Developing an Email Marketing Strategy in Hospitality

14th Sep 2004

By Jason Price and Max Starkov
Email marketing has changed significantly since our first article on the subject appeared a few years ago. Savvy hoteliers who embraced the use of email marketing as a direct distribution tool have another potent weapon in their arsenal against the need for online intermediaries. We have revisited email because this eMarketing format has developed remarkably in hospitality over these few years. As well as highlight important changes, we share examples of the collective spirit of hotel marketers who have been able to overcome spam and Internet marketing challenges by introducing great solutions for promoting their hotels in a cluttered email box world. Background
This year over 20% of all revenues in hospitality will be generated from the Internet (15% in 2003). Another 20% of hotel bookings will be influenced by the Internet, but done offline (call center, walk-ins). In 2004, for the first time Internet hotel bookings will surpass GDS hotel bookings. Two years from now the Internet will contribute over 27% of all hotel bookings (PhoCusWright). 53% of all Internet bookings in hospitality will be direct to consumer (i.e. via hotel-owned websites).

Direct online distribution cuts costs, attracts affluent customers and lessens the dependency on intermediaries and more traditional and expensive channels. Over 205 million Americans are active Internet users (Nielsen) and close to 50 million of them will purchase travel online this year. Many hotel clients already generate 30%-40% of their bookings from the Direct Internet Channel.

This new dramatic channel shift raises a very important question: Who “owns the customer” in this new online environment? Is it the online intermediary, which made the booking, or the hotel where the guest stayed? Online intermediaries like Expedia have perfected the “interactive relationship game” with customers who book hotel stays:
§ A confirmation email is sent to the customer at the time of booking

§ A follow-up email is sent a week prior to arrival

§ Followed by a post-stay email, inquiring whether the customer was satisfied by the experience at the hotel and offering a list of new hot deals and destinations.

§ Followed by regular “Hot Deals” type of email blasts at least once a month.

During the same time not once has this same client ever heard from the hotel, pre- or post-stay.

Developing a robust and effective Internet marketing strategy requires not only establishing ongoing interactive relationships with your customers (hotel guests, meeting planners, corporate travel managers, and travel professionals), gaining extensive knowledge of your customers and performing precise customer segmentation. It requires shifting marketing funds from offline to online channels, and deciding what your marketing objectives will be.


Here is a quick review of the four most popular eMarketing formats:

? Display Ads (e.g. Traditional Banners): Steady decline: 2003: 21% (as percentage of total online advertising spend); 2002: 29%; 2001: 36%; 2000:50% (PWC/IAB). Click-through rate 0.83%  in Feb 2003 (eMarketer)

? Keyword Search (e.g. PPC, paid-inclusion, etc): Steady increase: 2003: 35%; 2002: 15%; 2001: 4%; 2000: 1%.

?  Classifieds: increased usage of this format:  2003: 17%; 2002: 15%; 2001: 16%; 2000:7%.

? E-Mail Marketing: Currently between 3%-4% of total expenditures.

The Current Environment with Email Marketing
Since our previous email report in 2002 we have seen email marketing achieve unprecedented growth from creative messages to creative methods of delivery. We have also seen an assault on our email boxes by spammers, a rise of anti-spam software tools, and the need for federal laws to protect consumers from unsolicited and misleading email. A new study by IDC reports that spam will continue to be a major problem in 2005, accounting for 12 billion daily emails, compared to 13 billion person-to-person daily emails.
Yet in spite of all the spam, Internet users like receiving their travel related emails. By category, travel email marketing retains a loyal audience, especially if it offers the recipient value, accurate communication, relevance, and familiarity. Forrester Research notes 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 online.

Email Marketing - a Powerful Direct-to-Consumer Distribution Tool
In the context of explosive growth in Internet distribution and marketing in hospitality, email marketing is a powerful direct-to-consumer distribution and marketing tool. It allows hoteliers to engage customers in strong, personalized and mutually beneficial interactive relationships, increases conversions, and sells more efficiently. Email marketing is an important aspect of today’s multi-channel marketing model that requires hoteliers to communicate a single brand image across all channels.

Email marketing spending will triple from $2.1 billion in 2003 to $6.1 billion in 2008, according to Jupiter Research forecast. By segment expenses are committed to newsletter sponsorships, outsourced email delivery, and the email list rental, which will continue to outpace the other two combined.

In hospitality, email marketing continues to receive marketers’ attention because costs remain relatively low, it is easy and fun to create and to implement and the results can be measured practically in real time. Intuitively, email marketing makes sense—email creates direct revenue opportunities with past, present, and future customers.

Why email marketing 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; pennies per email compared to $1 to $3 or more per direct mail.
Case Study: This boutique 100 room hotel in Napa Valley opened in the fall of 2003. The hotel launched an aggressive Direct Online Distribution and Marketing Strategy, including an award-winning website and robust customer email capture and email marketing strategy.  Results: Within 6 months the hotel opt-in e-mail list grew to 10,000 recipients. The hotel performs highly targeted email and PPC marketing campaigns on a regular basis. The hotel website, supported by powerful email and pay-per-click marketing campaigns has indeed become the “first point of contact” with customers and over 50% of bookings come via the hotel website.

Trends in Emails Usability
Email marketing’s ease of use also means more email clutter. According to DoubleClick, in the past year delivery rates have increased by 1.5% while open and click-through rates have declined by 5.6%. Growing competition for attention makes all our jobs more difficult. Click through rates for travel remains steady and equal to the industry average of 8.4%. Your campaigns should equal or exceed the CTR of 8.4%.

Permission-based email remains strongest for consumer readership, general satisfaction, and likelihood to purchase, according to a study by NOP World Research, 2004. Response rates to satisfaction, likelihood to purchase, and recommend to others were 10 percentage points higher for recipients of permission-based email than unsolicited emails. As described in our previous article, our tips on growing your own organic database are one of the smartest and most effective ways to build an email marketing and direct distribution strategy.

So the fight is to build your organic database, construct effective email campaign messages, win the right to be recognized and accepted into the email box, and convert the reader into a customer now and into the future. So how can all this achieved?

Here are some important considerations when designing your Email Marketing Strategy:
Know Your Customer

Knowing your customers is an extremely important consideration when conceptualizing and designing your hotel email marketing strategy. Addressing your key audiences and providing them with relevant information is one of the key aspects of any successful email marketing campaign.

It is a matter of perspective on what is truly important to the customer.  Different characteristics of the property and its product can appeal to different customer segments. For example, to the business traveler, choosing a hotel may be influenced by the availability of a function room, high-speed Internet access or proximity to an area corporation, while a leisure traveler may find the same hotel attractive because of its great location near local area attractions and family friendly entertainment. Same hotel, same destination, but different appeal requiring differentiated email marketing message.

Create a Single-View Email List
Are all customer emails and relevant guest data from POS, PMS, CRS, call center and Web channeled into a single email database? A single-view customer database has obvious benefits:

? Allows you to establish a single and easy to manage opt-in email list

? Allows you to address all of your customer segments

? Perform ongoing and frequent updates to the email database

? Use an appending service to obtain the email addresses of past guests for whom you only have a physical address.

? Identify your most valuable customers with best lifetime value perspective (80:20 principle)

? Launch email campaigns addressing different customer segments by adjusting a “master template”

Email marketing is a crucial component of the hotel’s overall eMarketing and online distribution strategy. The shift toward online purchasing means that the hotel website is becoming the “first point of entry” to establish interactive relationships with your customers. Capturing client email profiles on your website has become increasingly important.

The hotel is in a unique position to build a robust email list from existing customers. When using your own email list to market the hotel, the conversion rates can be 15-20 times greater than any stand-alone rented mailing list because the targeted group already knows and has experienced your 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 who may even anticipate these messages.

The property should also consider additional means to capture emails at the property level: at the front desk and the PMS level, by introducing free promotions, customer surveys, and email data cards to name a few. With the right capture strategy and a coordinated and combined effort by the front desk and sales staff, the email customer list can grow rapidly into a robust direct distribution channel.

For the actual email capture and email list functionality, consider using any of the many third party email vendor that provides low cost tools to capture, maintain, secure, and enforce the recent CAN- SPAM laws. These vendors provide templates and reporting tools to track and measure email campaigns.

Testing Your Email Campaign
As with any marketing campaign you want to be certain your message is clear and effective. For email, the subject line is critical as it serves a dual purpose of summarizing the content of the email and entices the recipient to open and read more. As email clutter grows the subject line becomes even more important. Once there was a time when the email simply dropped into the email box. Now you have to contend with spam screeners, virus protectors, and skeptical consumers (we will discuss spam at length later). Assume the email gets passed these filters and drops into the email box, now subject line prominently appears to the reader.

The subject line will determine the success of the entire campaign. It serves as the hook for the reader to bite on. To measure the validity of the campaign before a full launch, conduct your very own focus group. Take a sampling of customers from your database and test the sales message as it appears in the subject line. Narrow your choice to three different versions of the message and use the click-to-view and click-through rates to determine which sales message drew the greatest response. As described in the case study, read how some HeBS clients are using email as a focus group to test entire online and offline marketing.

Case Study: A prestigious Nevada resort with a customer base of 7,000 former and future guests will be targeted for a new “healthy habits” program and package next year. Management wants to market test three different messages to prepare for next years national launch. Randomly selecting 300 people from the list and parceling them into three groups, each received a specific message in the subject line. Message 1 generated an open rate and click through rate of 7 and 9 percent, respectively. Message 2 yielded a similar response. Message 3 exceeded 21 percent open and 34 percent click through and the only group to generate reservations. Message 3 became the focus for all resort marketing. Even the advertising agency withdrew its campaign slogan for the new marketing message.

Setting Goals in Email Marketing
Internet marketing and email marketing in particular can be used successfully as a direct response vehicle (short-term, results-oriented) or as a branding tool (long-term and strategic goals).

The best measure of any hotel marketing campaign - email or other - is the number of new reservations generated by the campaign. With a special rate code embedded in the email-only offer or use of a special 1-800 number can provide the means to track the results. Since the science of marketing is also to influence purchasing habits and create future demand, a more realistic measure is the general impact created in the campaign not just immediate reservations. 
The analytics to measure the success of an email campaign should include: open or view rates, click through rates, the number of pages viewed, the duration of the site visit, the number of contact forms submitted, the number of phone calls received, revenues and roomnights from special rate code bookings or packages purchased, and the long term sustainability of the campaign. Do people print out the email and present it by mail or at the front desk when making a reservation? Have you received inquires referencing the special rate announcement? As mentioned, there are many ways to measure your email campaign besides the number of reservations. 

Here are goals to consider with Email Marketing:
Email as Direct-Response Vehicle

§ Room reservations

§ Packages purchased

§ Extended stays (additional nights)

§ Ancillary purchases

§ Dinner reservations

§ Spa services scheduled

§ Tee time reservations

§ Additional guest

§ Repeat customers

Email as Branding Tool

§ Generates new leads

§ Reinforces existing subscriber base

§ Grows existing email database (Mail forwarding and email sign up)

§ Increases brand awareness

§ Reduces sales cycle time

§ Visit the website

§ Call the 800#


Timeliness of the Campaign
A marketing promotion is a call to action. You create the sales message for the consumer to react soon if not immediately. The challenge through email is to solicit a response amidst competing solicitations from other travel and non travel related products.

Once the campaign is launched the buzz around the message already begins the fade. It is that simple. The buzz tapers off the further we get from the date of the message announcement. At least with direct mail a postcard or brochure may sit on the kitchen table in clear view for weeks before the recipient acts. The influence of an email decays based on the rate of new email arrivals. After 72 hours studies have shown the email becomes completely forgotten.

Timing has become an important issue for email, not just for the best time to launch a campaign but the window of opportunity to act on the sale. According to a study by eMail Labs in coordination with eMarketer, an Internet marketing research group, email campaigns enjoy the best view and click-through rates, as high as 22.8 percent, on Wednesday and Thursday. So intuitively launch the campaign in the late morning or early afternoon, after the overnight junk mail has been cleared, if you are trying to reach people at their work desk. Considering time zones is important if you wish to reach a west coast audience from the east coast. Schedule the campaign for 1 pm in order to reach the west coast after 10 am.

The time factor to act on the sales message is also important because you have to contend with a reader’s short attention span and the loss of priority as the email box gets filled up. Consider placing a time constraint on the sales message. A real or artificial expiration date motivates the recipient to act. The timeliness of your appeal also turns a simple promotion from common to premium and ordinary into unique and special in the recipient’s mind. It prompts them to act. An entire industry of last-minute, 11th hour services now live off the exclusivity of your perishable inventory. Nothing stops the hotelier from doing the same by using email marketing.

Case Study: The Cherry Blossom Festival is a three week event that draws visitors to Washington, D.C. every April. When the trees are in bloom the air grows sweet and the city lights up in bright pink and white petals. Each year the hotel launches a specials rates and packages for the Cherry Blossom Festival. The event itself has a time factor as the trees are only in bloom for a short period of time. In this case, missing this beautiful, once-a-year seasonal event is enough to motivate and generate hundreds of hotel bookings for this client. 

Back to the Future with eFaxing
With complaints of spam and email clutter, fax marketing presents an interesting opportunity for the hotel marketer. It is an excellent option, particularly with a robust fax database. Through faxes you can distribute your sales message to the intended audience. Some of the better third party email vendors offer the eFax functionality as part of their total email toolkit and are keen to help adhere to any fax spam rules. In fact, such vendors allow you to send either a fax or email as back up if the first delivery method fails. Or, better yet, get the recipient from both ends with a fax and email.

Since faxing is a phone based system, expect a phone delivery charge of around 8-12 cents in the U.S. and higher for international calls. Fax reporting capabilities are limited to the delivery rate since there is no other automated tracking mechanism like with email. However, a unique rate in the sales message can help measure the campaign’s efficacy.

Personalization is more than providing the right information to the right person at the right time. Personalizing of the eMarketing message is a powerful conversion and retention tool. Customizing your interaction with your most valuable customers (those 20% that generate 80% of your business) will provide significant long-term rewards.

Personalization on the property level should start by identifying all “electronic touch points” with your customers (hotel guests, meeting planners, travel professionals, etc) and creating an action plan.

Personalize all electronic communications with your customers. Every email guru expounds on the importance of personalization. If you have the name, use it and use it wherever possible, in the greeting and in the subject line. True, such personalization smells like the work of spammers because they are the most adept at using technology, but the name coupled with a recognizable hotel name and enticing subject line can boost your open and click-through dramatically.

Synergy: Message and Landing Page
A landing page is a web page that was linkable from an email message. Too often, however, the email message and the landing page are not synergistic. Too often the home page serves as the landing page for all promotional messages in the email. This creates as much confusion as it does frustration to the reader.

The message and landing page must be synergistic. With a content management system (CMS), the hotel marketer can create new pages in real time as the email gets created. By matching each sales promotion in the email message to a relevant link for more information, you have streamlined the reading process for the recipient. The user can now go directly to the site for more information specific about the package or special in the email and complete the transaction.

Case Study: A leading Italian destination site that markets over 100 Italian hotels recently launched a 3-night, 4-day cooking tour of northern Italian. With an upcoming slow fall season, several hotels are being co-marketed in agreement with the hotel restaurants to entertain customers in a coordinated cooking tour theme. What was once a typical stay in Tuscany during the slow season has become a popular learning experience available only for the fall season. This complex package with a $1700 sticker price requires further explanation. The small image in the newsletter is enlarged on the landing page to include an attractive landscape, pictures of people, and customer testimony, plus any point of sales support message you may wish to include to further reinforce confidence in making a reservation. 

A Word about Spam and Spam Filters
No article on email marketing would be complete without addressing the subject of spam. Federal laws protect consumers from unwanted emails while technology has introduced spam filters to sift the good from the bad. Thought leaders, including Bill Gates, have suggested a number of archaic initiatives to curb spam. These include a charge per email similar to a postage stamp, a bond in escrow drawn down based on email sender violations, and the blacklisting of IP addresses.  The Sender Policy Framework (SPF), an anti-spam approach which authenticates the sender before mailing, has drawn both successes and mailers in test markets.
The CAN SPAM Laws of 2003 (Controlling the Assault of Non-solicited Pornography and Marketing Act) plus state laws make certain violations criminal with severe financial penalties, confiscation of equipment, and even jail time. The Coalition for Unwanted Emails and Spam Haus are two excellent organizations offering consumer and marketer guidance on spam issues.

Summary of Email Requirements:

1) The email recipient should have an ongoing business relationship with the email marketer, or should have had such a relationship during the past 8 months. Your hotel guest definitely qualifies.

2) Email must clearly identify the sender

3) The subject line must authentically represent the content of the email message

4) The sender’s full name and physical address must be included in the email message
5) The recipient must be able to unsubscribe right on the email or via a link from the email.

Be sure to check any local or state laws as well as review the CAN SPAM law yourself. The good news is that most qualified email vendors are the strongest proponents of email and serve as protectors of privacy and enforcers of the anti-spam requirements. Their entire business depends on the success and integrity of your email marketing.

Email Marketing is here to stay. It is an important aspect of the hotelier’s Direct Online Distribution and eMarketing Strategy. Email and eMarketing in general can be used both as a direct response vehicle (short-term, results-oriented) and as a branding tool (long-term and strategic goals). Email marketing allows hoteliers to engage the customer in a strong, personalized and mutually beneficial interactive relationship at a fraction of the cost of traditional marketing. And most importantly, email marketing allows the hotelier to “own the customer” in this new online distribution and marketing environment.

There has never been a better time to embrace email marketing as part of your Direct Online Distribution and Marketing Strategy. You have already realized that the Web can be either your best ally or your worst enemy. Consider retaining an experienced consultancy to help you navigate the often confusing Internet “Dos” and “Don’ts” and provide you with the “best practices” tools needed to utilize email marketing to its fullest potential.

About Hospitality eBusiness Strategies

Hospitality eBusiness Strategies, Inc. (HeBS)
advises companies in the hospitality and travel verticals on their Internet Distribution and eMarketing strategies. HeBS specializes in helping hoteliers build their direct-to-consumer online distribution and eMarketing strategies and regain control of their online brand and price integrity from the online intermediaries. A diverse client portfolio of over 200 top tier major hotel brands, multinational hospitality corporations, hotel management and representation companies, independent, and privately owned properties, has sought and successfully taken advantage of their eBusiness expertise.




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