True cost of acquisition metric a long way off for hotels

There is a belief by some that hotels should be able to select their distribution channels easily.

A hotel owner or the channel manager wonks at chain level can measure which one performs well and then pick accordingly.

Factors such as time, inventory, target audience and room rate come into play, obviously, but a few swishes of the abacus and it all miraculously falls into place.

The concept of the “cost of acquisition” plays a large part in that evaluation.

As well as evaluating the product, other elements such as fees to third-party IT or distribution providers (PMS, GDS, wholesalers, et al) come into play.

Here is a rough chart shared at the Seize Opportunity In Disruption conference for hotels in London last week outlining some examples prices and elements that are often included:

cost of acquisition

Yet even with all those considerations, some believe there is still no “true” cost of acquisition.

In fact, currently, it is impossible to achieve without some form of standardisation in the form of a uniform way of tracking every element that goes into facilitating a booking.

There is no doubt, delegates were told at the event, that the basic cost of acquisition has increased steadily for hotels in just over half a decade, primarily due to the complex nature of the distribution chain.

Jane Lewis of JLC Consulting argues that six years ago the average cost was around 5%-10% of the room rate for a property.

This figure has jumped to somewhere in the region of 15%-25%, she says.

But while factors such as fees being paid along the distribution and software chain can be measured easily, hotels rarely add other elements into the equation.

This includes the human resources element of actually doing the calculations, servicing the customer once they are in the system using a property or chain’s own or third party customer relationship management tool and other processes that do not have an immediate metric to measure.

Sadly, such a process of recording and evaluating those items that are difficult to scrutinise is some way off becoming a mainstream process.

This is largely due to many of the items not falling under a standard platform, with many hotels or chains using basic time and motion studies that can often differ from property to property.

Whilst some might say that such a lost opportunity to come up with a true cost of acquisition doesn’t really matter, it appears hoteliers – with many increasingly forced to show as much value and return on their investment by the beancounters upstairs – are looking for some movement in this direction.

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