The global pandemic has kick-started a digital revolution in the industry with digital loyalty and app e-commerce capabilities becoming part of a rising trend of technology-driven solutions. However, these rapid operational and marketing changes have revealed a vulnerability to ad fraud, meaning engagement and traffic that is not from legitimate and genuinely interested sources.
Ad fraud in the hospitality industry is being overlooked and undervalued as a problem, yet in the US alone, Statistica forecasts that by the end of 2022, digital ad fraud costs are set to reach $81 billion. With fraudsters constantly evolving in sophistication, paired with a lack of awareness in the hospitality industry, advertising budgets are being impacted and hospitality companies are suffering losses to bad actors.
Following the impact of the pandemic, it is more important than ever to turn attention to preventing fraudulent traffic, so that the hospitality industry has the best possible chance at reclaimed growth.
The Cost of Fraudulent Clicks
Many businesses have been forced to undergo operational changes as the pandemic made it increasingly harder to maintain high margins.
Businesses have introduced high-value loyalty programs to drive conversions and increased mobile apps for booking, boosting their bookings and sales. Coffeehouse chain, Starbucks’ digital scheme helped the company recover from 2020 losses, seeing an additional one million active loyalty club members being added in Q3 of 2021, representing 51% of all spending in US Starbucks stores. Additionally, according to Paytronix’s Annual Order and Delivery Report, sales generated through digital ordering platforms more than tripled after the onset of the pandemic.
Loyalty programs and app e-commerce capabilities have driven post-pandemic recovery and revenue from missed sales. However, it has left hospitality businesses with a new burden of greater digital ad fraud losses. Positive numbers in engagement data can easily translate to negative losses for businesses that cannot distinguish between authentic and invalid traffic.
Due to the artificial inflation of website clicks, app downloads and incentive redemption from invalid or fraudulent sources, businesses face huge losses in budgets. Recently, I saw a European online travel company discover it was wasting nearly $30,000 a month on invalid traffic. It was continually investing more money into its digital marketing strategies and incentives which only caused more damage and risk of ad fraud.
Once the business became acutely aware of the problem it was able to act by leveraging an automated technology solution to detect and prevent invalid traffic, but many businesses in this sector have little understanding of the scale of the problem. Additionally, as marketing and sales incentives have been rolled out quickly to combat the pandemic’s impact, businesses didn’t have time to critically analyse the losses they faced. It was a matter of moving with the market or being left behind.
Invalid traffic is affecting the hospitality industry now more than ever, so it is imperative that businesses put measures in place to combat the losses in they are facing.
Capturing Genuine Growth
At the core of success in the hospitality industry are human engagement, sales, and customer experience. Invalid traffic stands in the way of genuine growth by consuming ad spend, polluting data and restricting optimisation.
In tackling ad fraud, businesses can get ahead and give themselves the best chance at securing legitimate bookings and sales. By ensuring genuine targets redeem discounts, download apps and submit competition entries, businesses can not only increase initial conversion rates but also customer loyalty and returning customers.
Addressing invalid traffic means all advertising engagements can be verified to guarantee certainty of genuine impressions, clicks and conversions as early as possible to create cleaner traffic. Businesses can:
- Utilise incentive marketing – Without the threat of invalid traffic, hoteliers can make the most of using competitions, loyalty programmes and promotional prices without the fear that bad actors will be redeeming them to sell on. In reducing fraudulent redemptions, businesses also increase the opportunity for genuine users to win.
- Reclaim growth – By proactivity tackling invalid traffic, hospitality businesses can improve and optimise marketing campaigns with more accurate engagement data to drive success and stay ahead of the competition.
- Unlock budget – The amount of ad spend wasted significantly reduces and hospitality businesses therefore unlock more money to reinvest into marketing campaigns.
Bouncing Back Post-Pandemic
Hotel and restaurant operators have recognised the opportunity to rebuild and with the removal of restrictive COVID-19 measures, The Business Research Company estimates the global hospitality market grew at a CAGR of 13.9% from 2021 to 2022. This growth will continue, reaching $6 billion by 2026. However, the increase in operational changes, paired with the lack of resources and knowledge to deal with the extent of ad fraud means that the growth the industry hopes to see may easily be reversed.
ABOUT THE AUTHOR
Adam French is the Regional Vice President (EMEA) of TrafficGuard, an international ad fraud detection and protection software provider. He has over 20 years experience working for multiple blue chip brands including Microsoft, Nokia and Telefonica commercialising their data for utilisation across digital advertising channels.