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The Growth Strategy Blog

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How Much Should Travel Agencies Budget for Marketing?

Apr 24, 2019 8:20:58 PM

Marketing is one of those key areas of business that you can't afford to ignore. I talk to lots of travel agency owners who are worried about growing their businesses and looking for ways to bring in more customers.

And while we all want to save our money, sometimes you just have to bite the bullet and invest in marketing so you can give your business a chance to grow. But how much should travel agencies invest in marketing anyway? And what types of marketing deserve the biggest share of your budget?

Every travel agency is unique and it’s difficult to give you a hard and fast rule. But we do have some important aspects for you to consider:

Spend on Digital Marketing in the Travel Industry

More and more travel agencies are investing greater amounts into their digital strategies. Digital advertising spend is forecasted to reach 9.81 billion dollars by the end of the year across the travel industry. Similarly, travel agencies are investing in search, with many spending 54% of their budget on this component of marketing. The big players in travel are spending billions of dollars in getting customer’s attention online this according to Smart insights "Social media marketing trends 2019" article. Luckily, with tools such as Facebook Ads, it’s possible for smaller agencies to get into the game at much lower price points.

Don't Forget about Traditional Marketing

Although digital is very in, traditional marketing methods still can work for many agencies. The majority of travel agencies still rely on local networking and referrals, which don't cost a penny. It's important not to neglect this in your marketing plan.

The caveat of course, is that the number of leads from referrals you can attract in a given month is harder to predict and control, and if you want to build a sustainable business with a good flow of leads coming in every single month, you will probably have to advertise. Additionally, if you’re newer to the travel business, or don’t have an existing network of ideal clients, it may take years to build up a referral network.

So, how much do you need to invest?

The general rule of thumb suggests that you should budget between five and ten percent of your gross revenue goal on marketing.

This is a good starting point for most travel agencies. Depending on how successful your strategies are, this figure can be adjusted as needed and divided up between different areas accordingly.

It's often a matter of trial and error, for some spending their marketing budget on referral strategies or marketing to their existing list of prospects might be effective, whereas for other businesses who need new prospects, Facebook ads might be the best way to bring in the leads.

If you’re worried about the cost of implementing a sound marketing campaign, you first need to change the way you think about marketing. You may view it as an expense, but it’s actually an investment in the future growth of your business.

Once you decide to jump into digital advertising, you need to understand your business numbers to come up with the right strategy and budget.

You should always begin with your net revenue goal. For example, if you are looking to make $100,000 in net commission revenue from your travel agency, and your average commission per booking is $1,000, then you know you need 100 bookings per year to meet your goal.

Depending on your closing rate (the percentage of your leads that turn into bookings), you can figure out how many leads you need each year. For the travel industry, the average closing percentage rate according to HubSpot is 16%. If we use the average, you would need 625 leads per year or about 52 new leads every month to meet your goal.

Once we know how many leads you need, the next step is to figure out the marketing investment required to generate that amount of leads. If your cost per lead is $20.00 per lead, that means you’d need to invest $1,040 per month in advertising to generate those leads.

Your monthly marketing budget of $1,040 per month will yield potential revenue of $8,333 per month, assuming you are able to close 16% of your leads with an average net revenue of $1,000 per booking. So, are you willing to spend $1,040 in ads to generate $8,333 in revenue?

If you are interested in learning more, schedule a call with me at myrnacall.com and we'll go over these numbers for your agency.

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Topics: Budgets

Myrna Arroyo
Written by Myrna Arroyo

Myrna helps business owners who've been frustrated that they've spent lots of money and time on their marketing, but it hasn't produced results. She helps them develop effective growth strategies that can create more website traffic, leads and revenue.

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