Digital Marketing: Native Advertising and Online Influencers in the Hospitality Industry

What You Need to Know about Recent FTC Enforcement

By Theodore C. Max Partner, Sheppard, Mullin, Richter & Hampton LLP | December 25, 2016

The travel tourism and hospitality industry have embraced influencer marketing to enhance and pinpoint access to target audiences. Online influencers and native advertising not only helps companies reach their own customers but also helps them to reach other influencers and a broader audience of customers. When working with influencers and media, one needs to be careful and mindful of the basic rules governing endorsements promulgated by the Federal Trade Commission ("FTC") and recent enforcement actions which underscore the differences between advertising and endorsements, on the one hand, and unsolicited and impartial consumer responses, on the other, in various forms of social media, including Facebook, YouTube, Instagram, Twitter and others. These FTC decisions impact all forms of online retailers and advertisers, including travel tourism and hospitality. The increased frequency of these recent enforcement efforts makes it plain that the FTC is scrutinizing the explosive growth of digital marketing and the growing role that influencers play in impacting decisions of consumers. Notwithstanding the radical change in technology, the FTC remains vigilant in enforcing the simple rule that advertisements and marketing that promote goods or services must be clearly identified as such. (1) To avoid a serious mistake and potential FTC enforcement, it is critical that advertisements and digital media campaigns take into account recent FTC enforcement actions impacting online and native advertising, influencers, and social media.

Influencer Marketing in the Travel Tourism and Hospitality Industry

Influencer marketing involves working with influencers to access your target audience, rather than marketing directly to customers. Influencers are individuals or channels of media communication that by virtue of their knowledge or celebrity hold "influence" over the potential tourism or hospitality customers. Online influencers may command an expansive audience for one of the following reasons: (1) Strong media following; (2) Extensive following for videos distributed on YouTube; (3) Blogging influencers with strong website signals; (4) Experienced travel journalists and writers; and (5) Popular travel-related websites and publications. Influencers may be contacted and used without compensation or imposition of any conditions, which would not implicate the FTC Guidelines. As a practical matter, one should carefully plan any effort with regard to online influencers and define the objectives of the project. The marketing project should be developed carefully and one should try to develop a relationship with the influencer, even if financial consideration is paid as part of the advertising effort. In addition, whether or not the effort constitutes an advertisement or endorsement under the FTC Guidelines, it is important to constantly monitor and review the social media output of the influencer to ensure that any necessary disclosures are made.

Endorsement Guidelines in the Age of Social Media

The FTC's published "Guides Concerning the Use of Endorsements and Testimonials in Advertising" ("Endorsement Guides") defines an endorsement as "any advertising message . . . that consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser." The FTC updated the Endorsement Guides in 2009 and issued "The FTC's Endorsement Guides: What People Are Asking" in June 2010 to address the most frequently asked questions ("FAQs"). (2)

In June 2015, the FTC revised the FAQs to address social media and other new issues not previously covered: "The key principle is that consumers have a right to know when a supposedly objective opinion is actually a marketing pitch." (3) The revised FTC Guidelines make clear that the basic rules apply to social media, including bloggers and influencers:

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Social Media: Getting Personal

There Social media platforms have revolutionized the hotel industry. Popular sites such as Facebook, Twitter, Pinterest, Instagram, Snapchat, YouTube and Tumblr now account for 2.3 billion active users, and this phenomenon has forever transformed how businesses interact with consumers. Given that social media allows for two-way communication between businesses and consumers, the emphasis of any marketing strategy must be to positively and personally engage the customer, and there are innumerable ways to accomplish that goal. One popular strategy is to encourage hotel guests to create their own personal content - typically videos and photos -which can be shared via their personal social media networks, reaching a sizeable audience. In addition, geo-locational tags and brand hashtags can be embedded in such posts which allow them to be found via metadata searches, substantially enlarging their scope. Influencer marketing is another prevalent social media strategy. Some hotels are paying popular social media stars and bloggers to endorse their brand on social media platforms. These kinds of endorsements generally elicit a strong response because the influencers are perceived as being trustworthy by their followers, and because an influencer's followers are likely to share similar psychographic and demographic traits. Travel review sites have also become vitally important in reputation management. Travelers consistently use social media to express pleasure or frustration about their guest experiences, so it is essential that every review be attended to personally. Assuming the responsibility to address and correct customer service concerns quickly is a way to mitigate complaints and to build brand loyalty. Plus, whether reviews are favorable or unfavorable, they are a vital source of information to managers about a hotel's operational performance.  The February Hotel Business Review will document what some hotels are doing to effectively incorporate social media strategies into their businesses.