Rethink ROAS: Leverage Lifecycle Marketing to Unlock Advanced Metrics for Your Hotel

As a marketer, you are probably all-too familiar with Return on Ad Spend (ROAS)—a marketing metric that measures how much revenue you have earned for each dollar that you spend on advertising. ROAS is an important key performance indicator (KPI) for any business because it shows you the effectiveness and profitability of your advertising efforts. But what if ROAS isn’t the ultimate measure of marketing effectiveness? What if there was an even better, more comprehensive approach to measuring KPIs that drive performance for your digital marketing campaigns?

Noreen Henry, chief revenue officer at Sojern, spoke in a panel discussion—Revolutionizing Profitability, Rethinking the ROAS Mindset—at the HSMAI Hotel Commercial Strategy Conference. The session, moderated by Nancy Johns, SVP of integrated marketing and digital solutions at Crescent Hotel and Resorts and vice chair of HSMAI America's Marketing Advisory Board, explored emerging metrics and strategies reshaping digital marketing in the hospitality sector.

Joining Noreen on the panel were industry experts, Dan Fernandez, VP of digital marketing and strategy at Concord Hospitality; Rory Peska, former VP of ecommerce at Aimbridge Hospitality; and Joe Spirito, VP of demand generation advisors at Amadeus.

Noreen presented Sojern’s alternative to ROAS–the “Loyalty Loop” or Lifecycle Marketing–offering a more comprehensive view of hotel marketing effectiveness:

“If you are only measuring on metrics associated with the marketing funnel, you are optimizing all your campaigns throughout the funnel to drive a conversion—but the reality is, a marketer’s job doesn’t end with a conversion,”  Noreen shared.

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Shift Your Focus

Imagine having a marketing strategy that not only secures bookings but also transforms each new conversion into a loyal, returning customer. That is the essence behind the Lifecycle Marketing strategy.

When you shift your focus from ROAS to Lifecycle Marketing, you start to think more broadly about your advertising spend and drive the right metrics throughout the entire customer journey. While ROAS does a great job at measuring revenue generation from ad spend, you can’t measure everything with ROAS. As the hospitality industry evolves, you should be thinking of the customer journey less like a funnel, and more like a continuous loop. This prevents you from solely concentrating on driving bookings and overlooking the overall customer experience.

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The Deal With ROAS: Why It Might Not Be Enough

ROAS is a great tool for measuring ad investments and hoteliers should continue using it for their business model. Although ROAS measures immediate ad spend returns, its narrow focus fails to capture the full scope of marketing effectiveness. This makes it limited in scope for several reasons:

1. The Customer Journey is Complex: Guests may take time between seeing an ad and making a booking, and their decision-making process can be influenced by various touch points beyond the initial ad click.
2. Longer Customer Lifecycle: Hotel bookings aren’t always one-off transactions; they often involve multiple stays over time, and additional spend on upsells or favored amenities. The way each hotelier measures ROAS can vary based on things such as the lookback window they implement, and many times doesn’t capture the full lifetime value of a customer or repeat bookings. 
3. Attribution Challenges: Multiple channels and touchpoints contribute to a booking decision. It is challenging to accurately attribute conversions solely to ad spend. Multi-touch attribution models might offer a more nuanced understanding of how different marketing efforts contribute to bookings across the customer journey.
4. Customer Experience: A narrow focus on driving bookings through advertising might neglect the overall customer experience. Hoteliers should consider prioritizing metrics related to guest satisfaction, such as Net Promoter Score (NPS) or online review ratings. After all, positive experiences lead to repeat bookings and referrals, driving long-term revenue beyond the scope of ROAS.

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But if Not ROAS, Then What?

We understand that the customer’s path to purchase is rather complex. In the initial phase of their journey, customers visit a number of websites looking for inspiration, then move through the funnel to the planning or consideration phase,  and then finally, to the booking phase. While we’ve covered various metrics for evaluating customer experience—such as Net Promoter Scores, Loyalty Member Enrollment, Google Reviews—we recommend focusing on three key metrics that offer real insights into the effectiveness of your Lifecycle Marketing strategy:

1. Customer Acquisition Costs (CAC): Re-attracting a previously converted customer is always cheaper than finding a new one, which can reduce your marketing cost. You can use CAC to assess your ROI for acquiring a new customer and ensure that the lifetime value of a customer exceeds the cost of acquiring them. 
2. Revenue per Occupied Room (RevPOR): RevPOR shows how successful you are in selling more than just a room to guests. This encompasses additional revenue streams such as room service, dry cleaning, and spa sales. When you build loyalty and establish a closer relationship with your guests, you can motivate them to spend more and increase their purchasing frequency. This ultimately increases how much revenue you can drive per room sold.
3. Lifetime Value (LTV): As customers remain loyal to your brand over time, they tend to make more purchases, increasing their overall value. Hotels should prioritize metrics like LVT, which reflect the frequency of repeat bookings and highlight long-term relationships with guests. 

By combining all three of these metrics, you unlock the value of the Lifecycle Marketing strategy and optimize your plans to not only book more rooms, but foster longer-term engagement with your hotel guests.

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Know Where You Are 

Each hotel business has unique goals and clients, and as strategies evolve, so should the metrics used for measurement. For instance, one customer might be a high on-site spender: Renting a cabana at your pool, booking a spa massage and dining at your restaurant. On the other hand, another customer might be a low on-site spender: They’re just there for the room and are spending their dollars outside your hotel.

If you’re going to leverage the Lifecycle Marketing, it is crucial that you focus on the ideal customer profile that is going to drive LTV and profitability. If you rely solely on ROAS, you may not distinguish how to strategically spend advertising dollars to drive these two different customers to your property. The key to this is knowing each type of guest and effectively conveying the metrics that tell those separate stories. Once you understand how you are performing in these areas, you can leverage these insights to assess and refine your marketing strategy’s impact.

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ROAS, Lifecycle Marketing, Or Both?

Now, we’re not suggesting that you abandon ROAS entirely; rather, ROAS and Lifecycle Marketing metrics complement each other, and using both can enhance marketing effectiveness.  Lifecycle Marketing unlocks a more holistic overview of your hotel’s marketing efforts, offering metrics that encompass every aspect of the customer journey. 

Get in touch with our hotel marketing experts and find out how you can start unleashing the power of the Loyalty Loop today.