The Pareto Principle, also known as the 80/20 rule, suggests that approximately 80% of outcomes or results come from about 20% of the causes or inputs, emphasizing the importance of focusing on the vital few to achieve significant results.
Translated in hospitality-speak, The Pareto Principle means that hotels get 80% of their business from a handful of feeder markets.
Quite often I hear OTA proponents claiming that The OTAs can take your hotel’s name to every corner of the world. The question is: how many hotels need their name being taken to every corner of the world? Most hotels rely for their occupancies on a handful of feeder markets, not on random travelers from the other side of the world. This is the Pareto Principle at its best!
Today, I think the main issue is that the OTAs a) are increasingly usurping customer segments and feeder markets that hoteliers have been working directly with for decades, and b) are providing fewer and fewer incremental guests from unreachable to the hotel corners of the world.
Case study: Bidding on the property’s branded keyword terms on Google Ads (GA)
When was the last time independent hoteliers have searched Google using the official name of their hotel? The OTAs are making a killing on Google Ads (GA) by bidding on the branded keywords (official names and their derivatives) of independent hotels. Who searches a hotel by their official name? These are past guests, people referred by friends and family, people who have read positive reviews or PR about the property. What happens when they search Google? They see the OTA sponsored listing about the hotel and they book the hotel via the OTAs. This is called hijacking of a direct client!
Hoteliers have a great advantage over the OTAs: They know their property’s product and services much better than the OTAs. They know their guests and their preferences much better than the OTAs. Hoteliers know their local neighborhoods and immediate destinations far better than the “far and away”-based OTAs. Hoteliers know the local tour and activity providers much better than the OTAs and can create unique hotel packages and offers.
Using the Pareto Principle, hoteliers can focus on their feeder markets and customer segments that generate 80% of their business thus being much more efficient than the OTAs.
Here is how hoteliers can take advantage of the Pareto Principle:
Invest all of the property’s sales and marketing efforts in the feeder markets that generate 80% of the property business and do not allow the OTAs to encroach in these markets. The remaining 20% of the markets that generate only occasional bookings? Leave them to the OTAs.
Launch Google Ads (GA) campaign for your branded keyword terms to capture all friends and family referrals, repeat guests, etc. The goal is to “own” 100% SOV (share of voice) i.e. if there are 1000 searches for your property’s brand name, you should budget enough your GA listing to be served 100% of the time. You will be surprised how inexpensive these search campaigns are!
Launch Google Ads campaigns targeting your top feeder markets. Google allows your ads to be served only in your preferred geographical locations. Focus on long tail keyword terms that best describe your hotel location and hotel product Ex. Boutique hotel near Central Park NYC, hotel with rooftop bar midtown Manhattan, 4 star hotel near Central Park Manhattan, etc. Best practices: Aim at owning at least 50% of SOV.
Invest in Google Display Network (GDN) campaigns in your main feeder markets. The average CPM (cost per mille, or cost per 1,000 impressions) typically ranges from $3 to $5.
Invest in content marketing – the cheapest marketing format of them all.
Establish solid social media presence with original posts and useful content.
Take advantage of all the freebies out there: free Google Business Profile, free booking links on Google Hotel Ads, free listings in your feeder markets: business directories, CVB and Chamber of Commerce listings, etc.
Sales & MarketingOnline Travel Agencies (OTA)
