Director of Revenue Optimization, MGM Resorts International
  • Dev Koushik, VP, Global Revenue Optimization, IHG
  • Chris Nixon, CRME, CHDM, AVP Revenue Optimization, Ashford Hospitality Trust
  • Julie Abou Nohra, Regional Director of Revenue Management, The Americas, Mandarin Oriental Hotel Group
  • Breffni Noone, Associate Professor, Pennsylvania State University
  • Scott Pusillo, CRME, General Manager (NorthEast USA), Sales & Account Management, Sabre Hospitality Solutions
  • Heather Richer, VP, Revenue Management and Distribution, Kimpton Hotels and Restaurants
  • Scott Roby, CRME, Vice President, Revenue Management, Evolution Hospitality
  • Tim Schulte, CRME, Solution Consultant, Infor
  • Corey Stanley, CRME, CHDM, Corporate Director of Revenue Management, Seneca Gaming Corporation
  • Jim A. Struna, CRME, Regional Director of Revenue Management, Rosewood Hotel Group
  • Jennifer Torsleff, CRME, Senior Director, Revenue Optimization, John Q Hammons Hotels
  • David Warman, Senior Vice President Hotel Marketing and Revenue Management, Four Seasons Hotels & Resorts
  • Tim Wiersma, Vice President, Revenue Management, Red Roof Inns, Inc.
  • Misty Wise, CRME, CHDM, Director, Digital Strategies, John Q Hammons Hotels
  • Monica Xuereb, Chief Revenue Officer, Loews Hotels & Co.


Categories: Revenue Management
Insight Type: Articles