Suppressing the OTAs with branded Pay-Per-Click
Hotels and resorts are constantly locked in a balancing act with Online Travel Agencies (OTAs) such as Expedia, Orbitz, Booking.com, and others. A resort would like to avoid the 20-30% commissions required to participate with an OTA, but they also want to ensure their occupancy numbers are satisfactory.
Hotels and resorts are making better use of owned media and traditional marketing; however search, and specifically paid search, has proven to be a difficult battleground.
Nearly all of Fuel’s clients see OTAs bidding for Pay-Per-Click ads on their resort brand names, which inevitably drives bookings away from the property at a key point in the conversion funnel.
However bidding on a resort’s brand is often seen as fruitless since the properly likely is already at the top of the natural search results and bidding to keep the OTAs off the search results page only increases the cost of conversion and cannibalizes the natural revenue the resort would have realized without adding any new revenue.
The challenge lies in determining if bidding on resort’s own brand is an effective strategy to increase revenue and minimize the OTAs exposure to a resort’s customer.
In order to test how brand PPC impacts conversion rate and natural search cannibalization we focused on multiple resorts in the Myrtle Beach area and tested how bookings and revenue were impacted by running, or not running, brand paid campaigns.
We carried out the test over five of the key brand terms that typically convert well, “resort_name,” “resort_name Resort,” “resort_name Oceanfront Resort,” “resort_name Resort Reviews,” and “resort_name.” During the test we monitored clicks, cost, sales, online revenue, average sale value, and source of sale (paid versus organic).
This data was compiled with test and archival data to determine the effective cannibalization rate.
The results were surprising and for the sake of brevity, we have selected two properties to highlight. The data for both resorts is based on a 30-day test.
Property A is a large resort and generated $317,848 during the test cycle from both paid and organic traffic. By looking at the period where the paid campaign was paused, we determined that the paid campaign cannibalized $70,836 in organic bookings. Property A had effective PPC revenue of $247,011 on a spend of $4,385, an ROAS of 5633%.
Property B is a smaller property and generated $123,200 in total paid revenue in the testing period. The paid search cannibalized $32,675 from the organic listings. Property B had effective PPC revenue of $90,525 on a spend of $2,122, an ROAS of 4265%.
What we have proven is paid search does cannibalize a portion of a resort’s natural traffic and bookings, however the cannibalized revenue makes up only a quarter of the total revenue generated from a paid campaign.
In summary, we have found running an optimized paid search campaign on a property’s own brand terms generates four times the revenue of organic listings alone. This is in addition to the value of suppressing the OTAs and creating multiple click opportunities on a search results page.