Conversion rate is a digital marketing metric. In the hospitality industry, it belongs to the context of direct booking strategies for hotels. As discussed in one of our earlier articles, there are various types of conversion rates in a customer journey funnel. This article is about the booking conversion rate, commonly referred to as e-commerce conversion rate, or website conversion rate.
An in-depth look into what is hotel website conversion rate
The metric indicates the ratio between all website visitors and bookings completed on the website. That is all it does.
Let’s take an example of a hotel website with 10,000 visitors that generated 100 bookings, which means the conversion rate is 1%. Small changes in conversion rates can result in enormous differences in transactions and revenue. Increasing booking conversion rate from 0.5% to 0.75% means a whopping 50% improvement in reservations made on the hotel brand website, which in e-commerce language is often called website transactions.
We have to emphasize, that despite the conversion rate correlates with transactions and bookings, it is not the only factor that impacts the revenue generated on the hotel website.
Higher conversion does not guarantee more booking engine revenue. Hotel website revenue depends on various factors including the length of stay, room night sold, and ADR – which can be optimized by revenue management tools. In most cases, reducing room rates on the hotel websites will increase conversions, but due to lower ADR or fewer rooms sold, revenue might not increase.
Optimizing your hotel website conversion rate
It is essential to understand that the hotel website conversion rate is a result of a set of variables, and it is not possible to optimize the conversion rate on its own. To optimize a hotel website for a better conversion rate, the hotel marketing team needs to audit the factors contributing to bookings and website abandonment.
The equation includes the following variables and factors:
- Website traffic quality
- Hotel product presentation
- Website user experience
- Booking engine experience
- Direct booking benefits
- Pricing and special offers
- Rate parity
How does hotel website conversion rate impacts marketing ROI and ROAS?
Bookings made on the hotel brand website are a key part of any hotel marketing strategy. It enables the hotel brand to establish a profound connection with guests, allowing more optimization than any other sales channel.
Back in the early-mid 2010s, website bookings and direct bookings used to be the holy grail for hotel marketers, because of the high profitability. Unlike Booking.com and other OTAs, website bookings did cost a hefty commission. Today, when hotel marketing moved entirely online, both independent and international chain hotel brands are very active on social media, Google, OTAs, and other digital channels.
Because of this increased competition, hotel online marketing is no longer affordable. With ever-increasing traffic acquisition costs, optimizing for marketing efficiency became a top priority.
Return on investment (ROI) is a metric to monitor the overall return of marketing investment. From a pure business management aspect, a realistic ROI calculation includes all hotel digital marketing management expenses associated with getting direct bookings. Not exclusively, the list of hotel marketing expenses typically include:
- Software subscription fees
- Traffic acquisition costs
- Graphic design costs
- Salaries of the hotel marketing team
In a hotel marketing and advertising context, ROI is used interchangeably with ROAS, which stands for return on ad spend. As the name suggests, this metric shows the ratio of revenue and advertising costs. ROAS is not an accurate representation of marketing effectiveness, as it can only describe advertising efficiency.
Well done, but what does it have to do with conversion rate?
How to increase your hotel website conversion rate to improve ROI and the overall hotel digital marketing effectiveness?
As mentioned earlier, the conversion rate cannot be optimized on its own. To improve the conversion rate, we need to break down the entire digital marketing funnel into segments and look for inefficiencies in each.
Before planning a conversion optimization strategy, one needs to find answers to the following questions:
- Is the website traffic quality good enough?
- Is the hotel product presentation up to guest expectations?
- Does the hotel brand website offer a smooth user experience?
- Is the booking engine straightforward to use?
- Are the available direct booking benefits attractive enough?
- Is your pricing in line with competitor rates, or higher?
- Do you have rate parity issues that make website bookings unattractive?
- Does your hotel value proposition look better online than competing hotels in the destination?
The bad news is that there are no quick fixes to enhance hotel website conversion rates. Most of our clients who approach us for help to improve their website conversions need profound improvements in many aspects.
In the majority of cases, the conversion rate can be improved by developing a better brand experience, a better product presentation, and a seamless booking engine experience. Sounds simple, but improving these requires research planning, time, and money.
Getting the basics right, which are product presentation, booking engine, and brand experience, most of our hotel clients managed to double their conversion rate.
With an average of 96% increase in conversion rate for over 30 hotels, we can confidently recommend focusing on these when you want to improve bookings and conversions on your hotel brand website.