Hotel loyalty is and has always been a hot topic of debate. However, it’s influence on travel bookers has been equally difficult to estimate. In the age of endless distractions and price wars, how loyal is your hotel booker? And how much hope can you as a hotel pin on promotions and programmes that rely on bookers retaining an element of loyalty to your hotel or brand?
As we know, there is a wide variety of factors that influence a hotel booker. Where does hotel loyalty sit in that pyramid – if it is a pyramid at all? And can independents compete in the hotel loyalty stakes with their larger chain counterparts?
The word loyalty in our context means faithful to a cause, ideal, custom, institution, or product – in our case a hotel. And hotel loyalty matters because it can act as a key differentiator which allows bookers to see you as different / better / more suitable than your competitors and also support a certain level of price elasticity.
On a less serious note, this is a funny twist on loyalty!
Why does it work?
Loyalty in a commercial environment is built on a positive emotional connection to a brand or a product. This may be the result of a combination of factors including pleasant surprise gifts, individual, sense of belonging to an exclusive group with special privileges, a special value in terms of better pricing among others. Equally important to hotel loyalty is the dependability of your hotel’s product and service.
And if you seek the science behind a loyalty programme and how it works, read up on the “Endowed progress effect”
Why is loyalty so important?
Hotel loyalty and loyalty driven marketing ideas are based on the costs of acquiring and retaining customers. The cost of acquiring a new customer can easily be 6 -10 times more than to retain an existing customer. And this retention is built on the way that a hotel services its bookers and the reputation it creates with them and as a result in the wider marketplace. So in itself, a hotel loyalty programme cannot substitute the needs for a hotel to provide a good product and matching service.
In many instances, hotels consider loyalty as just a programme that needs to be set in place but in reality, it is a wider commitment on a range of levels throughout the organisation.
What is changing in the world of hotel loyalty?
While traditional hotel loyalty programmes had a certain impact, the new age disruptive technologies and resulting choices have made it harder for hotels and bookers. As new technology offers more choices, the drivers for trust and engagement also changes and increasingly hotels are having to look beyond the traditional models.
The arrival of the millennials (born between 1980 and 2000) and the way they shop is substantially different and has brought about great shifts in the e-commerce world. Millenials have grown up with digital media in their everyday life. And they expect fast personalised service. While millennials are considered to be less loyal and more price conscious, there is evidence that they still value relationships.
How is your hotel loyalty programme doing?
If your hotel has a loyalty programme in place, have you tested it recently to check if it is bringing in the right results? Some or all the following questions can help analyse the effectiveness of your loyalty programme.
- What is the sign-up rate monthly, yearly and year on year (YOY)?
- Have you asked your hotel loyalty programme members recently about why they use it and what else would they like to see within the loyalty programme or how it can be improved?
- Have you asked the non-booking population within your loyalty programme members why they have not booked?
- What is the overall ratio of revenue generated from the programme versus actual redemption?
- Can you measure the incremental revenue coming from loyalty programme members?
- What is the return on investment taking all costs into consideration
- Have you done any tactical loyalty marketing promotions to boost the impact of your loyalty programme?
What actions can you take and what can it look like?
Keeping the right customers is valuable. Start by looking at how many bookers that are “right” for your hotel are coming back. This can include reviews based on price, spend on ancillaries while at the hotel, booking channel among others.
While this may differ based on hotel type and location, almost all hotels have the opportunity to create a proposition that helps keep the right customers.
This should be the foundation of any loyalty programme whether already in place or newly being considered.
Tools and resources
While there are many ways to measure the impact of hotel loyalty and customer satisfaction, one of the most popular metrics used is the Net Promoter Score (NPS). This metric captures the chances of your guest referring your hotel to their peers. While NPS is not a direct tool to measure the effectiveness of your loyalty programme, it is a very strong indicator of overall loyalty towards your hotel and brand.
Companies like Trustfuel offer options to gather NPS scores.
If you use the NPS model already in a different way, then the NPS calculator here can help analyse the data to help make some conclusions.
To understand how to benchmark using NPS with averages within the hospitality industry, click here.