An Internet-based survey in the US has found a wide range of expenditures on online marketing, as well as considerable diversity in organisational structures.

Published: 28 Apr 2011

An Internet-based survey in the US has found a wide range of expenditures on online marketing, as well as considerable diversity in organisational structures.

The study, 2011 Travel Industry Benchmarking: Marketing ROI, Opportunities, and Challenges in Online and Social Media Channels for Destination and Marketing Firms, based on feedback from 426 marketing executives, found that for social media campaigns, about 80 percent of the marketers said that they produced Twitter campaigns and social media promotions in-house, but such functions as search engine optimisation and pay-per-click advertising are largely outsourced.

Sixty-eight percent of the respondents worked in accommodation firms, 20 percent were destination marketers, and the rest worked in a variety of travel-related firms. The respondents reported a noticeable difference in average annual budgets for marketing and ecommerce. At $1.354 million, the average budget reported by marketers for accommodation firms was 10 times the average for destination marketers, who reported an average of $136 thousand dollars. Both groups reported that the electronic marketing portion of those budgets was increasing year to year. The two types of organisations also reported different structures for deploying members of the online marketing services team and the ecommerce team.

Findings:

Accommodation firms are more likely to outsource all social media functions, including pay-per-call, Twitter campaigns, and pay-per-click management. Destination marketers, on the other hand, generally handle more functions in-house.

Two-thirds of the entire sample said their 2010 e-commerce budgets had increased with respect to 2009. Sixty percent of accommodation marketers anticipated a further increase in 2011, and 71 percent of the destination marketers said their 2011 budgets would increase.

Three-quarters of the destination marketing organisations housed their online marketing team in the marketing department, but that was true of just 41 percent of the accommodation marketers. Instead, 17 percent of the online team was housed in the accommodation firms’ sales department, and another 9 percent in the ecommerce department. A similar relationship occurred for the ecommerce team. Just over half of the destination marketing firms put the ecommerce team in the marketing department, while that was true in only one-third of the accommodation firms. Instead, 40 percent of the accommodation firms made their ecommerce teams part of the revenue management department, and another 17 percent were in the sales department. Looking specifically at the people who determine strategy for online pricing and distribution, we again see that the marketing department is foremost for destination marketing firms, but that is not true of accommodation firms.

Well over half of the accommodation firms (54 percent) put their pricing strategists in the revenue management department, with another 18 percent in sales. Just 10 percent of the accommodation firms had their pricing strategy function in marketing.

For the destination marketers, 25 percent of firms put pricing strategy in marketing, and just 12 percent in the revenue management department. For distribution strategy, well over half of the destination firms housed distribution strategy in their marketing department, but that was true of only 14 percent of accommodation firms.

In terms of budget allocations, marketing and promotion was by far the largest single online marketing and ecommerce category for both destination and accommodation firms. Those expenditures were followed in order by commerce and conversion, loyalty and reputation, and analytics and research. The respondents reported similar percentage allocations of staff time. For the entire sample, the average number of staff members involved in online marketing and ecommerce was 3.25. The range of budgeted online advertising expenditures was remarkable, with some firms reporting budgets of less than $10,000 and others over $1 million. The budgets skewed toward the lower end of the range, however, as the average online advertising budget for accommodation firms was approximately $60,000, while for destination marketers the average was about $80,000. In terms of the percentage of the marketing budget, online media placement also varied widely.

Although the average online budget allocations represented an average of 40 percent of destination firms’ marketing budget, seven of the 87 destination firms and 20 of the 216 accommodation marketers reported online budget allocations of less than 10 percent of the marketing expenditures. Two-thirds of the firms reported that they spend less than $10,000 on social media, and three-quarters spend less than $10,000 on mobile media. The breakdown of purchasing channels for advertising in online media is similar for destination and accommodation firms. While substantial percentages of firms handle purchases internally, many also use multiple agencies. A relatively small percentage use just one agency for online media buys. Looking more specifically at how these firms handle the many aspects of online marketing, we see that such matters as Twitter campaigns and social influence are largely handled in house. Indeed, destination marketing firms are, in general, more likely to handle all online marketing functions in-house. On the other hand, pay-per-click management, search engine management, and pay-per-call campaigns are quite frequently outsourced. Taking this issue from the other perspective, accommodation firms are far more likely than destination firms to retain specialised firms for online marketing campaigns.

The difference in approaches shows up most noticeably in pay-per-call, branding, Twitter campaigns, and affiliate marketing programs. Destination firms reported outsourcing these functions only 25 percent of the time, while accommodation firms frequently outsource not only those functions, but also ad placement and social influence campaigns. The marketers were much more inclined to handle social media sites and corporate websites on their own than they were mobile apps and the mobile website, which were most typically outsourced.

Again, destination marketers were slightly more likely than accommodation marketers to handle most of these functions on their own. The breakdown of sources for the content management system was similar for both destination marketers and accommodation firms: just under 30 percent were open source, not even 20 percent were enterprise systems, and over one-third were custom written.

For most firms, the development cycle on these systems typically occupied two or three years. The two types of companies took relatively similar approaches to social media policies and functionality, with one exception. Destination firms were overwhelmingly more likely to sell advertising space on their sites than the accommodation firms were. As a result, the destination firms were somewhat more likely to maintain an advertising management system. On the other hand, the accommodation firms were more likely to provide online purchasing capabilities.

Responsibility for managing social media resided overwhelmingly in the marketing and sales department (58 percent of respondents), with a small percentage in public relations (15 percent), ecommerce (12 percent), or a smattering other departments (15 percent). Asked which social media were most effective, the marketers rated Facebook at the top, followed by Twitter, YouTube, and LinkedIn.

Accommodation firms were far more likely than destination marketers to report that they maintain blogs. Fifty one percent of the accommodation firms reported blogging, compared to just 31 percent of destination firms. The person responsible for managing the blog was almost never the CEO or president. Instead, blogging fell primarily to the director of marketing, the social media or public relations staff, or in some cases external partners.

The survey has been written by Cornell Professor Rohit Verma, executive director of the Center for Hospitality Research (CHR), and Ken McGill, executive vice president of research for Vantage Strategy.