The digital landscape is constantly evolving. Hotel digital marketers continue to seek more effective and cost-efficient ways to reach the right audience, at the right place, and at the right time. But do hotel marketers truly know the value of each and every guest and, more importantly, do they understand what motivates guests to choose their hotel, then choose to stay again?
Understanding the lifetime value of guests, including the type of content and promotions that compels them to book direct, is crucial to an effective book direct strategy.
So, what’s the secret to understanding the value of your guests and knowing your most profitable guest? The answer lies in RFM (recency, frequency and monetary) modeling. In a nutshell, this means:
- How recent a guest has stayed (recency)
- How frequently a guest stays (frequency)
- Total monetary value of a guest (monetary)
How is RFM analysis done?
RFM analysis looks at all of the bookings and transactions in your customer database during a specific time period, usually the last 2-3 years. The purpose of the database analysis is to determine the value of your guests based on how much they spend with your hotel brand, how often they stay with your hotel brand, and how recently they’ve made a booking.
With the combined power of RFM data, hotel marketers can get a deeper understanding of a guest’s relationship with the brand and use this data to reach a more qualified audience with personalized messaging.
How is RFM modeling used to build segments?
Based on RFM, you can classify your guest database into different value segments. Here are some example segment classifications based on recency, frequency, and monetary values:
High-Value RFM Classifications:
- Premium Best Guest: High revenue, active guests who have stayed within the last year, and have stayed with your hotel brand three or more times.
- Best Guest: High revenue, active guests who have stayed within the last year, and have stayed with your hotel brand two or more times.
- Potential Best Guest: High revenue, active guests that have stayed within the last year, and have stayed with your hotel brand at least once.
