What drives customer retention strategies in hotels is the first question we need to ask.
NB: This is an article from Hotelogix
To answer this question, it is important to first understand that not all guests who check-in are of equal value to your hotel. From a purely financial point, loyal hotel guests are more valuable than one-time tourists who never return. According to a study reported in Harvard Business Review, it was found that acquiring a new customer costs anywhere from five to twenty-five times more than keeping an existing customer. Furthermore, Reichheld discovered that boosting client retention rates by 5% improves profitability by 25% to 95%. The necessity of client retention strategies for hotels is one of the clear consequences of this study.
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Hotels that place a greater emphasis on maintaining long-term relationships with existing customers rather than pursuing new consumers would benefit from lower expenses and higher profit margins. Therefore, retaining existing customers is a higher priority than acquiring new customers. Consider acquiring new customers as a valuable secondary strategy.
Advantages of customer loyalty in the hotel industry –
Apart from financial gains, having a strong customer retention strategy can be useful in the long term, as well as have several other important benefits:
- Build a consumer base that is both loyal and profitable.
- Reduce the expense of acquiring new guests.
- Develop a strong promoter network.
- Minimize OTA commission payments, encourage direct booking.
- Upsell and cross-sell your services to existing customers.
In an increasingly dynamic world of OTAs, non-traditional hotel options, increased competition, and rapid feedback and reviews online, hoteliers need to learn to differentiate their products and design a customer retention strategy even before their guests have arrived.
1. Reduce dependency on OTAs and booking sites
Online travel agents, or popularly OTAs, are a mixed blessing for the hospitality industry. While they help hotels fill rooms fast and meet occupancy and revenue objectives, they also charge what many hoteliers consider to be an excessive commission. Consumers may be likely to be loyal to an OTA rather than a specific hotel brand. This has a negative impact on hotels’ ability to create long-term guest connections and retention rates.
Hotels must be able to convince their prospective guests to book directly with the hotel in order to gain ownership of the guest relationship. Hotels can start by ensuring that their own website or booking engine is quick, simple, and intuitive to counteract OTAs’ competitive advantages. Guests who book directly receive a discount, or other additional value-added benefits such as late check-out or free breakfast. These strategies to drive more direct bookings are picking up in the hospitality industry.
2. Offer some incentives
Although there has been an assumption in the hospitality industry that millennials are not fond of loyalty programmes, it is not true. Just like everyone else, young travellers can easily be motivated but their preferences differ from those of ordinary business travellers. However, since the primary audience for most hotel loyalty programmes are business travellers, adventure-seeking millennials can often time be ignored. Research shows that millennials consider room upgrades to be a great push which is not the case for business people.
3. Identify your VIPs and be ready for their arrival
Even if your hotel does not provide a loyalty programme, customer retention strategies can be effective. Begin by concentrating on your most valuable consumers. Once your VIPs have been identified, make sure that all of your employees are aware of who they are and have been trained to greet them by name and cater to their demands. When guests feel like they’re part of the family and have a sense of belonging, they’ll become happy, high-value customers who help your hotel retain customers.
Once your guests have arrived, it’s time to add value. Dig up their stay history and make note of any previous hobbies, activities, or behaviours demonstrated by the guest and use that information to enhance their stay.