Is a loyal hotel guest more valuable than a first-time hotel guest?
Tricky question. The inherent rules of hospitality would say no: All guests are equally valuable to the hotel.
But what do the economics of loyalty say?
The economics of loyalty
Retaining existing customers costs less — and has higher profit margins — than attracting new customers.
An article published in Harvard Business Review, while conceding variation across different industries, pointed out that “acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one.” Research done by net-promoter-score inventor Frederick Reichheld of Bain & Company found that increasing customer retention rates by 5% increases profits by 25% to 95%.
PwC in turn found that guests are on average willing to spend an extra $25 on their preferred hotel brand. Furthermore, these guests drive ancillary revenue by regularly indulging in their favorite services, and they contribute to positive word-of-mouth awareness as brand ambassadors.
So yes, loyal guests are high-value guests. But not necessarily more valuable than new guests; rare is the hotel that can survive on loyalty alone.
10 key things to keep in mind about fostering loyalty
The good news is that the actions taken to increase guest loyalty and inspire repeat bookings can also work to attract, convince, and delight first-time guests as well. And every first-time guest may be seen as a potential loyal hotel guest.
PcW’s illuminating 2016 study “What’s driving customer loyalty for today’s hotel brands?,” conducted as part of their Consumer Intelligence Series, found that both business and leisure travelers cite room quality as their number one reason for choosing a hotel. But beyond quality rooms, which may seem the most fundamentally basic of guest expectations, what can hotels offer travelers to encourage their loyalty?
We’ve identified 10 key things to keep in mind when developing a strategy to foster guest loyalty. Here’s what helps — and what harms — in the quest to create a hotel experience that has guests booking . . . and rebooking.
What encourages guest loyalty for hotels?
All of the following:
Impactful first impressions
A hotel’s first chance to lay the groundwork for a loyalty-driving guest experience is, unsurprisingly, the first touchpoint the traveler has with the hotel. Increasingly, this touchpoint is the hotel’s profile on a metasearch site.
By owning and optimizing the content and rates contained in this profile, hotels can make the sort of impactful first impression that can turn into consideration, then conversion, and then ultimately, loyalty.
Super-simple booking processes
If a hotel’s booking process is slow, difficult, and demanding, it creates a painful experience that travelers may not even complete once, let alone want to repeat.
If, on the other hand, the booking process is quick and intuitive the first time, it will be that much quicker and more intuitive the second (and third, fourth, etc.) time around. And if the personal information is (securely) saved so that it only needs to be entered once? Even better. trivago Express Booking helps hotels offer this super-simple, loyalty-encouraging booking experience.
Inventive incentives
Discounts on direct bookings (where possible) are a good start to attracting and converting guests who not only are loyal to a hotel, but faithfully book through its direct booking funnels as well.
But they’re just that — the start of what hotels can offer loyal guests who book direct. Every imaginative perk, from locally sourced gift baskets to free bike rentals, improves a hotel’s chances of converting a looker not just into a booker, but a book-again booker. To understand what incentives to offer, a hotel can look to data on their core audience.
To promote their hotel’s direct booking funnel with the official website rate directly on trivago, hoteliers can run a campaign with Rate Connect.
Compete with booking channels
Relevant rewards
It has been argued that with the rise of millennial travelers, loyalty programs have lost their relevance. Not true, says PwC’s research.
Millennial engagement with loyalty programs is similar to that of leisure travelers, though millennials and vacationers want different rewards than business travelers. It’s about targeting a hotel’s core audience and diversifying rewards.
Tasteful personal touches
From a warm personal welcome email to a courteous check-in, concierge services and recommendations (whether from a real person or an AI program), and small in-room gifts, the small personal touches that enhance the guest experience can go a long way toward fostering loyalty.
Well-executed emailing
Hotels can stay in touch with past guests, keep their stay fresh in their minds, and offer enticing incentives to encourage them to visit again, all through calculated emailing marketing campaigns that use messaging and timing to turn previous guests into recurring guests.
Quality technology
Improved marketing efficiency, streamlined operations, and facilitated inter-staff communication all enable the hotelier to focus on the quality of the guest experience and invest in building lasting relationships with their customers. To this end, hotels can run optimized CPC marketing campaigns with automated bidding platforms and save time (and money!) with cloud-based property management technology.
What kills guest loyalty for hotels?
We previously outlined loyalty program pitfalls to avoid in a past article, but here are a few more faux pas that also apply, independent of any rewards programs:
Expectation frustration
The reality of the hotel stay didn’t match up with the image painted online? This not only kills loyalty, it also can impact the hotel’s online reputation and thereby jeopardize its ability to attract new customers.
Lack of feedback requests
If there’s no sign that the hotel is committed to improving the experience for the guest next time they stay, there probably won’t be a next time.
Operational distractions
Running a hotel shouldn’t get in the way of providing stellar hospitality; when it does, the guests recognize they aren’t the hotel’s first priority. And they likely won’t come back.
While it may be futile to question which guests are most valuable, it would certainly not be futile to work toward fostering a strong loyal base of repeat guests.
And when every guest is given the attention and personalization afforded longtime guests, a hotel’s circle of high-value loyal guests can only grow.
