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Key takeaways for hotels from the Paid Search Benchmark 2018 report

The world of paid search marketing remains hugely competitive for hotels, but understanding the latest industry trends and consumer behavior can make a big difference to how search campaigns perform.

In the recent “Paid Search Benchmark 2018” report by Adthena, there were some fascinating insights that all hotels can use to their advantage. The report compared several industries (including travel) in the US, UK, and Australia. Over 100,000 advertisers were interviewed, and data was collected from over 140 million paid search ads. Suffice to say, the scale of this report offers a lot of invaluable data.

In the following post, we’ll discuss some of the key findings, and highlight how these translate into opportunities for hotels to maximize the impact of their own paid search campaigns.

Paid search is growing

Contrary to industry reports and blog posts, paid search is seeing steady global growth across all sectors. The travel and tourism industry is experiencing a particular boon in first page search engine results page (SERP) click-through rates (CTR), with the sector currently enjoying +2% CTR above the search industry average.

The fight for a first page ad position in this industry is also fierce. The US travel and tourism sector is in the top two most competitive industries, easily outnumbering the overall search average. This intense competition is heavily driven by the OTAs. Their aggressive marketing strategies involve bidding on both branded keywords and generic, broader keywords — such as ‘hotels in X location’.

This represents a major problem for smaller hotel groups and independents. With such huge spending power, OTAs can easily outbid hotels and claim the coveted top spots. As a consequence, hotels frequently lose out on high-value direct bookings. With commission fees averaging 15%, relying on OTAs to bring in bookings cuts sharply into a hotel’s profit margins.

High click-through rates

In US search, average click-through rates in travel and tourism exceed the industry average by over 2% in all segments.

When it comes to mobile, the gap is even greater: average CTRs for brand ads are 4.14% higher than the industry average. This reinforces the potential benefits of investing in paid marketing campaigns, and the absolute necessity of having a mobile-ready website — especially since OTA mobile bookings are growing faster than hotels.

Looking at the UK travel and tourism industry, CTRs for generic terms far exceed the search average, while CTRs for brand terms are below average. This is most likely due to the high OTA dominance in the UK compared to other countries.

Costs and competition

One of the other major takeaways from the report was just how expensive generic keywords are compared with brand keywords in the US travel sector — indicated in the graph below.

CPC by device graph

Comparatively, the difference is also far greater than all other industries. This high CPC for generic terms may be because the travel sector has less brand awareness, and consumers are more price driven when compared to other industry sectors. This creates far greater competition for top of the funnel keywords that are typically dominated by the OTAs.

The cost to compete is undoubtedly high, making life tough for smaller hotel groups and independents. Google’s pricing structure and the intense competition in AdWords Auction means they’re effectively being priced out of bidding on generic keywords (which are 4-5 times more expensive than brand keywords).

Again, much of this comes down to the OTAs. Their ability to spend significant sums of money in this area makes it prohibitive to all but the biggest hotel chains. Because paid search works largely on an auction basis, the more the OTAs bid, the higher the price everybody else pays.

In complete contrast, brand terms are more expensive than generic terms in the UK. However, both are well below the UK’s CPC industry average. This difference compared with the US can be explained by the fact that the UK has fewer independent hotels bidding on paid search platforms.

With below average CPCs (and above average CTRs), UK independents have a great opportunity to maximize the returns on paid search utilizing generic search terms.

Fighting for the number one ad slot

The number one search ad position in travel is not the most contested. That was one of the major surprises from the report (although any agency with a strong relationship with Google will know about this already). In large part, this is because competition volume for the same keywords in the travel and tourism industry is so high.

The highest competition was actually for the second ad slot. Sometimes, aiming for this position can lead to higher CTRs at a cheaper CPC. Ultimately, experimentation is key. It is down to your agency to test position against costs and conversions to find the ideal sweet spot.

When it comes to the amount of advertisers competing on search ad positions, competition in the travel and tourism is intense.

Unique competitors per ad position graph

As the graph above shows, the industry ranked a close second behind finance.

Things are less aggressive in terms of CPC for first page ad positions on desktop. In the US, travel and tourism was found to be the fourth most expensive.

Average CPC per ad graph

Big opportunities for mobile engagement

The report also found that mobile clicks make up nearly 49% of all clicks in the travel and tourism category. This is despite the fact that just over 35% of ad spend in this sector went towards mobile ads. For travel marketers, this reveals a significant opportunity to invest in mobile-focused search campaigns to take advantage of more clicks-per- dollar/pound.

The report goes on to suggest that ad spend on desktop is likely to be less profitable. This is based on the observation that advertisers in US travel and tourism invest an average 64.72% of their ad spend on desktop, yet receive just 51.4% of clicks as a result.

However, looking at spend verses clicks is just half the picture. When we have compared Travel Tripper clients with the same against total revenue generated, we can see that desktop still far outweighs mobile. However, the balance is changing each year.

What is clear is that mobile is very often one of the first devices used when a potential booker makes first contact with your website. We are also seeing that the number of bookings on mobile optimized websites are seeing greater increases when compared to other devices. Take a look at your own website analytics platform and check what device people are using when they first enter your website.

Top three recommendations

Based on some of the key takeaways from the report, we’ve compiled three top tips to help your property enjoy more success from your search ad campaigns.

1. Change your OTA contract

Every hotel should have a conversation with their OTA rep to change their existing contract to include a branded keyword bidding exclusion clause. This will stop the OTAs from bidding on your branded keywords — a topic we’ve talked about in the past.

If you don’t bid on your brand terms, the OTAs almost definitely will do. This reduces your visibility in SERPS, and means you could be missing out on those all-important direct bookings. This is an area that Travel Tripper has significant industry expertise.

2. Focus on mobile

It’s also crucial for hotels to focus on mobile. Compared to desktop, it offers a more favorable return on ad spend (ROAS), plus greater numbers of travelers are now using their smartphones to book. This fact should give hoteliers reason to consider investing in a strong mobile search strategy. At the very least, providing a quality mobile experience is essential to ensure you maximize conversion rates.

3. Reduce CPC and increase conversions with Real Time Ads

When a person clicks on a hotel ad, but doesn’t convert, a hotel still has to pay for that click. It’s easy to see how this happens. Most hotels don’t reveal the room rate until users reach the booking engine. So a person might click an ad, discover the room rate is higher than they’re willing to pay, and leave the site.

Travel Tripper’s industry-first Real Time Ads help solve that problem. The ads show the current nightly rate for a hotel in the search results. This pre-qualifies users on price. And if a person knows the price of a room and clicks the ad, there’s a far greater chance they’ll convert. In fact, our Real Time Ads product has helped hotels achieve a 68% boost in conversion rates on their search marketing ads.

Bringing it all together

There’s no doubt that competing in paid search is a real challenge for independent hotels. While the dominance of the OTAs continues, the Paid Search Benchmark 2018 report shows there are ways to outmanoeuvre the industry giants.

By understanding travel shopper behavior, considering the latest market trends, and combining the right technology with customized advertising, hotels can maximize conversions and earn a healthy ROI from paid search advertising.

Gina Ciarrocchi Zech

Gina Ciarrocchi Zech

Gina's digital marketing approach is founded on the in-depth data-mining capabilities required of an agency-bred paid search marketer. Read: Quantification and efficiency are two of her favorite words, next to wine and pizza. As an Associate Director of Digital Marketing at Pegasus, you're most likely to find her knee-deep in spreadsheets looking for nuggets of wisdom that move the needle for clients. Contact her at gina.ciarrocchizech@pegs.com.

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