The Power of Email Marketing in the Hospitality Industry
By Jason Price and Max Starkov
Boston Consulting Group describes the marketing power of the Internet in
terms of reach and frequency. Nowhere is this better illustrated than
through email marketing. Following the lead of the airlines, many
hospitality managers are evaluating email marketing for its low cost, rapid
dissemination, and measurability. As many marketers have demonstrated, a
well-executed email strategy can produce results. It can strengthen existing
market share while at the same time reach new markets to boost revenues,
particularly online-generated revenues.
Email marketing - a powerful marketing tool
Email
marketing is a crucial component of the hotel eMarketing and online
distribution strategy. The shift toward online purchasing suggests that the
website is becoming a key point of entry to establish interactive
relationship with your customers and capture client email profiles. Over 192
million North Americans are active Internet users (Nielsen) and 37 million
of them have already purchased travel online. The Internet offers a vast,
interactive, content-rich media and most importantly, a growing distribution
channel for the hospitality market. It is estimated that 8%-10% of all hotel
bookings will originate on the Internet in 2002. In fact, some hotels
already generate 20%-30% of their total bookings from the Internet.
Email
gets the most attention of any hospitality eMarketing effort because
intuitively it makes sense—since email can create direct revenue
opportunities with past, present, and future customers. Email marketing
increases revenue opportunities throughout each customer's purchasing life
cycle. The reason this is effective is because a total email marketing
strategy addresses the entire buying process from initial email capture to
message evaluation and everything in between including copy creation, type
of messaging, follow-up, and vendor partnership, all components of a
comprehensive communications strategy Once the strategy is built, an
effective email campaign serves as a powerful sales force and marketing
channel.
Why a
total email marketing strategy in hospitality makes competitive sense:
 |
Serves both as direct-response vehicle and branding tool |
|
Creates personalized interactive relationships with customers |
|
Targets and entices recipients with relevant promotions |
|
Plants seed in the minds of recipients regarding future travel plans |
|
Serves as a tool to move distressed inventory |
|
Functions as a sales force – tens of thousands reached in seconds |
|
Recruits and retains customers, new and old |
|
Least expensive form of active marketing available |
Does email marketing
work?
You
bet! Everyone uses email. We read, forward, file, and print email. We send
email to friends, family, and clients. Furthermore, almost everybody has at
one time or another actively signed up to receive travel related information
from a travel supplier or third-party collection service. Travel is a sought
after product and a top information category chosen by most Internet users.
The
Aberdeen Group indicates that email marketing has grown more than 270% from
1999 to 2000 and rapid growth is expected to continue well into 2005. An
estimated 30 billion permission-based email messages were sent in 2001; a
number that will grow to 150 billion in 2005 (Winterberry Group).
By
category, travel related email marketing retains a loyal audience,
especially if it offers the recipient value, accurate communication,
relevance, and familiarity. Forrester Research points out that on average,
only 5 percent of recipients have ever unsubscribed from any travel related
list. Indeed, some travel-related email campaigns report response rates as
high as 25%. Let’s face it; consumers want to learn about travel specials
and promotions. Even travel agents serve as a viable audience as they too
seek bookable opportunities.
But isn’t email
marketing junk mail and spamming?
Wrong! Thanks to technology and the law, filtering agents and anti-spam laws
have begun reigning-in annoying junk email. Filtering products such as
Spamex and Spamcop, which cost less than $30 off the shelf, delete messages
sent by anonymous senders to group lists and can filter by key words in the
message itself.
The laws are getting tougher. Go to
www.spamlaw.com and
read the anti-spam laws in your state. Third-party email messaging vendors,
also called service bureaus, and marketers are increasingly wary of these
laws and are leading the charge to protect the privacy and protection of
email recipients.
Permission-based and
Precision email marketing
Permission-based email marketing is the second-generation email approach
that goes well beyond guerilla email marketing, known as email spam. A
permission-based customer list is one in which you asked the customer
permission to enter personal information voluntarily including an email
address for the purpose of marketing, i.e. you obtain "permission" to send
promotional emails. Opt-in or opt-out options enable the user to sign up or
be removed from a marketing list. Growth in permission-based, 100% opt-in,
opt-out practices consistently cleanse the customer lists to produce the
most robust client lists possible. Once a firm starts an email collection
process, it should include these features resulting in email that will be
opened and read time and again without concern of violating email privacy
norms.
Precision e-mail marketing is the next, third generation email approach that
dynamically "reads" customer profiles, purchasing habits and history to
create highly personalized emails. Over the past year airlines have used
this type of marketing extensively to promote special offers in order to
sell seats. Actually, permission-based email and precision email marketing
have become the airlines' preferred marketing tool. Why? It is cheap and it
works! For example, precision
e-mail marketing has generated up to a fivefold increase in response rates
and tenfold lower conversion costs than direct mail (IMT Strategies).
Why does email marketing make sense for
hoteliers?
o
Low cost:
Email is relatively
inexpensive, pennies per email compared to $1 to $3 or more per direct mail.
o
Reach:
Almost instant
outreach to an expansive client base, one email blast can be equivalent to
thousands of sales calls.
o
Protects brand integrity: Enables promotion of
the latest specials on a one-to-one basis to a pre-selected audience without
announcing to the world the latest discounts.
o
Personalization: The recipient thinks this is a
personalized invitation at a preferred customer rate.
o
Instant gratification: People are at their
computers most of the day and can receive, respond, forward, and print email
almost immediately.
o
Rich Media: Email marketing comes in various
styles: text, e-Newsletters, HTML messages like a postcard or survey. The
hotel gets its message across with sound, color, animation, video, whatever
is most appropriate.
o
Results: Outcomes based, from knowing who opened the message,
clicked on which links, how much time spent viewing each page, completed a
transaction, or forwarded the email.
Email for distressed
inventory?
Great idea! Group cancellations and
overestimations can make empty rooms the biggest competitor. It is
well-known that the September 11th tragedy left hotels scrambling
for solutions. Using email to move distressed inventory is an effective,
practical option. With a well-executed message matched with a robust
customer list, an email campaign can begin producing revenues within 24
hours without weakening brand integrity. The challenge is in collecting the
right data and stratifying the data list to meet campaign objectives.
Case Study: Distressed Inventory
A Las Vegas hotel casino blasted an email
promotion to an existing customer base. The message included a video insert
and link to the booking engine. The hotel experienced a 30% boost in
occupancy within 12 hours of the campaign.
An Orlando hotel blasted an email promotion
that included room nights combined with local attractions. The hotel
included a “Forward to Friend” button that expanded the initial database.
The campaign helped the hotel generate some 40% of total bookings online
during that test month.
Who are the customers for email marketing?
This is an important question. There are
three main groups of email audiences: consumers (leisure or business),
travel intermediaries (travel agents, wholesalers) and corporate clients. If
a significant percentage of reservations come from transient business
travelers, or from overseas tour operators, build campaigns that focus on
these client segments.
How about consumer
email marketing?
Hoteliers can either buy a broadcast to a permission-based consumer email
list from any number of third-party vendors or create their own "home-grown"
email capture strategy, or do both. Renting from a third-party is an
efficient short-term strategy. It creates an immediate audience and serves
as a supplement to your own customer email database. Long-term, starting
immediately, it is important to build an in-house customer database as part
of a total email strategy. It is critical to capture client data at the
property-level for the purpose of creating highly relevant, targeted email
marketing campaigns.
Hoteliers are in a unique position to build a robust list from existing
customers. Using a list built from existing customers, the conversion rates
can be ten times greater than any standalone rented mailing list because the
targeted group already knows and has experienced the product first-hand. In
addition, the hotel can stratify the customer list by specific
characteristics, communicate and offer value in the message, and send
targeted and relevant mailings frequently to the intended audience, an
audience that even anticipates these messages announcing hotel specials.
Hoteliers should carefully consider how large and comprehensive a customer
list would be from a home grown collection strategy. Anyone who has stayed,
inquired, or visited the property, visited the hotel website, or spoken to a
receptionist by phone or in person qualifies. An organically grown database
of customers can exceed the value of any customer list worth renting.
Reasons for building a homegrown customer list:
o
Represents an existing client base
o
Serves as a tool to access greater audiences,
i.e. friends, family, colleagues
o
Builds retention and overall loyalty
o
Ownership of the database
o
Low cost
Where
can customer information be captured? The short answer is at any perceivable
point of contact with customers: in the reservations process, on the
website, through convention attendee lists, holiday parties, weddings,
special events, at the front desk from walk-in customers, phone inquiries,
groups and tour operators, travel agents and vendors.
How big is the
potential homegrown customer email list?
Based
on actual experience a hotel can calculate the potential size of a customer
email list by filling in the fields below:
Number of
rooms:
_______________
Occupancy rate (last
year): _______________
Estimated average number of guests per room: _______________
Estimated average number of days per guest:
_______________
Total
potential number of guests per year per property: _______________
Case Study: Hypothetical 200-room hotel
A
U.S. hotel with 200 rooms has an occupancy rate of 62%. The average number
of adult guests per room is 1.3 and the average stay is for 2 days for
either business or leisure. The total number of guests for the one-year
period would be 29,383 guests. If 60% of them use the Internet (average Web
usage in the U.S.), the customer email list could be 17,630 strong within 12
months. A smartly done email broadcast to the entire list could produce a
5%-10% response rate, i.e. a minimum of 882 people will click a URL link in
the email and come to the hotel website to see a Web-only special or
promotion. Experiences show that 3%-5% of these qualified respondents will
book i.e. minimum 26-35 people, which represents revenue of $4,420-$5,652
based on 1.9 night average stay and $85 per night ADR.
How about capturing
email on the hotel website?
Does
the website offer customer email capture functionality? If so, that website
might draw 10,000 visitors per month, if optimized for the search engines. A
conservative look to book ratio of 20:1 yields 500 transactions per month.
Consider another 5% will sign up for promotions but not book producing,
another 500 registrations. The total number annualized from the website
could result in an estimated 12,000 new client profiles added to the
database.
How does a hotel compare to today’s average where 8%-10% of
all revenues in hospitality are generated from the Internet? It is estimated
that four years from now the Internet will contribute over 18% of all hotel
bookings. Hoteliers are beginning to like what they see as online
distribution cuts costs, attracts affluent customers and lessens the
dependency on more traditional and expensive distribution channels. Hotels
must employ new strategies to take advantage of these opportunities to
capture this Internet market.
What about travel agent email marketing?
Why do travel agents represent such an
important group for email marketing? Travel agents that use the Internet and
email are exactly the travel agents hoteliers must reach. These agents are
likely to visit hotel websites, book online, and even boast hotel web-only
promotions in their own marketing efforts to preferred clients. Research
from the most respected travel organizations, such as ARC, ASTA, IATA and
Plog Research, as well as leading travel industry trade publications shows
that:
| 96
percent of agents send and receive e-mail |
| 79
percent of agents receive e-mail travel requests from clients |
| 54
percent of agents e-mail clients with special offers or incentives |
Case Study: Hotel Pre-Opening
A plush, boutique hotel in Texas will open
its doors to the public in mid October 2002. Management initiated a weekly
email campaign to the most robust travel agent email database available in
the US. The campaign gets the hotel name in front of both corporate and
leisure travel agents, and allows them to come and visit the promo hotel
site, review Web-only specials, and register for a sweepstakes, thus
initiating an important interactive relationship between hotel and travel
agency community.
Case Study: Joint Email Marketing:
In
the aftermath of September 11th, many New York City hoteliers
teamed up to create joint marketing campaigns. Two notable campaigns were
the popular "America Loves NY" and "This Week's Top Hotel Deals in NY",
produced by Hospitality eBusiness Strategies. These HTML email campaigns ran
on a weekly basis over the course of 6 months and provided links back to the
hotel websites. More than 50 hotels in NYC and over 40,000 travel agents
participated in this successful campaign with click view rates as high as
25%.
How can hotels know
what data to collect?
Collecting the right information is essential to not confuse long-term
marketing plans. For example, in selling automobiles, single males and
females have their own particular tastes and needs as do families and
seniors. By asking the right set of questions on the website and at the
front desk, the dealer can stratify his database to reach discrete audiences
with the appropriate set of messages. It is essential to consider which
audiences the hotel wants to reach and with what types of messages.
Based on the type of hotel and other variables, one can begin
to get an idea of what data is important to build a customer database. It is
critical to avoid the 9-deadly sins of email marketing and not appear
anxious or aggressive when collecting client information. The hotel must
collect with sensitivity resulting in a process that runs on autopilot
whether it’s online or through your reservation desk.
Start collecting the data!
It is
important to follow the path of the customer! Exploit every point of entry
from the reception desk and corporate sales office, to the reservation
operator and website. Create an environment suitable for data collection;
client profiles from call-ins, walk-ins, or online lookers regardless if
they are patrons, travel agents, or others. At the same time, a central
repository will be helpful to avoid repeat inquiries from the same
customers.
The
hotels should always seek permission. It’s been shown that if a hotel asks
permission and clearly demonstrates how one can opt-in or out easily and
conveniently, chances are the user will sign up and remain a loyal recipient
of hotel emails. Such collection tactics include:
|
Sign our “Guest Book” |
|
Announce a drawing |
|
Offer a promotion or special discount |
|
Refer a friend |
|
Follow up e-Questionnaire |
|
eSurvey |
Where to store the
data?
Outsourcing the technology support for email marketing makes complete sense.
In 2001, an estimated 72% of all email campaigns were outsourced (Forrester
Research, 2001). Third-party vendors or “service bureaus” are inexpensive
and this is their core competency. These vendors specialize in email
messaging including email capture, hosting, managing, stratifying, blasting,
and reporting outcomes of the campaign.
There
are a plethora of third-party vendors ready to serve technology needs and
act as guardian of the data. These low cost highly competitive ASP
technologists want hotel business and can provide, at minimal cost, features
and formats to capture, create, and blast a campaign. Some vendors offer
templates to help design an eNewsletter while others support Macro Media for
Flash. Hotels should understand the level of customer service each vendor
offers. Of course, stick to your budget.
Not
surprisingly some online booking technology vendors offer email collection
and messaging management. Two are iHotelier and SecureRez, each with their
own suite of tools to help a hotel build a total email marketing strategy.
A
reputable service bureau adheres to the strictest rules permitted by law and
will maintain client information in a secure environment. They will not rent
or barter information to outsiders. However, hoteliers should seek advice on
vendor selection, review of campaign, and vendor agreement.
How to create the
campaign
There
are a number of guides to email marketing, starting with the marketing
objectives?
For
example, is it to use email as a direct response vehicle? Or as a branding
tool?
Begin
by devising a strategy, and start with these basic questions:
|
Who is the target audience? |
|
How often should a hotel launch this campaign? |
|
Who will support the campaign? |
|
What is the budget? |
Case Study: eNewsletter
A
Canadian golf and spa resort generates a seasonal eNewsletter and sells
advertising space on the mailing to local hiking, fishing, and boating
clubs. As a conference-housing center, the resort hosts a high volume of
business people who return for holiday. Some 7,500 patrons receive
eNewsletters each season and the cost of the campaign pays for itself with
the advertising from local vendors.
Email
marketing is used for a range of purposes. What is the purpose of the
campaign? According to Forrester Research these campaigns are used for the
following:
|
Promotion or discount – 66% |
|
Newsletter – 48% |
|
Product announcement – 34% |
|
Advertising/Marketing – 28% |
|
Alerts/Reminders – 24% |
|
Market Research – 8% |
|
Other – 4% |
A
quality email campaign delivers comfortable, interesting content, and offers
value in the form of premiums, discounts, or specials. Whenever possible,
the hotel should avoid the hard sell, be brief and to the point and never
overstate the message.
A
quality campaign would appear in an HTML newsletter. Today’s browsers
support viewing many forms of inviting eNewsletters. Information delivered
in this fashion reinforces the hotel brand—its logo and colors--and
organizes the delivery of content so that a quick glance may be all that’s
necessary to draw the user to link to a hotel website and book now.
Other suggestions include the need to clearly
identify the hotel and intent in the subject line and property insignia. In
addition, subject line must be relevant and personalized, if possible. The
subject line should not exceed 80 characters. Sample subject lines:
|
Sue, see great upcoming resort specials and enter free getaway! (65
characters with spaces) |
|
Can we expect you to play golf with us again this year? (58 characters
with spaces) |
Is there follow up?
You bet there is! Assume a 10% response rate
on 50,000 recipients. Is the hotel prepared to handle 5,000 inquiries over
the phone or by email? Has the campaign objectives been communicated
internally to the sales team? Is the website optimized for the special rate?
Is the network able to withstand such traffic over a short period of time?
The entire campaign may come down to preparation for the post launch
activities.
Recent trends in email technology and services include:
o
Built-in templates that incorporate hotel brand
and insignia for on-demand email blast campaigns
o
Dynamic content merge to produce highly
targeted and timely campaigns (precision email marketing)
o
Email forwarding features to increase client
database collection and evaluate the campaign
o
Multi-part MIME detects a users email box to
discern AOL from Outlook from Yahoo to Hotmail to Lotus Notes, etc to assure
guaranteed delivery
o
Enhanced personalization from subject line to
initial salutation
o
Enhanced tools to help stratify your database
by demographics, zip code, country code, language preference, past patrons,
or any combination or permutation
o
Integration and use of Rich Media, Flash, and
HTML
o
Numerous and hungry low cost service bureaus
willing to make a deal
Important issues to remember
o
Establish interactive relationship with
customers: Turn e-mail into a preferred communications vehicle, enabling the
hotel to stay in touch with customers 24/7, from virtually everywhere.
o
Frequency: Create a schedule and stagger blasts
over an appropriate time frame. Use it immediately and often for distressed
inventory or less frequently for seasonal activities and travel planning.
o
Personalize and Relevance: Address customers by
first names and offer information relevant to lifestyle and demographics.
Don’t blast an AARP special rate to young families, etc. A relevant campaign
is worth its weight in gold.
o
Permission-based: Recipients must actively
offer information after having requested it. This narrows the scope of
emails one receives on a constant basis and reaches those active information
seekers.
o
100% Opt-In and Opt-Out is a self-policing
cleaning mechanism: Make it easy for recipients to opt-in or opt-out and
they’ll choose to remain on the list. This self-policing method allows the
system to scrub and refine customer lists.
Don't forget what customers want
Here
is a list of U.S. email users' opinions regarding ways Permission Marketers
can improve their email programs (as % of respondents, two choices per
respondent allowed, Q1 2002, Quris/Greenfield Online, May 2002):
42% -
Less frequent messages
35% -
Better prices and offers
24% -
More relevant, targeted messages
18% -
More Control over email options
18% -
Time savers and convenience
17% -
Exclusive e-mail offers
Conclusion
A
total email strategy addresses every aspect of the email marketing process.
It's organized to leverage a hotel’s existing and future client base for
ongoing and upselling opportunities. This includes matching the right
messages with the intended audiences for ongoing customer relations.
In
this article we explained the rationale for the need to create a total email
marketing strategy and the value of building an “organically grown”
hotel-based customer lists. We looked at types of customers that could
benefit from email marketing and examined how all this data, put to good
use, can turn email marketing into a strategic sales force. It takes work
but is achievable with the right message and overall strategy. Implementing
this strategy does not have to be an expensive proposition or a lengthy
process. For example, Hospitality eBusiness Strategies' highly successful
Internet Strategy Consulting Services include special Email Marketing
Packages.
In
conclusion, a total email marketing strategy serves as a springboard to
launch various email campaigns, to boost ongoing customer acquisition,
relationship management, and increased bookings on and off line.
An experienced eBusiness hospitality
consultancy can help you navigate and
utilize the Internet to
its fullest potential.
About the Authors:
Max Starkov
is Chief eBusiness Strategist at Hospitality eBusiness Strategies, Inc. in
New York City (www.hospitalityebusiness.com
). He advises companies in the Travel and Hospitality verticals on their
eBusiness and eDistribution strategies. Max has 20 years of successful
executive experience in travel and hospitality. Max has an extensive
eBusiness experience having co-founded and served as CEO and Director of two
eBusiness companies. Under his leadership one of these companies won the
prestigious 2001 Worldwide Microsoft RAD Award for Web-based technology
applications (CRS and booking systems) for hospitality. He also teaches
graduate courses on "Hospitality/Tourism eDistribution Systems", "eCRM",
eKnowledge Systems" and "e-Travel" at New York University's prestigious
Tisch Center for Hospitality, Tourism and Travel Administration. You can
reach Max at
max@hospitalityebusiness.com
Jason Price
is Vice President of Business Development and Strategic Marketing at
Hospitality eBusiness Strategies, Inc. in New York City. Jason advises
companies in the Travel and Hospitality verticals. Jason helped build and
served as the Vice President of two eBusiness companies and was in the
leading team that won the prestigious 2001 Microsoft RAD Award. He
frequently guest lecturers on technology and hospitality to university
audiences in US, Europe and Asia. Jason has over five years experience in
pioneering and building successful travel and hospitality Internet
businesses and another four years building critical business units for major
Madison Ave marketing companies. You can reach Jason at
jason@hospitalityebusiness.com
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