What is the effect of loyalty programs in hotel chains?

 

Loyalty of a customer has been recognized as the most important and dominant factor in a business organization’s success. Every business and industry strives for loyal customers, including the hotel industry. But what exactly is loyalty and what does this mean for the hotel industry?

According to Peelen & Beltman (2013), as they describe in their book customer relationship management, Customer Loyalty is a commitment to buy back the preferred brand, product or service in the future again, no matter if changes in the environment happen or in marketing that may lead to different behavior. For the hotel industry this loyal behavior means booking the same hotel again, or booking the same chain but in a different place. But staying loyal to that specific brand.

Many hotels these days offer their customers loyalty programs to make it more interesting for their customers to book again since they get a lot of benefits in return (e.g discount, gifts, early check-in or late check-out). But why are these loyalty programs good and what are the benefits for the returning customers?

Generating new business and attracting customers requires a lot of investment in both marketing and advertising. It definitely costs a lot of money and is not even effective all the time. It is far more logical to develop a steady flow of returning customers. Research carried out by Second Opinion Marketing (n.d.) found out that it cost five to eight times less to retain and keep existing customers than attracting new ones and spend a lot of money to get their attention (gogroupbooking.com, n.d.).

A hotel loyalty program is very easy and works kind of the same as the airline industry with their frequent flyer miles. Loyal guests will receive awards when they book again and earn points. Awards in this the case of a hotel can range from a free room update, free treatments, guaranteed room availability and more. The ladder format would fit best for a hotel loyalty program. A ladder format means: the more points loyal guests earn, the more valuable rewards they get. This system makes it more effective.  Of course not all loyalty programs are the same and works like this point system, but it is a very common and popular one. There are a lot of loyalty programs but not every one of them is suitable for the hotel industry for example partner with a company to offer all-inclusive deals

There are more forms of loyalty. Pearson (n.d.)  mentions that when you deliver a relevant customer experience you will create customer intimacy, which will eventually lead into emotional loyalty.

Emotional loyalty describes the fact that customers choose to stay with one specific hotel, even when a competitor has a better or cheaper alternative. But how is it possible to turn that massive amount of data we collected into satisfied customers and emotionally loyal customers?

Let’s have a look at a specific case. A man has to visit the same city every time for business purposes. He stays in your hotel each time he travels to this specific city. A loyal customer? You may think so. But what happens when a new hotel opens closer to his meeting location? I bet this loyal customer will leave you because he is not as loyal as you thought.

But what will happen if you personalize his experience? What will happen when the doorman greets him by his name, his room preferences are taken into account, and the receptionist at the desk is informing him about a soccer game he is interested in takes place this evening and she can arrange a ticket for him? But also when he gets a discount, a room upgrade or when he can check in earlier than others because he is a loyal customer? That would completely change the experience, doesn’t it? At these moments you are performing great on customer intimacy and your customer will build emotional loyalty for your hotel.

In the digital area we live in we can see that contact with customers is more important than it ever was. The traditional customer intimacy is not enough anymore. Data is collected continuously and customers are targeted at every moment in order to deliver the best customer experience. There is a desire for more. The new customer intimacy is customer obsession.

So the question is now, do loyalty programs but also intimacy benefit hotel chains or are they a waste of time and money?

The Centre for Hospitality Research carried out a research about 50,000 hotels in the United States which took two year. They carried out whether loyalty programs were worth the time and money to invest in and it there are possible other and better ways to get these loyal customers.

This study found out that since the guest signed up to a hotel’s loyalty program the frequency of stays booked by that person at that hotel grew on average with 49%. Also they found out that because of these loyalty programs  the bedroom revenue rised with about 57% in comparison to hotels without a loyalty program (gogroupbooking.com, n.d.).  So yes we can say that a loyalty program benefits a hotel chain and it’s definitely not a waste of time or a waste of money when doing it in the right way.

Bibliography

Pearson, B., (n.d.), “The most successful way to ensure a guest’s happiness is customer intimacy”, Retrieved 13 September, 2016, from http://hotelexecutive.com/business_review/2998/the-most-successful-way-to-ensure-a-guests-happiness-is-customer-intimacy

Peelen, E., & Beltman, R. (2013). Customer Relationship Management.Pearson.

Why Hotel Loyalty Programs are Good for Hotels. (n.d.). Retrieved September 13, 2016, from https://gogroupbooking.com/why-hotel-loyalty-programs-are-good-for-hotels/

 

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One thought on “What is the effect of loyalty programs in hotel chains?”

  1. A nice blog, you come to a clear answer to your basic question. There is another blog on this subject, you may want to react to that.

    A couple of practical tips.
    – Since this blog is about the hotel industry, it is a good idea to categorize it as such.
    – Often the blog gets more lively if you add some examples of best practices.
    – On a business blog you use your complete name (first name, last name).
    You are allowed to update/upgrade your blog at any moment before the deadline.

    Like

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