Setting a hotel marketing budget from your own numbers

A hotel marketing budget is built from the hotel's own numbers, not a percentage borrowed from other hotels: pick the periods that need room nights, work out what one more room night leaves after variable costs, compare that with what the same booking costs through a third party, and set the spend below that gap.

The owner asks for one number: what should we spend on marketing next year. Finance has last year's line, sales has a list of channels, and neither answers the question, because the question is really about which room nights are missing and what each one is worth. This article replaces the borrowed percentage with a calculation you can run from your own records. By the end you will have a budget built period by period, a ceiling for what a booking is worth winning, and a one-page monthly review.

Why does a percentage of revenue from other hotels say little about your budget?#

Because the right number depends on which room nights you are missing, what each one leaves after variable costs, and what the alternative channel costs, and none of those travel with a percentage.

A percentage arrives without its assumptions. It was built for a hotel with a different mix of contract, agency and direct business, a different season length and a different cost base. Copying the number copies none of that. The same share of revenue can also mean very different money: a hotel that already pays a large commission bill is spending heavily on acquisition without a marketing line to show for it.

The bases do not match, either. Percentages are usually quoted on total revenue, while marketing works on incremental room nights. A share of all revenue cannot tell you which nights to buy, which month, which source market or which channel. What replaces it is four inputs, all from your own records: the need periods, the room nights required in each, the contribution per night, and the cost of the same booking through the channel you would otherwise use.

Treat any outside percentage as a hypothesis to test, never as a budget line. If your own calculation lands far from it, the calculation is the one to trust.

What does a hotel already spend on marketing?#

More than the marketing line shows: every commission, every agency net-rate gap and every complimentary stay is money spent to bring a guest in.

Split existing spend into two pots. The first is paid per booking: commission to a booking site, the gap between your published rate and an agency's net rate, a tour operator's margin. The second is paid before any booking exists: advertising, photography, website, content, trade shows, sales trips and public relations. The first pot usually sits in distribution cost or is netted out of revenue, which is why the marketing line looks small while acquisition feels expensive. Read the two lines together as one acquisition cost, on the basis described in comparing channels by what the hotel keeps per booking.

Put every channel on the same basis: what the hotel keeps after the channel's cut and after the costs that exist only because the room was sold. That is the only comparison that survives a change of channel mix. Decide the split between the two pots deliberately, because money moved from commission to direct spend is a transfer, not an increase, and it only works if the direct channel converts in that same period.

Record the freebies as well. Complimentary nights, upgrades given for content and familiarization trips are marketing spend with a real cost, and leaving them off the budget hides part of the decision. Finally, write down what you cannot know: we know of no outside benchmark for this split that carries your channel mix and your need periods, so the split has to come from your own numbers.

Which periods need the room nights?#

Start from the calendar rather than the annual total: marketing exists to fill specific dates, and the dates that need filling are the ones where you can tell whether the spend worked.

Build a demand calendar with holidays, school breaks, fairs, events and local festivals, laid against your own pickup history by week. The calendar is the map the budget is drawn on, and the method for building a hotel demand calendar on one sheet is worth doing before any spending decision. Mark each week as need, shoulder or peak. In peak, extra demand usually displaces or cannibalizes rather than adds, so spend there buys little that would not have arrived anyway.

Convert the gap into room nights: target occupancy for the period, minus what is already on the books, times rooms, times nights. Then discount for realism. Not every gap can be filled, so choose a fill rate you are willing to be judged on, for example 30 percent of the gap in the first year. Label it as an assumption and revisit it.

Rank periods by contribution at stake, not by size of gap. A small gap at a high rate can be worth more than a large gap at a low one. Rebuild the calendar every year and check it monthly: a period that fills early stops being a need period, and money left there is money not working.

What does one more room night leave the hotel?#

Contribution: the room rate minus the costs that exist only because that room was sold, such as cleaning, laundry, breakfast food, utilities, guest supplies and any channel commission.

Contribution is not revenue and not profit. Fixed costs such as rent, salaries and loan payments do not change when one more room is sold, so they are left out of this calculation on purpose. List the variable items honestly, including the ones usually forgotten: laundry, amenities, breakfast covers, extra utilities, payment fees, and the commission whenever the booking comes through a third party. The full method is set out in cost per occupied room, line by line.

Work an invented example and label it as such. For example, a room sold direct at 4,000 TL with 800 TL of variable cost leaves 3,200 TL. The same room through an agency at a net of 3,000 TL leaves 2,200 TL. The difference, 1,000 TL, is what the hotel gains by winning that guest itself.

That difference is the ceiling for direct acquisition cost. If winning the guest directly costs less than the gap, direct is cheaper; if more, it is not, however good the campaign looks. Contribution also sets the floor for need-period discounting: a discount that falls below variable cost destroys value even when occupancy rises. Do the calculation line by line once, then reuse it. The same numbers feed the budget, the channel comparison and the monthly review.

How do you build the budget? A worked example with invented figures#

Multiply the room nights you are trying to win in each need period by the contribution at stake, set a spend per booking below the gap to the alternative channel, and add the periods up.

The arithmetic on one page#

Step one: list the need periods from the calendar with the room nights you intend to win in each. Step two: put the contribution per night beside each period, since a January night and an April night rarely leave the same amount. Step three: put the ceiling per booking beside that, meaning the gap between the direct contribution and the contribution through the channel you would otherwise use.

Step four: plan to spend a share of the ceiling, not all of it, for example half, so that a channel that underperforms still leaves the hotel ahead. Label the share as an assumption. Step five: add two blocks outside the period spend: a small always-on block for the website, photography and content that cannot be judged month by month, and a contingency line for opportunities that appear during the year.

Every figure in the table is invented to show the arithmetic. The ceiling is the gap between direct contribution and contribution through the alternative channel; the planned spend per booking is half of it in each row. Replace every number with your own.

Where the line sits in the accounts#

Marketing sits as its own line under operating expenses while channel commissions stay in distribution cost, and management reads the two together as total acquisition cost. Splitting them is fine; reporting only one of them is not. The same structure belongs in the wider plan described in building next year's hotel budget month by month.

How should the budget be split by channel and reviewed each month?#

Fix the split by period first, then split each period by channel, and review monthly against room nights won in the need periods rather than against total revenue.

Allocate by period before channel, because a channel that works in July may do nothing in January, and a channel-level budget set on annual averages hides that. Give each channel one measure, cost per room night won, computed on the same contribution basis used for the ceiling. Anything else invites comparisons between numbers that are not alike. Keep the always-on block out of the monthly judgement: website, content and photography are judged over a year, not over a month.

In the monthly review, compare planned and actual spend and room nights won per period. If a channel stays above its ceiling for two consecutive months, move the money. Do not reallocate on one month of data: small counts move a lot, and a channel judged on a handful of bookings will look brilliant and then terrible for no reason. Keep the review to one page so that it actually happens.

What to do next#

Before the next budget meeting, write one page: the three periods that need room nights, the contribution per night in each, and what the same booking costs through the channel you would otherwise use. That page replaces the borrowed percentage, and every later decision, from channel split to monthly review, is read against it.