In the midst of this global health and economic crisis, how do the principal OTAs manage their online advertising? What can we learn?
If you manage a vacation rental company and you are using payment campaigns to gain visibility or, basically, if you are reviewing the organic traffic that reaches your website, you will probably have noticed how the conversion percentage (the ratio of reservations that arrive over the total visits in your page) began to drop as this coronavirus crisis (COVID-19) began. This is a trend that you probably have appreciated, very slightly at the end of February but today, in the month of March, it has become a fact that nobody could expect even in their worst nightmares.
What can I do in this situation? Do I disable all my campaigns? Reducing expenses can be a wise solution, however there are other options. We are not going to give you the magic formula because, unfortunately, nobody has it, but, in this general uncertainty, we have thought that a good idea to orient VR Safe Harbor readers, may be to know what the main OTAs are doing with their investments in their online campaigns, particularly in SEM ads, something that can be easily measured using the tools available in the market.
Note: The data shown below is not exact, because it has not been provided by OTAs. One of the tools that has been used to obtain them is Semrush, which makes a rough calculation of the expenditure made and the traffic obtained by SEM campaigns with Google Ads.
After observing the results, in first place it is seen how the traffic has been much lower in the month of March for Booking.com. This fact contrasts with what happened at the beginning of the year, when it seemed that it was going to be a strong year for this portal due to its campaign data for this country. From 14,000 visits it obtained the previous year, it has gone down to only 7,300 so far this month, a far cry from simply matching the data. Compare them with the data for January, which certainly increased from around 4,000 visits to 7,600 in the same month of 2020.
It is clearly seen in this case that it is not only due to a decrease in searches, but also because they have drastically reduced the budget with respect to what was invested the previous year.
The following graph shows the cost of the traffic that they apparently generated from SEM campaigns, going from $ 23M to $ 9.5M just 8 days after the end of March 2020:
Has Booking.com followed the same trend in Europe?
To analyze it, we will first review the estimated investment in a specific area. Looking at Spain, for example, it can be seen that the investment made is identical to the previous year. In this case, the investment is actually maintained compared to 2019, since with what remains from March, the spending estimation is $ 1.2M, very close from what was spent the previous year, that is $ 1.6M.
The curious fact is found when looking at the graph about the traffic obtained by this campaign:
It goes from 2.4M in March 2019 to 3.1M so far this month. In part of the analysis collected, it is clearly observed that the decrease in advertisers bidding for the same keywords means that, for the same investment, they obtain a figure that could increase visits to their portal by between 30 and 50%. We are convinced that they will not get the same conversions from the previous year, but it seems that their decision in Europe is to keep the investment, since they know that they will get more visits, visits that they can use to convert later, for example, through remarketing strategies.
So it seems that Booking.com’s decision is that as to invest in its main market, Europe, where they know they will be able to get better conversion rates.
In the case of VRBO, it seems that it has limited its spending on SEM, although this time less investment has not meant similar traffic, but has been much lower than the previous year’s figure. It seems that so far this month some local competitors or small portals are still bidding, and the price per click has not decreased, as it has happened in some European countries that have been more affected by the coronavirus in early March.
The following two charts show the approximate cost of SEM campaigns in March 2019, which was of $ 4.9M and the estimated traffic, 4.2M. So far this month, the estimated cost is $ 3.1M and visitor traffic 2.2M. Looking at the evolution of spending between January and February, it can be seen that when this crisis started, they contained their spending in these campaigns.
To see how its evolution has behaved in Spain, following the previous example, if we want to assess its investment in a territory of Europe, we will use the domain reference homeaway.es for March 2019 and vrbo.com for March 2020 , because during the beginning of this year they were in the process of transitioning from one domain to another.
Although it is possible that due to the change of platform from Homaway to Vrbo, its strategy has undergone some changes, with less investment, it is evident that the investment in SEM campaigns has been much lower during the month of March, from $ 46,000 in 2019 to $ 12,000 in 2020 , results that can be seen in the previous graphs.
The trend in Airbnb investment in the United States shows very similar data to Vrbo, although an increase in investment could be expected, as happened in 2019. It was anticipated that they would continue with that trend in 2020, since for the month of March they move at a very similar level of spending, although it has finally led to a decrease in the traffic obtained by these SEM campaigns.
It can be seen that, with an expense similar to the previous year, the traffic for these campaigns has so far been only half that of March 2019. This is a good indicator to show that, in the United States, portals and agencies have been bidding with very high CPCs (cost per click) during the month of March, hence the lower traffic with the same investment.
Let us now look at the data for Europe. To expand the analysis a little, we will use France as a reference. It can be seen that far from reducing their budget for these campaigns in a country badly affected by the pandemic, in this month of March they have maintained their investment from previous months, with spending much higher than the previous year.
So, even though it is a country badly hit by the coronavirus, it can be seen that not only have they not reduced investment, but also, and similarly to what has happened in the United States, they have not obtained an increase in traffic for the month. of March. These facts corroborate that many more OTAs and agencies have continued to bid for SEM for this country.
How can we apply it to our vacation rental business?
The conclusion of the analysis of all this data is that in most cases OTAs have maintained their investment in SEM campaigns in the midst of the crisis. It is evident that its conversion ratio has dropped dramatically, because if there is anything clear today it is the uncertainty of when will the restrictions be lifted and people will be able to travel, thus reactivating the tourism sector.
But, despite this, these portals have not lowered their investment and have decided to keep spending. As this situation continues, they will see how CPCs will begin to fall, and thus it is when they hope to pick up their opportunity to capture existing traffic at a much lower price. It is true that it will not be a traffic that becomes into reservations, but it means users who have an interest in a destination, or accommodation, and that this companies have already segmented for their remarketing campaigns, which will boost their sales as soon as the situation starts returning to normalcy.
In summary, the advantage of all this traffic that they obtain to their websites, while not generating reservations, is to have a segmentation that they can easily pursue through display banners in different media or in social networks, constantly searching for users who were interested in lodging on their portal. This is going to be the best opportunity they will have, where the conversion ratio will be much higher, since they will be showing their ads only to those who have already shown interest in them, as this crisis begins to remit and reserves are reactivated.
So, if you are in a situation of indecision as whether to continue investing in SEM or other campaigns, it is possible that this text may have helped you to solve it. If you have funds to invest in this type of advertising, I recommend using them intelligently, because in the next month many keywords will descend from CPC, thanks to all those competitors who are paralyzing the investment. If you watch over these facts, it will be possible to find opportunities with which to gain traffic to your page with a much lower investment than usual.
What if my economy is going through very difficult times? Most agencies in the sector cannot afford to maintain an investment, as is the case with large OTAs. In that case, do not bet on these campaigns, since you will not obtain immediate income. You have to wait for the worst of this crisis to pass and, while it lasts, you will not generate practically reserves. Surely you still appreciate a minimum of organic traffic that continues to reach your website, whether it is derived from the portals thanks to your brand or because you have optimized your page a while ago to improve organic positions. You can also use this traffic for more aggressive and perfectly segmented remarketing campaigns with platforms such as Google Ads or Facebook Ads, using data on user behavior on your site.
Are you wondering how remarketing works and how you can use it to prepare the way out of the coronavirus crisis? Stay tuned to our newsletter. Soon we will offer you more advice, in future articles, in which we will delve into this theme and other very important aspects for your online business.