Customer Retention in the Hotel Industry

NaamloosSource: Olivier Le Moal – Fotolia.com

According to Choi and Chu (2001) hotels that are able to attract, maintain, satisfy and retain customers are more successful. It has been proven that long-term customers are more profitable for organisations, since they tend to buy more, bring in new customers by positive word of mouth, take less of the service provider’s time as they are acquainted to the processes, and they are less sensitive to price (Reicheld, 1996). He also found out that attracting new customers is seven times more expensive than retaining old ones. So, focussing on customer retention will eventually lead to higher profit.

Since there are so many advantages to customer retention, it would be great to know how to enhance the retention of customers. Multiple studies have noted a significant link between customer satisfaction and retention (Bolton, 1998; Cronin & Taylor, 1992). Customer’s repeat purchase behaviour is closely linked to their level of satisfaction with the initial purchase (Sirgy and Tyagi, 1986). Therefore, it is important for hotel management to understand the relation between customers’ satisfaction and customer retention (Sim, Mak, Jones, 2008).

Sim, Mak & Jones (2006) found out that ambiance and hospitality are two significant indicators for customer satisfaction. Hospitality focuses more on the service that is delivered by employees who have direct contact with customers and ambience is more about the atmosphere, architectural design, colour harmony and décor. It is suggested for hotels to provide a high level of service and maintain their hotel to perfection.

Since Sim, Mak & Jones (2006) found a significant link between customer satisfaction and hospitality, it is important for a hotel to get an insight into the service they offer. A way to do this is by looking at the customer journey. As mentioned in one of the previous blogs, the customer journey mapping strategy enables hotels to identify the desires and expectations of each guest and provide appropriate services at each touch point during their stay.

Once a hotel has identified the clients’ touch points and the level of customer satisfaction, it can analyse which improvements can be implemented. At Taj Hotel Resorts and Palaces, they give every customer a souvenir upon departure (SlideShare, 2013). As this is a very thoughtful gesture and not always implemented at other hotels, we suggest hotel groups to re-analyse their own services and make the necessary improvements.

All in all, it is very important for hotels to get a clear idea on who their customers are, what they expect and how to meet those needs. If a hotel can satisfy their customers, the chances of them returning are higher, so a happy client might become a loyal client.

 

References

Bolton, R. N. (1998). A dynamic model of the duration of the customer’s relationship with a continuous service provider: The role of satisfaction. Marketing Science, 17 (1), 45-65.

Choi, T. Y. & Chu, R. (2001). Determination of hotel guests’ satisfaction and repeat patronage in the Hong Kong hotel industry. International Journal of Hospitality Management, 20, 277-297.

Cronin, J. & Taylor, S. (1992). Measuring Service quality: A re-examination and extension. Journal of Marketing, 56, 55-68.

Reichheld, F. (1996). Learning from customer defections. Harvard Business Review,74, 57-69.

Sim, J., Mak, B., & Jones, D. (2006). A Model of Customer Satisfaction and Retention for Hotels. Journal of Quality Assurance in Hospitality & Tourism , 7 (3).

Sirgy, M. J. & Tyagi, P. K. (1986). An attempt toward an integrated theory of consumer psychology and decision-making. Systems Research, 3 (3), 161-175.

SlideShare. (2013, March 30). Taj Group Of Hotels. Retrieved on October 1, 2015, from: SlideShare: http://www.slideshare.net/rjamarchawla/taj-hotel-17918313.

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4 thoughts on “Customer Retention in the Hotel Industry”

  1. Dear Florean,

    I appreciated reading your post, which is especially due to the pleasant structure you chose. You guide your reader through your article, which is underlined by a well-balanced use of key academic sources, and end up with a final observation from the industry. Especially the latter is what I highly appreciated when reading your text.

    You could even strengthen this part by adding further examples to Taj Hotel Resorts and Palaces. Looking at certain hotel associations as Relais & Châteaux (www.relaischateaux.com) for instance, could add two or three further examples and really make your final conclusion a very strong one.

    This would be beneficial to as well academics as practitioners I believe and could add the final bit to a very well written post.

    Niklas

    Like

    1. Dear mister Hundt,

      Thank you very much for reading my blog and your advise! I fully agree with you, it would have been a much stronger blog if I had added more examples. I will definitely have a look at the website of Relais & Chateaux and perhaps other websites to strengthen the conclusion.

      Thank you again and kindest regards,
      Florean

      Like

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