Why is Setting Marketing Goals and a Budget Important?
In order to succeed, your business will require a definition of what success is (goals for revenue & occupancy) and enough marketing budget to achieve those goals.
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Setting Goals for Occupancy/Revenue
What is your optimal target for occupancy? It is not 100%. The research shows that optimal occupancy is 75% - 85%. Over 85% occupancy produces diminishing returns.
Perhaps it is more realistic for your property to operate at a lower occupancy than that. There's a sweet spot for your property. Operating over your ideal occupancy and still not meeting your revenue targets? Maybe you aren't charging enough. Not getting to your ideal occupancy target? Perhaps you aren't spending enough on marketing to acquire guests. There are any other number of variables that may impact your occupancy and revenue, but starting with a proper marketing budget is a part of it.
Setting a Budget
As a rule of thumb, the marketing budget for independent lodging properties doing less than $5M/year in revenue should be from 10% - 15% of gross revenue. In other words, if your property's revenue target is $500,000 in revenue for the year, the marketing budget would be anywhere from $50,000 - $75,000 for the year.
More established properties in a very popular destination may be towards the lower end of the spectrum or even slightly lower. But this requires built-in demand and little competition. Newer and less established properties, properties that aren't in destinations with high demand, or properties with a lot of competition may be budgeting towards the higher end of the spectrum.
Next Steps: Evaluate Your Goals & Marketing Budget
We've created a spreadsheet to help you evaluate your marketing budget. See the webinar (above) for guidance on using the spreadsheet.