Short Stays Should Change How Hotels Reach Guests

For a hotel, a stay that lasts a little more than two nights puts a tighter limit on what it can cost to acquire that reservation.

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The value of the reservation changes with the number of nights, but the cost of generating a booking doesn't automatically change with the length of the stay. A paid search click costs the same whether the guest ultimately books two nights or five. The same is true of a display ad impression. The hotel incurs that media cost before it knows how much room revenue the reservation will produce.

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So when the typical summer booking is just over two nights, acquisition cost has to be judged against a relatively small amount of room revenue. A number that looks reasonable against a longer stay can get expensive quickly when the guest checks out after night two.

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A shorter booking leaves less room for acquisition cost

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Let’s look at a hypothetical $40 acquisition cost.

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On a five-night reservation, that works out to $8 for every room night sold. On a two-night reservation, it is $20. The hotel spent the same $40 to acquire both reservations, but the two-night stay gives the property far fewer room nights over which to spread that cost.

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When longer and shorter stays are averaged together, the stronger revenue from a few five- or seven-night reservations can make overall booking performance look healthier than some of the two-night stays really are. Those shorter bookings may still be expensive relative to the room revenue they produce. If reporting is built on cost per booking, that can be hard to see.

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Cost per booking only tells part of the story

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A $40 cost per booking tells the hotel what it spent to generate the reservation, but not how many room nights came with it. Adding acquisition cost per room night gives marketers another way to evaluate the efficiency of that spend.

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Paid search and direct mail could each show a $40 cost per booking and appear to be performing the same. For example, if one acquisition source produces guests who stay one night on average while another produces guests who stay three, the first source is costing the hotel $40 per room night while the second is costing about $13. The booking-level number is identical; the room-night economics are not.

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Cost per booking still matters. Adding cost per room night gives marketers another view of what came back from that spend. The hotel already has the information needed to calculate both: media spend, bookings and room nights.

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Looking at the two measures together gives marketers a better way to compare acquisition sources when one channel is producing longer stays than another.

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The next question is when the hotel reaches the traveler

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With paid search, the hotel reaches the traveler after they’ve already started looking for a place to stay. By then, several properties, OTAs and other advertisers may be competing for the same click.

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Hotels do not have to wait for that moment to start reaching potential guests. They can identify households that fit the kind of traveler they want to attract based on factors such as where they live, household income and travel behavior. Those households can then be reached through email, direct mail, display, social and other channels. The strategy is to establish an audience before the traveler reaches the search stage, rather than relying entirely on capturing demand after the research process has already begun.

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A resort might use that audience to reach households in markets where it already draws guests, or to introduce the property to travelers who fit the profile of its best customers. A city hotel could build around people with travel patterns that suggest frequent business or leisure trips. 

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The point isn't to replace search. It's to give the hotel another opportunity to reach prospective guests before they begin actively searching.

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Those lists can also support more than one campaign. A hotel might use the same audience for direct mail first, then reach that group again through display, social or another channel later. The property can build continuity across channels instead of starting with a completely new audience for every campaign.

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Search can and should still be part of the strategy. Someone who sees the hotel through another channel may later turn to Google to compare rates, read reviews or book. 

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Search captures existing demand. Prospecting can help create or influence demand before that search happens. A strong acquisition strategy can use both.

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Repeat stays lower the average cost of acquiring a guest

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Once a hotel has paid to acquire a new guest, the value of keeping a direct way to reach that person becomes easier to see.

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Let’s go back to that $40 spent to acquire a two-night reservation. On that first booking, the acquisition cost is $20 per room night. If that guest later books another two-night stay through an email or another direct channel that costs very little to send, the hotel now has four room nights tied back to the customer it originally spent $40 to acquire.

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The hotel hasn't eliminated the original acquisition cost. It has spread that initial cost across more bookings and room nights from the same customer.

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That is an important reason to think beyond the cost of the first reservation. A short stay gives the property fewer room nights to absorb the expense of acquiring someone new. Keeping a way to reach that guest afterward gives the hotel a chance to earn more room revenue from the relationship without paying the full acquisition cost again for that customer.

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It also changes how prospecting fits into the budget. Reaching people who have never stayed will generally require more investment than contacting customers already in the hotel’s database. But every new guest who books can become someone the property is able to reach directly later, assuming the hotel has permission to stay in touch.

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Over time, a hotel can look at more than what it paid for the first booking. It can also look at how many bookings and room nights followed from the customers it acquired, and how much it spent to bring those guests back.

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For a property where the typical summer stay is just over two nights, repeat business can improve the economics of the original acquisition by generating additional bookings and room nights from the same customer.

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Hotels have more control over acquisition cost than stay length

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Hotels cannot control whether a guest stays two nights or five. They can influence that through rates, packages and the experience, but the length of the stay ultimately depends on the traveler.

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Acquisition cost is different. Hotels can decide how much they rely on auction-priced channels, how much they spend reaching defined audiences before those travelers search and how well they use the customer relationships they already paid to create.

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That is the practical opportunity in a market where the typical summer booking is just over two nights. 

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If there are fewer room nights in each stay to absorb the cost of acquisition, the answer is not simply to hope for longer bookings. It is to get more disciplined about what it costs to win each guest, how that cost is measured and whether the hotel has to pay it again the next time that person books.