Help solve the problem

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Help solve the problem
« on: 01-25-2013, 05:09:07 »
Can You please find a mistake in my calculations?

Milestone has collected three months of search-traffic data prior to introducing organic search-engine optimization (SEO) activities and then three months of search traffic data after the SEO actions had been taken. The company tracked a 6% increase in traffic to the site by comparing the two periods and provided the following information, which has been accepted as accurate by the general manager of the Independent:

Table 1: The Independent Hotel Web Site Characteristics



Estimated incremental increase in Web site traffic delivered to the booking engine during the Milestone test period


Conversion percentage of Web site traffic into bookings


Estimated call center reservations generated for each Web site booking—based on studies of Internet user assistance calls that generate bookings, Web site–only promotions referenced on calls, Web-site only 800 numbers, and similar topics.

1 to 1



Milestone charged a fee of $2,500 per month for services during the test period. At the end of the test, the company provided the following table of information, which was developed jointly by Milestone and the hotel’s IT department.

Table 2: Estimated Visitors and Views Sent to Independent’s Web Site During the Milestone Test Period
2012    Total Visitors    Total Page Views
Jan    45,708    495,352
Feb    38,913    440,066
Mar    39,039    429,057
Apr    36,849    1,063,668
May    31,825    806,018
Jun    33,689    708,318


During the test period, the average daily rate for the Independent was $300 with a length of stay of 1.5 nights for bookings generated from the Web site either directly (from the site) or indirectly (from the call center but initiated on the site). Both values were the same as last year, largely because of the impact of the recessionary economy. Based on this information, the general manager would like to know the following:
 What is the estimated ROI for the SEO services provided by Milestone, based on the incremental business generated during the test period? 
Your Answer:

I have used the following logic to calculate the estimated ROI for the SEO services provided by Milestone:

1. Total number of visitors during the test period: 226,023

2. Incremental increase - 6%

x - traffic before the test period

x + 6x/100 = 226,023

x = 213,229

Incremental increase = 226,023 - 213,229 = 12,794

3. Conversion percentage of Web site traffic into bookings  2.5% = 319.85

4. The ADR was $300 with a length of stay of 1.5 nights, which means that each guest on average paid $450. Total income 319.85 x 450 = $143,932.50

5. Milestone charged a fee of $2,500 per month. Total expenses during the test period $15,000

6. ROI = (Income - Expenses) / Expenses

ROI = (143,932.50 - 15,000) / 15,000 = 859%

Here is the instructor response:

total visitors and costs are correct, but take another look at your revenue numbers

Can You please find a mistake in my calculations?


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