Hospitality Marketing Budgets - How Much Should You Spend?

Published On: Feb 26, 2021

The hospitality industry has always been highly competitive, but in recent years, the demand for effective marketing has increased dramatically. With the digital revolution, hospitality businesses suddenly had to find new ways to stand out in the online space, though this shift did also usher in a wealth of new opportunities for businesses of all shapes and sizes.

More recently, the global pandemic has changed the landscape for pubs, restaurants and hotels, with changes that may last for years, if not decades to come. It has become more important than ever to find ways to connect with customers old and new and to inspire them to spend their dining or travel budget on your goods or services.

While there may be increased pressure on profitability, one thing remains constant - customers are the lifeblood of your business. So, reaching the right kind of customers (ie marketing) is essential for both growth and sustainability.

You no doubt appreciate that your business needs to allocate some kind of marketing budget, if you intend to be one of the hospitality industry's success stories. But in these rapidly changing times, what's less clear is precisely how much that marketing budget should be. And of the many potential channels available these days - where is the best place to invest in marketing to get the best possible return?

To help you identify the best options for your business - from a sometimes overwhelming sea of choices and channels - here's a quick guide to what to spend and where, when it comes to marketing your eaterie or hotel.

How much should you budget for hospitality marketing?

There is no one-size-fits-all answer to this question. For example, large hotel chains will have completely different criteria to small independent bars and restaurants.

However, there are some key guidelines to allocating a hospitality marketing budget.

While the average marketing budget for small businesses is around 11% of revenue, hospitality businesses often run a much tighter profit margin than other sectors. This might explain why the ballpark average for marketing budgets for independent restaurants is around 3% of annual revenue.

Whether this figure will be right for your hospitality business depends on a number of factors.

  • If you are a new business or reopening after a revamp or period of closure, it's advisable to spend double or even triple the average hospitality marketing spend.
  • If you're in a highly competitive niche, you will undoubtedly need to budget more for your marketing than if you are in a less competitive sector.
  • Seasonality can also be a factor. For example, you might want to increase your marketing spend to take advantage of the notoriously busy periods, such as a Christmas or Valentine's Day campaign.

Is more always better?

Not necessarily. It's widely believed that for many businesses, spending more on marketing will increase business success, however, this is not always the case.

What can sometimes matter more than the size of the budget is the effectiveness of the marketing, in other words, the return on the investment (ROI).

Marketing budgets & ROI

Given the vast array of marketing options available today - both online and offline - it can be challenging to know which strategies will be the most effective, i.e. profitable for your business. In theory, one way to find out is to try them all. But in reality, this would stretch most marketing budgets too thinly to see any quantifiable results.

So, one way to identify the best place for you to put your marketing budget is to get really clear data on things like traffic (volume and sources), conversions and success rates, so that you can identify the strategies that deliver the best ROI.

For example, if you know which marketing activities that are generating the most traffic to your website, or leading to the most calls and bookings, you can then direct more of your marketing budget to the things that are working, and make savings on the less effective strategies.

Tracking, analytics and bottom-line-boosting data

The good news is that many of today's online marketing options deliver valuable and usable analytics about what is working well, and what isn't. While analytics may not be the most glamorous aspect of marketing your pub, hotel or restaurant, it can make a powerful difference to your budget's effectiveness and the profitability of your business.

For online marketing, the best analytics undoubtedly come from the world’s favourite search engine; Google. Google Analytics (and related services) provide incredibly valuable insights into exactly how effective your marketing spend is for your business.

This is why marketing strategies that utilise Google Analytics, such as Pay Per Click advertising (previously called Google AdWords) and Search Engine Optimisation (SEO) are so powerful - and so popular. When you run a PPC campaign, for example, you get such detailed tracking data, that it becomes obvious just which ads or keywords are delivering the results your business needs. This means you can just do more of what works and less of what doesn’t, helping you to get the best possible return on your marketing budget investment - and get more customers through your door.

Other online marketing options, such as social media advertising, influencer marketing, content marketing etc can also provide a degree of tracking and analytics. But for the most comprehensive and usable data from your marketing efforts, Google Analytics is hard to beat, especially when combined with a good understanding of your ideal customer and what they’re looking for.

These days, an effective and affordable marketing strategy is not a business luxury or an ideal goal - it is essential. Spending money on marketing is an investment in your business, one that can help you weather difficult times, and flourish during the peak periods. This being the case, identifying the right channels and budgets for your business will always reap dividends.

And whatever the size of your marketing spend, if you want to maximise every penny of your budget, ensure that the channels or strategies you use provide trackable, measurable data and analytics. This often-overlooked factor can actually make a crucial difference to your business’s profitability and success.

If you'd like to explore the power of PPC marketing for your restaurant, please get in touch with us for your free consultation.

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