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.
PwC’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.
