Look-to-book (L2B) ratio is a metric that enables online hotel suppliers to measure the effectiveness of their marketing strategy. In this case, it’s used by travel agencies who rely on hotel inventory being delivered through web channels (booking engines, central reservation systems). The look-to-book ratio allows them to estimate the number of qualified leads coming from different distribution channels and how many of those leads become real revenue (bookings quantity).
Example of using L2B
A site gets 5000 visitors per month. 100 of these visitors make a booking. The look-to-book ratio would be 5000 / 100 = 50:1, meaning there are 50 people looking at hotels for each booking made.
The look-to-book ratio does not take into account the revenue generated by each booking. The number of bookings is just a proxy for revenue generation. In other words, it’s irrelevant if an agency has $1,000 of booking revenue per month or $10,000 – both are counted as 1 booking when calculating this metric.
There are multiple variations to calculate the look-to-book ratio depending on how you define what a visitor is and what constitutes a conversion:
- Visitor – Generally defined as anyone who visits your site. This definition is very broad since most visitors never start browsing nor complete purchases but they do contribute to traffic and therefore to the look-to-book ratio. It’s important for suppliers to understand that not all site visitors are equal since some of these will become more valuable over time (will convert into leads).
- Conversion – It can be defined as any behavior that indicates a real interest in booking hotel rooms: adding items to cart, adding items to wish list or signing up for webinars. Conversion is a much more flexible metric than the look-to-book ratio because it accounts for things like cart abandonment, which occurs frequently on ecommerce sites. It also takes into consideration people who visited your site once but did not return later – this tells you how effective your marketing strategy is in bringing new customers to your channel.
- Conversion rate – The number of conversions divided by the number of visitors. This allows website owners to compare conversion rates from different channels and optimize them accordingly.
The look-to-book ratio is also useful to estimate how many people were able to find your hotel on booking sites (via search engines) and make a booking online as opposed to making a phone call or sending an email inquiry. This allows hotel owners to measure their visibility performance from each channel and optimize ad spends.
Calculating look-to-book ratio
In order to calculate the look-to-book ratio, you need to have the following information:
- Number of visitors (from traffic reports)
- Number of visitors who made a booking (can only be calculated by looking at your website’s statistics)
Divide the two metrics. This will give you your look-to-book ratio.
Factors such as:
- Inventory type (room specifications)
- Hotel category
- Type of booking
can make the look-to-book ratio vary over time. Hotels with high occupancy rates will have better performance because the amount of visitors is higher and they are more likely to convert into bookings (since these properties tend to be in demand). In addition, there may be differences between channels depending on their bandwidth (the number of visits that are needed for a potential purchaser to find your hotel online).
The best way to determine an “average” look-to-book ratio is either by finding similar hotels with similar characteristics or doing it through a cohort study which tracks the same sources for several months.
How can a hotel improve its look-to-book ratio?
Increase traffic volume
You can do this by increasing your visibility and rankings in search engines through well-optimized landing pages (SEO) or through paid advertising across multiple platforms. Some hotels have developed solid SEO strategies but they don’t invest enough in paid advertising, which means that many potential customers find other providers before they get a chance to visit their site.
Improve the quality of bookings
The best way to improve quality is to analyze customer feedback and make changes accordingly. Plus, you’ll want to avoid the common pitfalls of insufficient customer service (i.e.: slow response times) or inaccurate information. You can also work on improving your landing pages and give more information about things like resort fees, insurance options, etc.
Optimize distribution channels
Look-to-book ratio analysis will help you decide where to invest your marketing budget as well as measure which hotels are performing best through which channel (e.g., which destination received the most visits last month for a given hotel). If you have not been able to increase your traffic volume and the conversion rate does not change, then it may be time to decrease marketing spending in this channel.
Improve occupancy rates
If a hotel has high occupancy rates but low conversion rates, it can mean that unqualified visitors are booking rooms through direct homing or online travel agencies (OTAs). By improving occupancy rates and using look-to-book ratio analysis, you will be able to understand the channels with the highest conversion and optimize your distribution.
You can also use case studies of individual hotels to perform a competitive analysis where you compare key performance indicators such as occupancy rate, percentage of direct bookings vs. OTAs/distribution partners etc. This is particularly helpful in price comparison since in many cases customers search by price alone, which allows hoteliers who have lower nightly room rates to win more business based on this metric alone.
Look-to-book ratio analysis is an essential tool for any hotelier who wants to understand where their inventory is best exposed to the market and how much demand they are able to generate through each distribution channel. The information can be used as sales data in order to learn about your best clients or analyze how your inventory is being distributed by country, region etc.
This will help you understand which distribution channels deliver the highest volume of qualified traffic and therefore find out which sites offer the most exposure. Look-to-book ratio analysis also allows you to optimize ad spends for maximum exposure based on historical performance (hence it’s called a “look” -to-” book”). This kind of statistical analysis provides valuable insights that can help you increase your revenue by optimizing distribution channels and determining the most effective way to expose your inventory.