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Many of you have asked me if points cards are an effective method to increase the loyalty of your direct hotel customers.
Unless you are a known chain that owns hundreds of hotels around the world, my answer is: no.
Of course, the title of my article is meant to be humorous: Booking did not change its loyalty program overnight! I just wanted to highlight the fact that the largest distributor with unlimited resources decided not to use the points system.
But be careful – this doesn’t mean that you shouldn’t implement a loyalty strategy. Very much the opposite! This is a subject that requires serious thought and you need to adopt the right loyalty strategy.
Increasing Hotel Loyalty: A Major Challenge
Loyalty presents a real challenge due to the increased power of the internet and content marketing today. Let’s look at a few numbers:
– A 5% increase in customer loyalty leads to a 25 to 100 % increase in profits (1);
– Attracting a new customer is 7 times more expensive than retaining an existing customer(2);
– By decreasing customer loss by 5%, a business can increase its net profits between 25 and 85%.(3)
In contrast, you should never compare mass market products to the hospitality industry.
As an example: Sephora sells convenience goods for every day use and is easy to access. It is very different for hotels. People don’t travel every other day.
Loyalty is still an essential part of increasing your share of the direct market, but it should be planned for and worked on over the long term. Did you know that a hotel that has 100% control over its loyalty can boost direct reservations up to 54%? (4)
Very different consumption habits
There are vast differences between mass market and hotel consumption methods and thus loyalty programs should also be very different.
Consider Zara. It is easy to shop there regularly, even several times per month. Accumulating points in a loyalty program makes sense in this case.
A person who stays in a hotel that often would be a business traveler. A loyalty program would not necessarily be of any interest to these travelers. Their company is in charge of negotiating rates and paying for hotel nights.
But staying at a hotel is even more sporadic for most visitors. Even two stays a year would be a lot. Note that a free night after earning 10 points, or 10 nights, could potentially take 5 years to earn – that’s not very attractive!
Which loyalty program should you implement?
There are many proven loyalty programs that are used by various large corporations. Some examples are: Amazon Prime with its paid VIP membership; American Express and its system of strategic partnerships; Nike with its community tool, etc.
The real question, can we adapt this kind of program to the hotel industry?
Yes and no. Or perhaps, it depends.
If you own a major hotel group, like the Accor Group with its 4,840 hotels, you can definitely try this. In this case, there are many chances for your guests to stay at one of your establishments.
It is not at all the same for independent hotels. Here, it is key that there be immediate benefits.
Stop using reward cards and follow Booking Genius’ example
Booking.com, the #1 hotel reservation system in the world is a great example to follow, both in its marketing strategy and how it communicates. Its Genius loyalty program is based on system that is very easy to understand:
After making 2 reservations in 2 years, you become a Genius for life. Booking gives you a 10% discount on every stay that you make from then on at a Genius establishment.
Its a simple and effective system, the genius of which is that it focuses on the essential.
I recommend that you use the same attitude and simplicity, particularly with a hotel’s loyalty program. Don’t add on ridiculous conditions that are impossible to fulfill. Above all, keep it simple. You register, are loyal, and earn a XX% discount.
It’s immediate and it works!
Hoteliers, work for your customer’s loyalty!
I can already hear you saying: “Yes, but Tony, my hotel is a unique destination. People only come here for special occasions.” And you’re right.
There are some hotels where guests only stay once for a special event like a romantic getaway, an anniversary, etc. Loyalty does not seem to be an important factor for these establishments.
However, used in an intelligent manner, it can work as one of the most cost-effective acquisition methods – word of mouth. How? One example would be a loyalty code intended to be used by the customer’s friends, family, and colleagues that is issued when they leave the hotel.
Add another variable to this equation – customer experience. Providing a memorable customer experience is essential to getting people to talk about you. It is a key element in increasing loyalty and recommendations.
While we know that word-of-mouth is a wonderful system for overcoming rate equivalency and generating direct reservations, building loyalty is still relevant, if not essential.
The Key to Loyalty: Understanding your Customers and the Customer Experience
A hotel that pampers its guests and communicates with them will clearly increase its loyalty rate.
It’s no secret – a wonderful customer experience, combined with personalized communication and occasional reminders of the benefits offered, has and will always create and grow loyalty.
Then, when the guest returns, you can use the information you learned to make their experience even more extraordinary.
The simple act of recognizing your guests and calling their name when they step foot in the hotel guarantees a certain “Wow” factor that makes an impression. This is exactly what we’re looking for.
It then creates a virtuous circle: the more satisfied the guest is, the more often they return, the better you know them, the better you can meet their needs, etc. Does your guest like seafood? Tell them about the delicious seafood platter served at xxx restaurant. Does his wife like to go to the theatre? Recommend the latest hit. Is it their wedding anniversary? Offer them an upgrade, put a bottle of champagne on ice in their room, place a few flower petals on the bed…
The most important thing, essential even, is that the stay creates a lasting memory. The value added is the human element. This is the variable that you can’t count on finding at every local hotel.
Tracking the Loyalty of Hotel Customers
The UDR (Unified Data Repository) or Data Management Platform is a solution that centralizes all customer data, removes duplicates, and consolidates them. All the sudden, you can see everything clearly. But this tool can also track your guest’s consumption habits and thus improve the customer experience.
With a good UDR, the customer is tracked accurately and the number of stays in the hotel can be easily identified. Of course, the more stays, the more the benefits increase. This is a bit like a points card, but the benefits are immediate.
Caution: it is very important to treat all guests as having the potential to be loyal customers. Every guest who stays for the first time must therefore receive a loyalty email when they leave with a promo code that can be used by their friends, family, and neighbors. Your objective is to work on your loyalty and word of mouth. This is a constant, immutable mindset.
Six Key Points to Remember
Hotel loyalty programs must stay simple, as with the example of Booking Genius.
- Offer an immediate financial advantage or small added value benefits (such as a free breakfast);
- Implement 1 rate code in your booking engine (or 2 or 3 if you want to have loyalty levels) but keep it as simple as possible;
- Your only limit is not to exceed the amount of your OTA commissions;
- Customer experience is more important than price. 80% of consumers are willing to pay more for a better customer experience; (5)
- 78% of hotel guests prefer to receive immediate benefits instead of accumulating points;(6)
- Keep your customer at the center of your loyalty strategy.
The three essential elements to meet the consumer needs of hotel guests are: personalized customer experience, immediate benefits, and simplicity.
Start with simplicity, immediate results, and an easy to use system, along with personalization that values your customer and you will make them want to return and recommend you to others.
As hoteliers, your challenge will therefore be to review your customer loyalty strategy to provide a significant boost to your direct bookings.
Would you like to learn more? Read my blog. And stop stressing about reward cards 🙂
Thank you for reading
(1) According to Fred Reichheld, author of The Loyalty Effect (loyalty effect = increased customer, employee, and investor loyalty = increased productivity, higher income, and increased growth),
(2) White House Office of Consumer Affairs
(3) Bain & Company
(4) Expérience Hôtel
(6) 2017 Oracle hospitality