A New Approach To Lifetime Value Of Guests

Revenue managers spend a lot of time and resources (rightly so) trying to determine the lifetime value of particular guests. Perhaps a better strategy would be to shift their attentions in a slightly different way by seeking the lifetime value of certain segments of guests.

Many RMs and others have specific formulas to calculate a guest’s long-term value: how often he or she will return to a hotel, what they typically spend on their room and in other areas of the hotel, the likelihood they’ll persuade others to visit the property, and more.

Sometimes, that calculation fails to take into consideration what it costs to attract that guest in the first place and then to retain him or her over a long period of time.  Measuring the total lifetime spend of a guest against costs of retention yields the most important metric: the gross margin of a guest relationship over time.

Through the use of data — both internally via a CRM and externally — a hotel’s marketing and revenue staffs can pinpoint the factors that can turn a non-loyal customer into one who seeks out a particular property or chain. It might strictly be price; it could be the promise of upgrades or other amenities; it could just be a feeling of a personalized experience. Of course, guest attachment to a brand or hotel through a loyalty scheme is another strong lure.

The keys to successfully calculating and using lifetime value are technology and data. The more data a hotel can see, the more effectively it can market to travelers, including its loyalty members, both in the short- and long-term.

The concept of personalization has taken root in the hotel industry and has become a bedrock on marketing and pricing dynamics. These same principles of personalization also need to apply during the booking process. Big data produces in-depth insights into the interests of individuals who are visiting booking sites, enabling hotels to create customized experiences.

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