How Much Would You Pay for a Guest?

Have you ever stopped to think about how much a guest is worth? If you haven't, you need to, especially if you do any advertising or marketing. Knowing the answer to this question allows you to be much more strategic and profitable! Here's how to answer this question, and why it's important.

To start, take your 2012 sales revenue and divide it by the total number of rooms that were booked. For instance if your sales were $200,000 and you booked 2500 rooms, your average sale (average room rate) is $80.

Second, calculate your profit margin by dividing your 2012 profits by total sales revenue. If your profits were $80,000 and sales were $200,000 ($80,000 / $200,000 = .40), your profit margin is .40, or 40%.

Next, calculate how much money that comes out to per room booked. To do that, take the average room rate and multiply it by your profit margin. So, in our case, $80 x .40 = $32. Now we've got a figure to work with. On average, our hypothetical hotel makes $32 profit per day for every room booked.

If most of our guests just stay one or two nights, $32 is a pretty good number to work with. However, if we had week-long guests, we might adjust the value per visitor to say $50 each. For simplicity sake, we'll assume our guests stay just one night.

With that in mind, the next question is: “How much are we willing to spend to acquire a new visitor, based on their average worth?” The answer to this question is entirely subjective; it's up to you. For our example, knowing that an average visitor is worth $32, we're willing to spend no more than $8 to acquire a new visitor. We just established our per-customer marketing budget.

From here it's just a matter of determining which marketing tactics to use that will cost no more than $8 to get new guests to our hotel. For example, if we use pay-per-click search engine marketing, we can measure and find out how much it costs to get each new guest. If it's less than $8, we'll continue to use PPC. If it's more, we'll stop. There are a number of marketing tactics we could explore, but that's a whole other topic. The point is that now we're in a position to be strategic about how we spend our marketing and advertising dollars.

Your business model may be a slightly different, but the premise remains the same. Regardless, you need to figure this stuff out. Otherwise, you won't have any basis for your marketing efforts, and you won't know if you're over, or under spending to acquire new customers.

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