What is Customer Acquisition Cost (CAC)?

We know that you want to get reservations from as many sources as possible, but do you know how much you are making from each channel?

That’s one thing many hoteliers simply do not understand. Yes, you may be putting out that same rates on different channels, but all rates are not created equal.

Say what?

That’s because the acquisition costs of obtaining that reservation can vary wildly from source to source. Plus, you may be paying more than your competitor down the street to acquire a reservation from a specific source, simply because that other hotel negotiated better pricing. It’s crazy to think that by making your hotel available on certain websites, for example, additional fees can add up to be so much it would have been better to have not had your rooms there in the first place.

That’s strange stuff. So how does it all work anyway.

Let’s look at what it actually costs you to book a room for a guest at, let’s say, $100 for a single night.

There are various ways to acquire that reservation such as a walk in, brand website (if you have a brand affiliation), the GDS or travel agent, and the online travel agency – commonly known as the OTA. In all, the average cost to acquire a customer ranges anywhere from 15% to 25%.

The walk in of course costs essentially nothing to acquire so let’s say that is $100. Next up is the brand website. That same customer, if booking through the franchisors website costs 2-5%. Now if the customer decides to use a standard travel agent it could come in at 10% plus a variety of fees to make the reservation through the GDS. Then there is the OTA, which if you are an independent hotel, can be the costliest customer acquisition method costing as much as 25%. It’ll be cheaper if you are with a big hotel company that has negotiated a better rate on your behalf.

And if that is not complicated enough, OTAs also give you the option of spending more to get higher visibility and a host of other options that can confuse you.

Customer Acquisition Cost Strategy

Fortunately, companies like cloud-based hotel PMS provider Skytouch Technology can do all the heavy lifting for you, relieving you of the burden of having to understand the various nuances between all these sites.  The system offers two-way channel management via XML connections with OTAs and the GDS. The platform also features a cool and customizable (branded) Internet Booking Engine (IBE).

Other great sanity saving features include pooling inventory so all your rooms are seen on every distribution channel, and they’ll even optimize your online exposure to drive revenue. Plus you can connect to an existing CRS system or use SkyTouch’s multiple connection options that feature a customized solution just for your hotels.

There’s no reason to worry about managing all those fees and wondering where your hotel is being seen. Fact is, you don’t have the time for it. And while it’s great to understand various customer acquisition costs, it’s much more convenient to have a single solution.