Marketing Operations in the Travel Industry Benchmarks: Online Travel Agencies

by Haixia Wang + Skift Team - Jun 2019

Skift Research Take

As modern marketing gets more complex, seamless delivery of marketing success requires a strong and well-executed operations strategy.

Report Overview

Empowered by the explosion of data that companies own or have access to about their existing customers as well as prospective customers, travel CMOs and their teams are on a mission to drive and transform business. Yet more opportunities and promises mean more complexities in technological offerings and skill and function demands. It is within this context that marketing operations has risen as an important discipline in the past few years.



As a result, marketing operations is often tasked to manage channel and campaign processes and performance evaluation, select and manage technology partners, plan budget, and coordinate inter- and cross-team communications. Yet core questions remain: Should there be a separate marketing operations specialist/team? What are the responsibilities and decision-making powers of the marketing operations function? In addition there are broader questions that are related to operations and crucial to marketing success, including how marketing teams should be structured, what functions should report under marketing, and how budgets should be set.



To help travel marketing executives see how they stack up in the industry in these areas and set up strategies to optimize, Skift Research conducted a survey of senior executives and marketing professionals in various travel sectors on their practices and attitudes related to these questions. We will release the survey findings in a series of reports, each focusing on one specific sector. Our first three reports presented findings for hotels (see Marketing Operations in the Travel Industry Benchmarks: Hotels for more details), destination organizations (see Marketing Operations in the Travel Industry Benchmarks: Destinations for more details), and tours and activities (see Marketing Operations in the Travel Industry Benchmarks: Tours and Activities for more details). This report focuses on data for the online travel agency (OTA) sector. As there is much convergence in the sector, we include online booking platforms as well as metasearch platforms under this category.



Total sample size for this sector is 32. Please see the Appendix for more detailed sample demographics.

What You'll Learn From This Report

  • 2019 marketing priorities for OTA companies
  • Prevalence of dedicated marketing operations functions in OTA companies
  • Responsibilities and effectiveness of marketing operations functions in OTA companies
  • How OTA marketing teams are structured and the effectiveness of each structure
  • Ideal marketing team structures in delivering marketing success
  • Functions that report under marketing in OTA companies
  • How OTA marketers set up marketing budgets and the effectiveness of each budgeting approach
  • How outperforming OTA companies stand out in key marketing operations areas

2019 Marketing Priorities

Most online travel agency (OTA) marketing leaders have clear mandates on what to deliver for 2019. As a sector known for the fierce competition among each other, from its suppliers as well as new-coming threats from the tech giants such as Google and Amazon, it’s not surprising that acquiring new customers is the top priority for the marketing teams of OTA companies. Ninety-four percent of surveyed companies selected acquiring new customers as the top priority, more than 20 percentage points higher than generating revenue, the second most selected priority.

 


Designated Marketing Operations Function

Sixty-six percent of OTA surveyed already have a designated marketing operations function, including 44% that have a team rather than one person handling operations. While there are still about one-third of companies we surveyed that don’t have a marketing operations function, we believe it’s largely due to the small size of these companies.

 

Online travel marketers recognize the importance of having a designated operations function, but size and business nature matter

For the 35% of online travel companies that either disperse operations responsibilities across various teams or don’t have specific operations functions, 54% state it’s necessary to have a designated operations function and 45% have a neutral attitude about having a designated operations function or indicate it’s somewhat unnecessary. While this lack of interest could be justified by the small size of some companies, as marketing gains importance in driving business with sophisticated channels and analytics tools, an efficient operations function or system is crucial for marketing optimization.

 


Responsibilities of Marketing Operations Function

Marketing operations in the OTA sector are taking on a variety of responsibilities to help navigate complex marketing activities and processes. The operations team is responsible for marketing campaign operations and tracking for 91% of the companies who have a marketing operations role or team. Budget setting and tracking, cross-functional communications, and project management are the other top responsibilities of the operations team.

 

Marketing operations plays decision-making roles in budget setting and tech development and deployment

As marketing teams get more complex with marketing and advertising channels and tech capabilities, decision making often requires the involvement of many stakeholders and prolonged processes. This can also create ambiguity and tension as to who should make the final decisions. Marketing operations in the OTA sector is tasked with crucial roles in these two areas. About 83% of marketing operations in online travel companies have decision power in budget setting and 75% have decision power in tech deployment. Within that, 17% of marketing operations functions are the sole decision makers for budget.

 


Measuring Success of Marketing Operations

Ninety-five percent of online travel marketers surveyed say they measure the success of marketing operations. Congruent with the responsibilities that marketing operations are taking on in marketing campaign management, cross-functional coordination, and budget and tech management, increased efficiency and clarity of success measures of other marketing functions are the most used metrics to measure success. It’s worth noting is that cost reduction is also a key success measure for marketing operations in online travel companies, indicating there could be overspending and waste in these marketing teams.


Roles of Marketing Operations in Delivering Marketing Priorities for 2019

There is still work to do for marketing operations in the OTA sector to deliver success. While 34% of respondents believe operations is crucial in delivering marketing priorities, only 16% state operations is very effective in executing its outcomes.

 


Marketing Team Structure

Over one-third of surveyed marketers in the online travel sector base team structure on functions. Yet only 58% of those who use this structuring approach think it’s effective. Other than this, there is a huge divergence in terms of team structure: 19% by channel, 16% by product, 13% by geography, and 9% by customer segment. And compared to the other sectors, marketing executives in the online travel sector seem to be less satisfied with their structural approach. The unique marketing positions of the OTA sector within travel might make it hard for the marketing teams to define roles and set up the right structure to deliver marketing objectives.

 

There is no consensus about the best alternative structural approaches

By channel is selected by the most online travel marketers as the ideal structural approach to deliver marketing success, with 34% voting for it. And by geography is the least favored approach. Yet many others opt for the other three structural approaches.

 


Functions That Report Under Marketing

Among all the evolutionary changes in modern marketing, the controversy and lack of so-called industry standards over what functions report under marketing are probably the most prominent. We see this trend across all travel sectors we’ve surveyed. For OTA companies in our survey, in addition to the traditional core capacities of marketing, (i.e., advertising, lead generation, and product marketing) we see customer insights, PR, ecommerce, customer loyalty, and revenue management reporting under marketing at various rates.

 

OTA marketers believe more functions should be integrated into the marketing team to deliver best outcomes

Functions with the biggest gaps between reality and desired inclusion are customer insights, product marketing, research and development, customer loyalty, ecommerce, and lead generation.

 


Marketing Budget Approaches

Traditionally, marketing budgets are set once a year by using the previous year’s budget as a base and assigning a percentage increase/decrease as a reflection of revenue growth projection. As marketing gets more dynamic with data and measurement tools, this approach may make it difficult to adjust budgets based on results and thus create inefficiency. Yet 22% of online travel marketers are still using this incremental approach in budget setting, while others are adopting more flexible approaches based on activities and regular evaluations. A combined approach, which is characterized by setting budgets once a year but evaluating and adjusting regularly, is adopted by 31% of OTA marketers surveyed. Among those who adopt a combined approach, 70% think it’s effective, the highest among all budget approaches.

 

Online travel marketers believe budgeting approaches that are based on clear goals and allow for regular evaluations and adjustments are crucial for delivering marketing success

When asked the ideal budget approaches for marketing success, there is big convergence on combined and activity-based approaches, with 84% believing either is important for achieving marketing goals.


Functions That Head of Marketing Reports To

The central role that marketing plays in OTA businesses is clear. For 62% of the companies surveyed, the head of the marketing team reports directly to the CEO.

 


Highlights of Outperforming Online Travel Companies

In the survey, we asked the respondents to report their companies’ financial performance. Of the 32 OTA respondents who completed the survey, 8 say their companies are more profitable than their competitors, 13 say their profitability is about average for the industry, and another 11 say they are less profitable than their competitors. We’ve found that the companies that are more profitable (outperformers) do stand out in the key areas we’ve discussed above.

They are more likely to have established a separate marketing operations role or team.

 

 

TTheir marketing operations functions are more likely to take on cross-functional communications, vendor management, and administrative responsibilities.

 

 

Their marketing operations functions are more likely to have decision power in tech decisions.

 

Yet, they are less likely to have set up metrics to track operations success.

 

 

They are more likely to use increased efficiency, clarity on success measures of other marketing functions, and cost reduction as operations success metrics.

 

 

They are more likely to structure marketing teams by customer segment.

 

 

Yet they are critical of their structural approach.

 

 

They are more likely to have customer loyalty, product marketing, customer insights, PR, revenue management, and research and development reporting under marketing.

 

 

They are more likely to adopt less mature budget approaches..

 

 

Yet their budgeting approach seems to work.

 

 

Their head of marketing is less likely to report to the CEO.

 

 

Their marketing teams are focusing more on generating revenue, increasing customer loyalty, building data and analytics capacity, and building ROI measurement capacity.

 

 

They are more likely to believe marketing operations is just one important element among others.

 

 

They are more likely to believe their marketing operations needs improvement.

 

 


Appendix: OTA Sector Survey Respondent Demographics