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Hotels are slowing down their growth by refusing to adopt market research

Companies worldwide use market research to test the feasibility of new products or services by communicating directly with target customers. In the past, market research was primarily conducted through telephone interviews or by distributing surveys to an existing audience through SurveyMonkey or similar tools.

With the latest generation of market research tools, anyone can survey people beyond their existing audience, with targeting options similar to Facebook ads, and gather real-time public opinion from consumers.

Global market research spend vs. advertising spend

Market research expenses were $73.4 billion in 2019doubled since 2008. In 2021 worldwide Market research spending exceeded $110 billion. North American companies spend the most on research at 54 percent of total spending, followed by Europe at 26 percent.

By comparison, search advertising spend was in 2021 $144.8 billion worldwide. Display advertising, which reached $238 billion, accounted for the largest share of ad spend in 2021.

This means that the global market Research spend accounts for approximately 28 to 30 percent of global search and display advertising combined, nearly identical to global search advertising spend.

This begs a question: how much does your hotel spend on research? Are you missing important business intelligence that your competitors might have?

How much do hotels spend on marketing and market research?

While the average small business marketing budget is about 11% of sales, hospitality businesses often have much lower profit margins than other sectors. This explains why the approximate average for marketing budgets is for independent hotels 7% of annual turnover. This is especially true for international chain hotel brands.

Independent hotels with good digital marketing setups typically aim to: a 10x Return on Ad SpendScale Google and Facebook ad spend to maintain positive ROAS while spending little to nothing on research.

Independently managed hotels took almost a decade to develop a willingness to pay for direct marketing. Even today, some hotels spend less on marketing than a beauty salon or a restaurant. The situation in market research is even worse. Not all hotel marketing decision makers understand the importance or function of market research.

This is especially true for hotel managers, who are extremely resistant to modern business processes. Younger, more dynamic hotel managers with up-to-date education are making good use of research to improve not only sales and revenue, but guest satisfaction metrics as well.

Hotel market research is a great investment

In business, it’s the impact on the bottom line that matters. Before spending on market research, you might ask yourself: How does this help us make more money? What tangible results are we getting for our money?

Here are the top reasons hotels do market research:

test markets

Market testing is the most common goal of market research. In short, the hotel measures demand across different countries and demographics from which it expects to do business. Test results help improve the targeting and messaging of marketing campaigns, resulting in significantly higher ROI and profitability.

A few hundred dollars invested in market testing can save thousands of dollars in poor advertising spend while helping launch profitable hotel marketing campaigns from day one.

To test brand and product presentation concepts

In pre-opening or re-branding, the professional method for selecting design concepts is market research. Concept testing is one of the most common reasons companies seek feedback from target customers. The process involves a series of complex AB tests to assess which concept or design is most appealing to target customers.

Hotels that participate in concept testing launch successfully, while concepts completed without obtaining proper market feedback may take years to launch – if they ever launch.

To measure brand awareness and compare it to competitors

Measuring brand awareness is probably not on your hotel marketing to-do list, but wait until you read on. Companies that manage their brand awareness in a targeted manner benefit from higher demand, less price sensitivity and less dependence on volatile market trends.

Brand awareness research can provide you with insights based on customer feedback on which segments know about your hotel brand and how it compares to the brand awareness of your competitors.

These insights are essential to drive brand awareness and long-term brand awareness.

Measure brand acceptance and compare it to competitors

Similar to brand awareness, brand acceptance research obtains data on what people like and dislike about your hotel’s product presentation, brand, and perceived values. This is very different from guest reviews.

Brand acceptance reports show you why people haven’t booked your hotel, what looks good about it and what’s wrong. This information is critical to improve brand adoption, product exposure, conversion rate, sales, and bottom line at the end of the day.

Conclusion: market research is still a tool for few forward-thinking hoteliers.

As mentioned at the beginning of this article, most hotels are still reluctant to invest in basic marketing, let alone market research. Spending the entire marketing budget on advertising seems to be the surest way to achieve a positive ROI, while spending on research does not automatically do it.

Market research only generates positive results if the management team can implement the findings appropriately. Most hotel marketing management teams just can’t do it.

There’s a reason global companies spend nearly 20% to 30% of their marketing budget on research. Data and information gleaned through primary survey research is vital in today’s fast and unforgiving market environment.

Modern research tools give forward-thinking hotel marketers and hotel management teams an edge over others who rely on assumptions and are still reluctant to use today’s standard business tools.

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