Highlights from L2′s Digital IQ Index: Hotels reveals that differentiated content on site and mobile bookings drive traffic and high margin revenue.
There are few industries that have seen more disruption at the hands of digital than hospitality. In 2000, the Internet accounted for 1-2 percent of hotel bookings. A decade later bookings across digital channels breached 50 percent. As other sectors struggle to articulate and justify investments in digital, hotel brands need look no farther than the cost(s) to book on their own site, vs. Online Travel Agents or OTA's. The cost incurred for booking directly via their brand site is just $2-$6 vs. a whopping $40 -- $120 in incurred costs via OTA's. In 2010, alone, hoteliers lost $2.5 billion in revenue to OTA's.
Despite evidence that digital is effective, digital advertising spending in hospitality comprises just a third of marketing dollars spent on non-digital channels. The lack of investment is apparent. Only 40% of the sites featured in our study have social sharing, only 27% offer online chat, and only 17% offer user reviews -- forfeiting billions in revenue to middle men such as Tripadvisor.
While experimentation across social media and mobile is pervasive, most hotel brands have struggled to develop strategies that make the whole greater than the sum of its pet projects. Even the bleeding edge platform of digital -- mobile, shows signs of huge ROI. 70% of booking via the phone are same day reservations, likely translating to high price/margin bookings.
Brands at the forefront of digital innovation, and their shareholders, are reaping financial rewards. Our data reveals a positive relationship between Digital IQ and year-over-year growth in Revenue Per Available Room and between Digital IQ and year over year change in stock price.
L2's Digital IQ: Hotels study attempts to quantify the digital competence of 52 global hospitality brands. Our aim is to provide a robust tool to diagnose digital strengths and weaknesses and help brands achieve greater return on incremental investment.
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