“A brand is no longer what we tell the consumer it is — it is what consumers tell each other it is.”
– Scott Cook, co-founder of Intuit
Long-term success in the competitive hotel industry requires customer retention and loyalty. Loyal clients are more inclined to refer your hotel or resort to others, which boosts brand awareness and word-of-mouth marketing. This is where customer retention and loyalty programs come in.
Customer retention is a company’s ability to keep customers. It involves creating a positive customer experience and building a relationship with customers to encourage repeat business. On the other hand, a loyalty program is a structured marketing approach that rewards customers for their repeat business and encourages continued loyalty.
The hospitality industry is well-suited for loyalty programs because of the repeat nature of bookings and the emotional connection guests have with their chosen hotel or resort. Successful loyalty programs promote customer retention, revenue, and differentiation.
A loyalty program can take many forms, including points-based rewards systems, tiered membership levels, cashback or discount programs, and more. The key is to design a program that is attractive and valuable to your target audience and encourages them to choose your hotel or resort over others.
Case Study – IHG Rewards (InterContinental Hotels Group)
InterContinental Hotels Group (IHG), an international hospitality company, operates Holiday Inn, Crowne Plaza, and InterContinental hotels worldwide. The IHG Rewards loyalty program is a successful example of how loyalty programs can drive customer retention and improve overall business performance.
Five ways IHG implements strategies in its loyalty program:
- Tiered membership levels: IHG Rewards offers tiered membership levels (Club, Gold Elite, Platinum Elite, and Spire Elite) based on the number of nights stayed or points earned, encouraging guests to stay more often to reach higher status levels and enjoy additional benefits.
- Points-based rewards: Members can redeem points for free nights, airline miles, goods, or gift cards for every dollar spent on qualifying stays.
- Personalized offers and promotions: IHG Rewards provides personalized offers and promotions tailored to members’ preferences and travel habits, increasing the likelihood of repeat bookings.
- Exclusive benefits: IHG Rewards members enjoy exclusive benefits, such as complimentary room upgrades, priority check-in, and late check-out, enhancing the overall guest experience and fostering loyalty.
- Partnership with other brands: IHG Rewards has partnered with various airlines, car rental companies, and retailers, allowing members to earn and redeem points through these partners, further increasing the program’s appeal and value.
Benefits of Customer Retention and Loyalty Programs
Loyalty programs can assist hotels and resorts by:
- Increased customer retention: Bain & Company found that a 5% improvement in client retention can boost profitability by 25% to 95%.
- Higher customer lifetime value (CLV): Loyal customers tend to spend more and make more frequent purchases, increasing their overall value to the business.
- Improved brand reputation: Loyal clients are more likely to refer your hotel or resort to friends and family, resulting in great word-of-mouth marketing and brand exposure.
- Lower marketing costs: Retaining clients is cheaper than gaining new ones, which might cost five times more (source).
- Enhanced guest experience: By offering personalized rewards and experiences, loyalty programs can help create memorable moments and strengthen emotional connections with guests.
Step-by-Step Guide of Staging Loyalty Programs for Hotels and Resorts
Staging a loyalty program involves several steps, from planning and development to implementation and monitoring. Here’s a step-by-step approach to creating a profitable loyalty program for your hotel or resort:
- Set objectives and goals: Start by defining loyalty program goals and objectives. These might include increasing customer retention, boosting revenue, enhancing guest experience, or improving brand reputation.
- Research and analyze: Conduct market research and analyze your customer base to better understand their preferences, needs, and expectations. This will help you design a loyalty program for your target demographic.
- Choose a loyalty program structure: Based on your findings, choose a loyalty program structure that matches your business and customers. Common structures include tiered membership levels, points-based rewards systems, and cashback or discount programs.
- Design rewards and benefits: Develop a range of rewards and benefits that cater to different customer segments and preferences. These might include free stays, room upgrades, dining discounts, or exclusive experiences. Ensure that the rewards are attractive and valuable to your target audience.
- Develop partnerships: Partner with complementary brands, such as airlines, car rental companies, or retailers, to expand your loyalty program’s reach and value. This will also allow your guests to earn and redeem points or rewards through these partners, increasing the program’s appeal.
- Create a user-friendly system: Make it simple for guests to track and redeem points or prizes. This can include an online platform, mobile app, or physical membership card.
- Train your staff: Educate your staff on the loyalty program’s features, benefits, and objectives, ensuring they can effectively promote it to guests and provide exceptional service. This will help create a consistent and positive guest experience across your hotel or resort.
- Launch and promote the program: Once your loyalty program is developed, launch it and promote it through various marketing channels.
Customer Relationship Management (CRM) Systems
Customer Relationship Management (CRM) systems organize and analyze customer data across the customer lifecycle. CRM solutions may help hotels and resorts strengthen client connections, customize experiences, and retain customers.
A CRM system for your hotel or resort has several advantages:
- Customer data management: A CRM system may manage and analyze client data. This includes personal information, booking history, preferences, and feedback. This information can assist you understand your clients’ wants and customize your services and marketing.
- Personalization: Using the data gathered through a CRM system, hotels and resorts can personalize their communication and marketing efforts to better engage with their customers. Personalization can include customized offers, recommendations, and communication based on customer preferences and behaviors.
- Enhanced guest experience: By using a CRM system to gather and analyze customer data, hotels and resorts can provide a more seamless and personalized guest experience. This can include personalized recommendations, special promotions, and customized services.
- Streamlined operations: A CRM system can help hotels and resorts streamline their operations. It helps automate tasks such as guest communication, reservation management, and payment processing. This can free up staff time and resources to focus on providing exceptional service to guests.
- Improved customer retention: By understanding their customers’ needs and preferences, hotels and resorts can use a CRM system to design loyalty programs and other retention strategies that are tailored to their target audience. This can result in increased customer loyalty and retention.
Consider functionality, usability, and scalability when choosing a CRM system for your hotel or resort. Additionally, it’s important to integrate your CRM system with other hotel systems. These include property management, point of sale, and marketing automation tools to ensure a seamless and integrated guest experience.
Personalization and Customized Offers
Personalization and customized offers are key components of successful customer retention and loyalty programs. By adapting your communication and marketing to your visitors’ wants and tastes, you can create a more engaging and memorable guest experience, encouraging repeat business and good word-of-mouth marketing.
Here are some strategies for implementing personalization and customized offers in your hotel or resort:
- Collect and analyze guest data: Use a CRM system or other data collection tools to gather and analyze guest data, such as booking history, preferences, and feedback. This data can assist you understand your guests’ tastes and adjust your communication and marketing.
- Customize room preferences: Give guests the option to customize their room preferences, such as bedding type, room location, and amenities. This can help create a more personalized and enjoyable guest experience.
- Personalize communication: Use the data gathered through your CRM system to personalize communication with guests, such as welcome emails, post-stay surveys, and promotional offers. Personalized communication can include customized messages and offers based on the guest’s interests and past behaviors.
- Offer personalized recommendations: Use guest data to offer personalized recommendations for activities, dining, and other experiences. This can include tailored promotions or discounts based on guest preferences and past behavior.
- Create loyalty programs with personalized rewards: Develop loyalty programs that offer personalized rewards and experiences based on guest preferences and behaviors. This can include customized room upgrades, dining experiences, or exclusive events.
- Use artificial intelligence (AI) and machine learning: Implement AI and machine learning technologies to analyze guest data and make personalized recommendations and offers in real-time. This can create a more seamless and enjoyable guest experience, increasing the likelihood of repeat business and positive word-of-mouth marketing.
Measuring and Analyzing Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) helps businesses determine a customer’s long-term financial value. In the hospitality industry, CLV can be used to evaluate the effectiveness of customer retention and loyalty programs and identify opportunities for revenue growth.
The hospitality industry calculates CLV as follows:
- Calculate the average revenue per customer: The average revenue per customer is calculated by dividing the total revenue by the total number of customers for a certain time period. The revenue potential of each customer will be determined by this.
- Determine the average customer lifespan: Calculate the average customer lifespan by calculating the average hotel stay of your guests. Either months or years can be used.
- Estimate the future value of each customer: Estimate customer future value by multiplying average revenue per customer by average customer longevity. This will estimate the overall revenue each customer is likely to make during their connection with your organization.
- Analyze customer segments: Segment your customer base by demographics, booking history, and other relevant factors to better understand the CLV of different customer segments. This can help you identify high-value segments and tailor your retention and loyalty programs accordingly.
- Calculate the cost of customer acquisition: Divide your marketing and sales costs by the number of new clients you gained. This will help you understand the cost of acquiring new customers compared to the potential revenue generated by each customer.
- Analyze ROI: Compare the money earned by your customer retention and loyalty programs to their implementation and maintenance costs to determine their ROI.
By measuring and analyzing CLV, you can better understand the long-term value of each customer and identify opportunities for revenue growth and cost savings. This data can improve client retention and loyalty programs, marketing and sales initiatives, and data-driven company decisions.
Summary Checklist of Action Plans on Hotel/Resort Loyalty Programs and Customer Retention
- Set clear loyalty program goals.
- Segment your customers to understand their preferences and wants.
- Create a tiered membership system with exclusive rewards.
- Customize offers and promotions based on visitor choices.
- Partner with complimentary brands to increase loyalty program reach and value.
- Create a simple points and rewards system.
- Analyze and adjust your loyalty program to stay competitive.
- Train personnel on the reward program’s features and benefits to market it to guests.
- Reach members with targeted marketing and individualized messaging.
- Track and tweak your loyalty program to increase client retention and income.
Loyalty programs and customer retention are essential for business owners, hotel and resort managers, and marketing professionals seeking long-term success in the competitive hospitality industry. By implementing a well-designed loyalty program that offers personalized rewards and experiences, businesses can foster stronger connections with their guests, increase customer loyalty, and ultimately, drive higher revenue and profitability.
Moreover, a successful loyalty program can serve as a valuable differentiator in the market. It sets your hotel or resort apart from competitors and creating a lasting impression on guests. A loyalty program benefits your business and improves the guest experience, making it a win-win strategy. Don’t miss out on the potential rewards that a loyalty program can offer. Start planning and implementing your own customer retention strategy today, and watch your business thrive.