Hotels are slowing growth by refusing to embrace market research

Companies around the world use market research to test the viability of new products or services by communicating directly with target customers. In the past, market research was primarily conducted via telephone interviews or by distributing surveys to an existing audience via SurveyMonkey or similar tools.

With the latest generation of market research tools, anyone can survey people beyond their existing audience, with targeting options similar to Facebook ads, publicly getting consumer opinions in real time.

Global Market Research Spend vs Ad Spend

Market research expenses were US$73.4 billion in 2019has doubled since 2008. In 2021, the market research spending exceeded $110 billion. North American companies spend the most on research, accounting for 54% of the total, followed by Europe with 26%.

By comparison, search engine ad spend in 2021 was US$144.8 billion global. Display advertising, which reached US$238 billion, accounted for the largest share of ad spend in 2021.

This means that the world market search spend accounts for approximately 28-30% of global search and display advertising combined, nearly identical to global search engine ad spend.

This raises a question: how much does your hotel spend on research? Are you missing essential business information that your competitors might have?

How much do hotels spend on marketing and market research?

While the average small business marketing budget is around 11% of revenue, hospitality businesses often have a much tighter profit margin than other industries. This explains why the rough average of independent hotel marketing budgets is approximately 7% of annual turnover. This mainly applies to international hotel chains.

Independent hotels with good digital marketing setups usually aim to generate a 10x return on ad spendscaling Google and Facebook Ads spend as much as positive ROAS can be maintained while spending little or nothing on research.

Independently run hotels have taken nearly a decade to develop a willingness to pay for direct marketing. Even today, some hotels spend less on marketing than a beauty salon or restaurant. The situation is even worse with market research. Not all hotel marketing decision makers understand the importance or function of market research.

This is especially true for hotel managers who are resolutely resistant to modern business procedures. Younger, more dynamic hotel managers with recent training are using research very well to improve not only sales and revenue, but also guest satisfaction metrics.

Market research for hotels is a great investment

In business, it all comes down to the impact on the bottom line. Before spending on market research, one can ask: how will it help us to earn more money? What kind of tangible results will we get for our money?

Here are the main reasons hotels do market research:

To test the markets

Market testing is the most common market research objective. In short, the hotel measures demand in various countries and demographic groups from which it expects business. Test results help improve the targeting and messaging of marketing campaigns, resulting in significantly higher ROI and profitability.

A few hundred dollars invested in market testing can save thousands of dollars in poor ad spend while helping launch profitable hotel marketing campaigns from day one.

Test brand and product presentation concepts

When pre-opening or rebranding, the professional method of choosing design concepts is to conduct market research. Concept testing is one of the most common reasons companies collect feedback from target customers. The process involves a series of complex AB tests to assess which concept or design is most appealing to target customers.

Hotels that engage in concept testing are successfully launched, while finalized concepts without adequate market feedback can take years to take off – if they ever do.

Measure brand awareness and benchmark against competitors

Measuring brand awareness is probably not on your hotel marketing to-do list, but wait until you read further. Companies that deliberately manage their brand awareness benefit from increased demand, less price sensitivity, and less exposure to volatile market trends.

Brand awareness research can provide you with insights based on guest feedback regarding which segments are aware of your hotel brand and how it compares to the brand awareness of your competitors.

This information is critical to managing long-term brand awareness and popularity.

To measure brand acceptance and benchmark against competitors

Similar to brand awareness, brand acceptance research gets data on what people like and dislike about your hotel’s product presentation, brand, and perceived values. This is totally different from customer feedback.

Brand acceptance reports will tell you what caused people not to book your hotel, what looks good and what doesn’t. This information is essential for improving brand acceptance, product presentation, conversion rate, sales and end-of-day revenue.

Conclusion: market research remains a tool reserved for a few avant-garde hoteliers.

As mentioned at the start of this article, most hotels are still hesitant to invest in basic marketing, let alone market research. Spending the entire marketing budget on advertising seems like the surest bet for generating a positive ROI, while spending on research won’t automatically do that.

Market research only generates positive results if the management team can take appropriate action based on the information. Arguably, most hotel marketing management teams just can’t do it.

There’s a reason why global companies spend nearly 20-30% of their marketing dollars on research. Data and insights gained through primary surveys are essential in today’s fast-paced and unforgiving market environment.

Modern research tools give hotel marketers and forward-thinking hotel management teams an edge over those who rely on assumptions and are still hesitant to use today’s standard business tools.

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