We have performed a detailed study and meta-analysis of hotels across the United States and determined a set of benchmarks for customer acquisition cost CAC) for hotels based on the customer acquisition channel and other factors. 

See below for CAC Benchmarks for Hotels by:

• Channel
• Location
• Price Point
• Purpose of Stay
• Brand Recognition

 

Each subgroup has been broken down further by organic CAC and paid CAC, as the distinction is quite large. An average of the two would be neither thorough nor accurate as many companies choose various investment ratios between paid and organic.  

• Organic: Organic channels include any advertising method in which dollars are not directly traded for impressions.
  • SEO, Email Marketing, Social Media, etc.
• Paid: Paid channels include any advertising method with a direct ratio between dollars spent and impressions gained. 
  • Google Ads, Meta Ads, Billboard, Radio Ad, etc. 

 

Calculating Customer Acquisition Cost

To calculate the customer acquisition cost for a hotel, use the following formula:

Customer Acquisition Cost (CAC) = Total Amount Spent on Marketing / Number of New Customer Acquired

Another helpful metric for hotels is the LTV:CAC (customer lifetime value to CAC) ratio. This ratio measures how much is made throughout a customer’s lifetime for every dollar spent on advertising. Ideally, hotels should aim for an LTV:CAC ratio that is at least 4:1 (for every $1 spent on marketing, $4 is made), but preferably this ratio should be higher. 

 

Hotel Customer Acquisition Cost by Channel

We’ve taken the eight most common channels hotels use to acquire customers and broken down the costs to acquire a customer from each, in addition to whether the channel is paid, organic, or a hybrid of both. Channels such as Trivago are not included because they are not true customer acquisition channels, rather they are listing sites and finding deals on other websites. 

Consideration: While some of these channels deliver cheaper bookings, not all of them will deliver a high quantity of bookings. Typically, with the notable exception of SEO, the higher the cost per customer, the more bookings it will deliver. Vendors can charge more for bookings if they can deliver more of them. 

 

Hotel Customer Acquisition Cost by Location

The location of the hotel, whether in the city or a rural area, proximity to landmarks, tourist locations, convention centers, office parks, or other attractions will drastically impact the CAC. 

 

Hotel Customer Acquisition Cost by Price Point

Hotels fall into different price points, from budget accommodations to premium, 5-star experiences. Each price point will yield a different CAC, not because the price increases per se, but because the market looking for each hotel as the price increases will typically decrease. 

This rule of thumb may not apply in all circumstances, especially in more premium travel destinations such as Aspen or the Hamptons, where a larger number of people may be searching for a more premium hotel versus a budget hotel, in which case the CAC of the premium hotels may be comparable to the more budget-friendly hotels. 

 

Hotel Customer Acquisition Cost by Purpose of Stay

There are many reasons a person may choose to stay in a hotel, and in many cases, this can drive the CAC up or down, especially seasonally. A beachfront hotel may experience high CACs in the winter, while a hotel with a similar pricepoint geared closer to business travelers may experience its lowest CACs of the year. 

 

Hotel Customer Acquisition Cost by Brand Recognition

As an example, if travelers to a destination are choosing a luxury hotel, and the options are between the Ritz Carlton and another luxury hotel, the Ritz Carlton will most likely achieve a lower CAC with most other factors being equal due to its brand recognition. We have ranked the hotel options by their perceived level of brand recognition. 

 

If you’d like a copy of this report, please contact us on our Contact Us page.

 

Sources:

Little Hotelier

Preno

Tripadvisor

Bankrate

SiteMinder

Budget Your Trip

National Institute of Health