Building Effective Guest Loyalty Programs
Guest loyalty programs are a powerful method in the modern hotelier’s revenue strategy. After all, it can cost from 5 to 25 times more to acquire a new customer than retain an existing one (Harvard Business Review). Establishing deep and lasting relationships with guests can help boost Customer Lifetime Value (CLV), so targeting previous and frequent guests can pay significant dividends. Additionally, in a time of crisis (such as the current COVID-19 pandemic), marketing to high potential market segments, such as loyalty program members and recurring guests, can help drive bookings even in times of reduced demand.
In our eBook, The Hotelier’s Guide to Loyalty Programs, we explore the many different dynamics that must be accounted for to build a loyalty program that delivers the desired business impact.
Download The Hotelier’s Guide to Loyalty Programs to discover the latest tips, tricks, and strategies for establishing profitable and lasting relationships with your guests.
Loyalty Program Benefits
To start, hoteliers should consider the many benefits of loyalty programs. These include several advantages beyond the obvious:
- Increase direct bookings: 43% of travelers enrolled in a hotel loyalty program book directly through the hotel’s website (Phocuswright)
- Increase/Hold ADR: Travelers willing to spend more with their preferred property/brand: + $27 for business travelers, + $23 for leisure travelers (HospitalityNet/PwC)
- Cross-sell properties across the brand: Drive demand from loyal base to new hotels, create incentives for off-season trips, drive leisure guests to business properties and vice versa
- Build a strong revenue-driving program to market to new owners: Proven demand-driving programs may be more attractive than soft brands or other management groups
Select the Right Program Types
While these benefits sound attractive and certainly make a solid case for loyalty program development, creating an effective program is not without its challenges. Consider this: while there are currently more than 3.8 billion individual loyalty program memberships in the U.S. alone, roughly 28% of members will leave a program without ever having redeemed a reward (Capgemini). Defining the right program that works for your hotel and your guests is crucial in ensuring your program efforts lead to the intended outcomes.
As a first step, hoteliers should understand the different types of programs they may want to leverage. Each has its distinct advantages, goals, and management burdens, and most formal programs utilize some combination of these three main program types:
- Surprise and Delight: These programs aim to nurture customer relationships and decrease churn by providing unexpected rewards as a thank you for continued business. Most campaigns involve rewards, such as free gifts, product upgrades, or a coupon for a meaningful discount.
- Cash Back and Points: These are point-based programs with a certain number of stays or hotel spend qualifying customers for partial or full redemption toward their final bill. They can also take the form of points toward a special customer experience, such as a free spa visit or room upgrade during their stay.
- Value-Add Rewards: These reward programs deliver perks or unique experiences (internal or external) that non-participants can’t receive. For example, offering a late checkout so guests can change out of their suit in their room, rather than a cramped, public bathroom stall.
Learn more about the different types of loyalty programs in The Hotelier’s Guide to Loyalty Programs.
Plan Your Data Strategy
The intent of modern-day loyalty programs is to capture and leverage customer data, so make sure you have a comprehensive data strategy that supports your goals. Be mindful of everything you can track, identify the attributes to track now and in the future, and be prepared to receive a server full of data.
To help plan your data strategy, ask yourself these questions.
- How will you analyze the data?
- What will you do with all that data?
- What data security measures are in place?
- How will you train new staff to understand, manage, and use the data?
Choose the Right Technology Partner
Executing an effective loyalty program means doing it at scale. The right technology partner can help you specify and apply reward types, the design of your engagement approach, program effectiveness, and processes to refine your program for the future. The right partner can also automate the execution of your program. Look for a tech provider that is hospitality-specific and avoid defaulting to generic CRMs that aren’t built specifically to solve the challenging and evolving needs of hoteliers. Perhaps most importantly, look for the right partner – not just a vendor. A technology partner can help guide you down the right paths while also leveraging your existing technology in the best ways possible.
Loyalty and loyalty programs are great tools to bolster hotels’ bottom lines. From surprise and delight to cash-back and points to value-add offerings or a mix of all types, these programs generate customer engagement and express true appreciation for customers’ business. It’s important to know that loyalty programs are not necessarily marketing tools, revenue management tools, or operations tools — but the intersection of all three. Loyalty is a continuous process, attitude, and philosophy that’s part and parcel of your hotel’s brand. To be executed at scale, technology must be part of the mix, but in a personalized way that expresses how much you know and personally value your customer.
Discover all the key ingredients of an effective loyalty strategy and learn how to turn guests into raving fans. Download The Hotelier’s Guide to Loyalty Programs today to help your property create long-lasting guest relationships.