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What is Customer Acquisition Cost (CAC)?
Customer Acquisition Cost, or CAC, represents the total amount of money a vacation rental business spends to gain a new customer (a guest who makes a booking). This key performance indicator (KPI) is calculated by dividing the total costs associated with acquisition by the total number of new customers acquired over a specific period.
It is a critical metric for understanding the efficiency and profitability of marketing and sales efforts.
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How it works
To calculate CAC, you sum all sales and marketing costs for a given period and divide that total by the number of new guests acquired during that same period. These costs can include advertising fees on platforms like Google or Meta, commissions paid to Online Travel Agencies (OTAs), salaries for marketing staff, and subscription costs for marketing software.
For example, if a property manager spends $1,000 on marketing in a month and acquires 10 new bookings, the CAC for that month is $100. This metric provides a clear financial measure of how much it costs to generate each new booking.
Why it matters
Understanding CAC is crucial for vacation rental managers to assess the financial viability of their marketing strategies. It helps determine which channels provide the best return on investment (ROI), enabling smarter budget allocation.
By comparing CAC to the Customer Lifetime Value (CLV), managers can ensure their acquisition strategy is profitable in the long run and make informed decisions about pricing and marketing spend.
Examples
- A host spends $300 on a Facebook ad campaign in May, which results in 4 new direct bookings. The CAC for this campaign is $75 per guest ($300 / 4).
- A property manager lists a property on Vrbo, which charges a 15% commission. For a booking with a total value of $2,000, the commission is $300. In this case, the acquisition cost for that specific booking via Vrbo is $300.
- To promote a new cabin, a company pays a travel influencer $500 for a post. The post directly generates 5 bookings. The CAC for this influencer campaign is $100.
- A manager analyzes their quarterly report and finds that the CAC for bookings from their direct booking website is $45, while the average CAC from OTAs is $130. They decide to allocate more of their marketing budget to SEO to attract more direct bookings.
Frequently asked questions
What is a good CAC for a vacation rental?+
How can I lower my Customer Acquisition Cost?+
Should I include OTA commissions in my CAC calculation?+
What is the difference between CAC and Cost Per Booking?+
Related terms
Return on Investment (ROI)
Return on Investment (ROI) is a key performance indicator used in the vacation rental industry to measure the profitability of an investment relative to its…
Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) is a predictive metric that estimates the total net profit a vacation rental business can expect to make from a single guest over…
Cost Per Booking
Cost Per Booking (CPB) is a key performance indicator that measures the total expense incurred to acquire a single reservation, helping property owners…
Direct Booking Rate
The direct booking rate is a key performance indicator (KPI) that measures the percentage of total reservations that are made through a property owner's or…