Mr. Sohn

Social Media & PR

Social Media ROI: Does Your Hotel Have a Competitive Advantage?

By Oliver Sohn, Co-Founder, Seventh Art Media

Co-authored by Doug O’Reilly, Co-Founding Partner, Seventh Art Media

Recently, New York City was co-host to one of the largest global social media conferences: Social Media Week. The conference is a great platform to measure the pulse of the industry and for us that meant identifying those aspects of social media that the hospitality industry needs to focus on the most for 2011. The unanimous answer this year: Return on Investment (ROI)! This represents a significant shift in how social media has matured since last year with less focus on media metrics (follower growth, friends, network reach, sentiment) and more on business metrics (ROI).

A thorough understanding of the top and bottom-line implications of social media is the most objective method of assessing its true value and is the key to your ability to leverage it for a competitive advantage. Thus, in this article we take a look at how to evaluate social media ROI and assign an actual dollar-value to some of the social media networks that hotels have established.

The first step for any successful social media program is to create a goal-oriented strategy that establishes and prioritizes possible outcomes and measures. Jumping into social media without any idea of where you want it to take you (at least initially) completely undercuts your subsequent ability to assess its return. In other words, if ROI wasn’t considered important from the beginning, then it is going to be hard to properly determine it after the fact. However, once a plan is in place the goals and results can then be used to readily demonstrate top-line performance, efficacy and return.

Getting a goal-oriented strategy in place is usually an exercise in narrowing your focus in the face of innumerable possibilities. On the flip side, one of the common challenges in this process is that many hoteliers look at social media as a vertically aligned function, a silo, instead of focusing on the benefits of horizontal integration across their business structure. In fact, the benefits of social media are only realized when it serves as a means for the integration of multiple brand facets and is allowed to organically realize exponential amplification or viral velocity outside of traditionally defined verticals. In order to keep it all manageable, a hotel can begin by focusing on returns and efficiency across three different disciplines that make up a hotel’s social media value chain:

1. Sales/Revenue Management: Incremental revenue generated with new guests and existing customers (top-line) as well as improvement of sales margins/ADR yield (bottom-line).
2. Marketing & PR: Efficiency of cost per brand impression for your hotel and avoidance of less efficient and more expensive lead generation channels.
3. Customer Service: Operational savings and added value for your guests.

With this focus in place, your ability to measure and assess the contributions of your social media efforts will mirror your ability to evaluate any other form of marketing and customer experience efforts. This begins with a full cost assessment and subsequent measurement of impacts as the social media program cycles through campaigns and ongoing engagement.

Creating an Evaluation Matrix

Every social media campaign happens in a sequence: It starts with an objective and investment (network setup, content development, human resources, agency fees, etc.) followed by an action (campaign execution and monitoring), resulting in impacts: both non-financial (media metrics, sentiment, guest satisfaction) and financial (sales and margin). Regardless of specific outcomes and goals, this process forms the framework under which all efforts can be evaluated and ROI can be determined.

One key step in creating a meaningful foundation for measuring ROI is to establish a baseline that will allow the hotel management team to illustrate changes (deltas) in investments, actions and impacts over time and also helps lend order to an otherwise dizzying array of information. Adding structure and discipline to your measurement regime further enables you to both assess your results with regard to your original goals as well as look at returns through a variety of lenses (i.e., topline growth vs. bottom-line).

A comprehensive measurement plan built in this fashion clearly delineates what you have invested, what you did along the way and what value you derived from your efforts. From here you can build out a basic matrix with the specific elements adjusted to reflect an individual property or brand’s social media plan:

An Example Planning and ROI Evaluation Matrix

The overlay of the information and data streams outlined above creates a powerful yet intuitive tool to evaluate the media and business impacts of any social media strategy. It further allows you to isolate patterns of correlation and quantify deltas. The corresponding revenue gains, cost savings, and margin increases are defined as the derived value to identify the true social media ROI for the hotel.

This is where the initial planning and prioritization comes full circle. Not every social media program can cover every facet or possible marketing outcome. Analysis of ROI needs to be driven off of definable and measurable outcomes delineated when efforts are initiated. In other words, if you don’t know where you are going how can you know when you’ve arrived?

All things considered there are a few specific outcomes that should be evaluated as part of any social media efforts and are likely to be part of most (but not all) social media campaigns:

1. Brand Exposure

Online brand exposure, measured in number of impressions, comes at a cost - whether delivered through traditional online marketing or social media campaigns. But where traditional online marketing offers a limited fixed-cost per impression business model, social media brings the significant advantage of amplification (the viral co-efficient of a content piece measures its ability to generate brand impressions through amplification). Once brand impressions have been quantified, their respective value can be calculated by comparing them to traditional average CPM costs of online advertising. Combining exposures with traffic referral data can proxy for click-throughs.

This is a key factor in all social media assessments. When you buy $50k worth of banner ads you have set your ceiling: X number of impressions or Y number of click-throughs. Well executed social media efforts build network reach, amplification and exposures over time. It is actually possible to assign a dollar value to the utility of a social media channel by comparing the number of qualified impressions generated from it to the cost of traditional online marketing. Qualified impressions are a subset of gross impressions and take into account that not every measurable impression reaches a consumer effectively, e.g. not every Twitter post will be read/noticed by all of the sender’s followers. Following this methodology, our company has created valuations for over 120 hotel Twitter accounts that range from less than $100 (despite 2k+ followers) to upwards of $450,000 (@cosmopolitan_lv).

2. Conversions

Channel management requires a granular understanding of the contribution of each channel to the conversion pipeline. Social media’s contribution can be quantified via traffic referrals, referral codes and the use of URL shorteners. But this is just part of the picture. In the world of yield management we also should look at the contribution of social media to shift sales from high-commission channels to preferred high-yield channels.

As distribution continues to decentralize, social media acts as a direct engagement channel with customers that is richer and deeper than traditional direct or email marketing channels. Leveraging the earned equity of these connections can help steer traffic past OTAs and toward direct bookings.

Our approach to social media is that it is earned media. Impressions, loyalty, referrals, mentions and conversions are all earned through the delivery of a better experience or some other form of added value unique to these networks. The value of earned media and the bottom-line benefits it delivers are at the core of justifying the investment required to execute any social media strategy.

Against this background, it is important to note that without a strategy in place, hotels are likely to realize either marginal or even negative ROI from their social media efforts. Often hotels look at social media to improve their distribution, when in fact the benefits of social media integration are functions of attention, influence and exposure. Don’t expect any valuable ROI from placing your booking engine on your Facebook page (distribution) without investing in building a network and engaging with the right target audience (attention/exposure). Selling a room on Facebook that would have otherwise sold to the same guest on the hotel’s website does not constitute a positive social media ROI – it is a zero sum game. Instead, the real value lies in growing and engaging a relevant target audience via social media that will directly impact a hotel’s top-line. It is important to focus on objectives and strategy first and technology last. Technology is just the means to an end, and in this context does not create value on its own.

This article was co-authored by Doug O’Reilly. Mr. O’Reilly has over two decades of marketing strategy, advisory and insight experience with many of the leading brands and agencies in the US. He is a co-founding partner of Seventh Art Media where he focuses on assisting hospitality brands and properties with their marketing, social media and community building strategies. Mr. O’Reilly may be reached at doreilly@seventhartmedia.com

Oliver Sohn is a practiced real estate investment & development executive with extensive hospitality and marketing industry experience. He is a co-founding partner of Seventh Art Real Estate and Seventh Art Media (both under parent company Seventh Art Group) where he focuses on social media based business development and revenue management strategies. Since joining Seventh Art Group in 2006, Mr. Sohn successfully completed investment and development assignments on 20+ international deals in excess of total $3 billion, including investment strategy, business development, development strategy management, and marketing & sales. Mr. Sohn can be contacted at 212-431-8289 or osohn@seventhartgroup.com Extended Bio...

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