BlogSeptember 2017How to Calculate Your Vacation Rental Mar

How to Calculate Your Vacation Rental Marketing Budget


Most are looking for a quick answer, but unfortunately the answer is not quick. Within the vacation rental management industry, each company has its own set of variables that can affect your expense calculations.

However, there are some basic ideas that prove true with just about every VRM, which I have outlined in this blog post.

A Marketing Plan

This means a real plan on what you have spent and plan on spending, not something you write on a napkin or on the back of a VRMA schedule.

Make a list of all your marketing avenues and expenses, then give each time to perform. Afterwards, compare them and adjust accordingly. 

The goal is to get to a point where relating your marketing sources is an apples to apples comparison. This can be difficult though, because many channels track success in their own way, or using their own set of tools. However, there are programs that can assist you in bridging the gaps in your data.

Having a truly comparable set of marketing sources allows you to confidently test new initiatives, check your ROI, and make decisions. However, all channels are not created equally. Thus, breaking them up into logical categories helps to see your data more clearly.

Three Categories for Your Marketing Sources

1. General

This includes money spent on anything that's not campaign based but may speak to your company brand. For example website development and hosting fees, your mobile app, or tangible branding touches like embroidered towels, arrival gift bags, etc.

2. Brand Awareness

These marketing initiatives are meant to get your company in front of new sets of eyes. Depending on your market, there can be upwards of 200+ pre-conversion digital touches (search, social, etc.) and an average of 6 hard-sale touches (email, phone call, etc.). So, unless your repeat guest rate is 100%, you'll need a brand awareness category.

3. Audience Conversion

Reaching out to your existing audience and saying: "Hey, remember us?" And they respond: “Why yes, here’s a booking!” This category of marketing has a better ROI because you’re reaching a group that already knows you.

Breaking up your marketing channels into these three categories will help you better determine when and where to allocate your budget. By doing this, you’re painting the bigger picture of where your money went, where it’s going, what source you can borrow from and what source you can add to.

Time to Make Your Own Plan

Along with our example above, here are some ideas that you can use to create your own marketing plan:

  • Compare year over year. Nearly all vacation rental markets are seasonal, so comparing month over month is not always practical. It takes time – at least a year or two – to be able to see real numbers.

  • If you are in a seasonal market, keep a consistent monthly budget year-round. However, during your booking season, move money from brand-awareness to audience conversion-based campaigns. That way, you’re reaching a larger audience every year with a higher conversion category ROI.

  • Which sources are maxed out

  • Which ones have reached their point of diminishing return? Perhaps your PPC conversion rate has increased the last 5 years but is down this year.

  • What is your repeat guest rate? If it’s low, you’ll need to spend more money on brand exposure. As you get more repeat guests and build your subscriber list, likes, and followers, your brand exposure budget can decrease and your audience conversion category can increase.

  • Some sources have hidden value. Remarking and social posting might not show exact conversion data. Rarely does a Facebook user see a post and think: "I'm going to book a vacation now." So, look through your Google Analytics Assisted Conversions to see how involved your guests are with those sources. Make your own table and give them your own booking value. Perhaps each assisted conversion is worth half a booking, every new follower is worth .05 bookings or every 100 shares are worth 3 bookings.

  • Other sources have hidden cost, such as social posting. How much time/money will it take? Is it something an internal staff member will do or are you paying a marketing company to do it? Are you buying camera equipment?

  • Managing your listing sites. I think it’s safe to assume that the majority of guests, who book one of your properties via a third-party site, are unfamiliar with your company. Thus, your marketing dollars in listings sites should be a part of the brand awareness category. If you meet their expectations during their stay, they will hopefully become a repeat guest and part of your audience conversion category the next time around.

  • Just because the cost-per-booking is high for some sources doesn’t mean you should drop them. Take social posting for example it may appear to have terrible ROI on a spreadsheet, but remember you need 200+ digital touches per booking. Social media can knock out a lot of these in a way that doesn’t leave the user wanting to add you to spam.

Ballparking Your Budget

My experience shows that a good starting point with your budget is 10-13% of your gross revenue. Of course, this is a general figure, and can be affected by a number of business-specific factors like inventory, market and brand reputation. Over the years, I’ve worked with some VRMs who spend less and some that spend more, yet are equally successful. So, your market and situation may dictate this figure higher or lower than our averages.

Final Verdict

As I mentioned at the outset of this article, there isn’t a quick and easy formula to calculate what your marketing budget should be. Your data is king and requires building over time to enable you to make good budgeting decisions. Instead of shooting from the hip, use good judgment based on solid analytics.

Take the time to create a marketing plan that will help empower your decision-making process through an honest comparison of channels – which will help your marketing efforts to be sustainable and your business profitable!

Published by Austin Rodgers
on Tuesday, September 26, 2017

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