Key Industry Issues - Advertising/Marketing Income

Key Industry Issues - Advertising/Marketing Income

In this Newsletter we would like to discuss the addition of ‘Advertising/Marketing’ income and its inclusion in some profit and loss statements.

Increasingly advertising or marketing income and expenses are part of a ‘short term’ (holiday or corporate let) business profit and loss statement. A business may charge the Unit Owner a fee for ‘advertising/marketing,’ of between 2% to 4% or it may be part of a Bundled Fee which is charged together with the letting commission and other charges.

In some cases, this income and expense can be a ‘neutral’ profit. However, if the fee is correctly charged in the letting appointment fees and charges (POA Form 6) it may be included as part of the profit and loss statement. Providing Managers have set up this fee correctly in their fees and charges it can be determined to be a ‘service’ and therefore, a profit is acceptable. For reference we refer you to the Resort News January 2022 edition where a very good article has been written explaining.

In the latter instance we agree that a Manager should be able to show a profit for their efforts. However, we have often seen the expenses recorded for this service are very minimal for the income earned. Although, a profit may look attractive it may be that you are ‘saving cents when you could be making dollars’.

We have been accumulating data on the profit of ‘advertising/marketing’ for a number of years. As a result, we have found that by not maintaining consistent marketing and improvements for your business such as; the website, online social media outlets, involvement in marketing in the various tourism bodies programs etc. This may significantly affect the ongoing occupancy and average daily tariffs in the near to medium future.

This research has consistently shown for holiday and corporate let businesses that the profit for ‘advertising’ can range between 25% and 90%. Interestingly, we found that those businesses with a lower occupancy of say 45% to 60%, the profit from ‘advertising/marketing’ was high at between 80% to 90%.

However, there is a direct inverse correlation between the amount spent on advertising/marketing and the occupancy for that respective MLR business. That is, where the profit for advertising has been say less than 40% the occupancy generally has been above 70%.

What can you take out of this statistic? If the occupancy and average daily tariffs can be increased through increased marketing, you will have more booked nights and/or increased tariffs. Not only will it increase the letting commissions but there will be additional cleaning and linen profits which will add significantly to your bottom line.

Importantly, unit owners will have increased returns, and this will ensure that they will remain in the letting pool.

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