In our first article, we looked at the 35 years old traditional loyalty program that is a point based (earn-burn-redeem concept) and the associated problems that small and medium hotels have had in making these traditional programs generate true customer loyalty. Our recommendation is to take a much wider and a more holistic approach to loyalty, that if adopted by hoteliers, will help bring new life into your loyalty strategy and generate a new interest with your clients.
In this second article, we’ll dig deeper into the HOW, or WHAT a holistic approach to hotel loyalty means in practice, by looking at both sides of the same coin:
- The current concept of loyalty as it stands today – Where is there room for improvement?
- Thinking beyond the traditional loyalty schemes – Introduction to Implicit Loyalty
1. The current concept of loyalty as it stands today – Where is there room for improvement?
The prevailing loyalty scheme is something that has become a ‘standard’ and is the norm for most customers, especially frequent travelers. We think that having a loyalty program is better than nothing at all, but it does raise the question of how can a program be unique in the guests’ eyes when it’s based on a 35-years-old point earn-burn-redeem concept?
In part one, we saw how large-scale loyalty programs that big chains are promoting are able to survive because they have high volume along with diverse offerings. But in fact, hoteliers don’t need massive budgets or a long list of major partnerships to have a successful loyalty scheme. As we discussed, a very personalized approach to loyalty can be a huge game changer, which can be achieved by using the guest data that is stored in a CRM. You can turn a boring generic program, into a truly personalized loyalty scheme that is able to compete against the big chains, on its own merits.
Loyaty needs to go from “commoditized and generic”
to “personalized and segmented”.
In today’s information age, it is critical that a hotel loyalty program uses intelligent technology to build a program that incorporates a complete guest data solution. There are 2 key elements of every loyalty scheme where a CRM solution can really make the difference.
1/ Reward schemes that are relevant & flexible to a specific individual
Small hotels can easily get lost in a sea of generic hotel loyalty programs by using a one-size-fits-all point redeeming schemes with all the classic rewards, such as room upgrades or special discounts. Generic programs don’t work for 2 apparent reasons: (1) It makes you look no different from your competitors; (2) The needs of your specific guests are not the same so using the same scheme for all your guests is only meaningful to a small fraction of them.
If you would like to encourage loyalty to a broader audience, the most important thing, is tailor your reward offerings to different customer segments. To facilitate this initiative, the optimal way is to use a CRM tool that incorporates a comprehensive guest database capable of easily segmenting clients and offering different benefits to the different segment.
In addition to being able to segment your different guests into groups and adapting your communication accordingly, it is important to give these different segmented groups, more choice and flexibility when redeeming their points.
For example, generally speaking, leisure travelers seek instant gratification (dining discounts, free gifts and tours), while business travelers tend to prefer accumulating points that can be used towards future stays (free nights, upgrades or higher status). Or, let’s say, some guests are interested in tangible rewards, while others prefer more intangible privileges such as VIP check-in, status ranking, guaranteed rooms or referral rewards. Some Hoteliers have great ideas such as offering time-pressed business travelers premium coffee and croissant to take away, instead of a lengthy full breakfast. But they just don’t have the tools to do this systematically.
By blending a mix of short and long term / tangible and intangible benefits, you give your guests the opportunity to benefit from the perks that are the most meaningful to them. Now your loyalty program is starting to speak to guests on a more focused level and is helping to deliver more meaningful incentives.
2/ Communicating your programs
No matter how attractive your rewards are, they will be meaningless if their recipients are not well informed about them. The lack of awareness of loyalty programs is actually happening on different levels. A study by J.D. Power found that: “Nearly half of all loyalty program members indicated a less-than-clear understanding of how to earn their points and only 50% knew how to redeem them“. It’s also often that a loyalty member forgets his / her membership in one specific hotel, given the fact that they already have a bunch of membership cards in their wallets. Or even worse, some guests don’t even realize that a loyalty program exists.
Bring benefits to the guest,
don’t wait for him to ask for them!
To avoid these communication errors and to ensure that your strategic efforts reach their full potential, a mailing automation tool that is synchronized with a complete customer database should be integrated with your loyalty program. This helps to:
- Maximize the enrolments to the loyalty program thanks to an automated mailing to guests directly after booking.
- Keep loyalty members informed about their every earned / burnt point, every benefit they may be given so that they understand and engage better with the program.
- Automate all the communications needed so that guests don’t miss anything while hotels save their time.
2. Implicit Loyalty – Thinking beyond traditional loyalty schemes
The basic idea behind today’s traditional loyalty practices is to reward customers, based on the value of their purchases, and then incentivize them to come back and book direct.
While implementing loyalty programs is still indispensable, the saturation of current practices has been weakening the initial idea. Very often these schemes seem to fail in delighting guests and making them feel special, since these benefits are becoming more and more mundane and run-of-the-mill.
That landscape calls for a disruptive way of thinking as well as a more holistic approach, which we call IMPLICIT LOYALTY. In essence, it means that no matter if guests are knowingly enrolled in the loyalty program or not, they will receive benefits from it, sufficient and lucrative enough to make them delighted, “loyalized”, and even turned into promoters for your brands.
Making guests loyal shouldn’t depend on enrollment.
This approach opens up a higher level of personalization, where no two guests are treated the same way. It may not promise guests anything in advance, but it can be a pleasant surprise that delights guests when they expect it the least. Implicit loyalty can also be combined with a more traditional approach, giving your loyalty program new life and marking points with your guests.
The biggest challenge to this approach is that hoteliers need to introduce, understand and be able to measure their guests’ Customer Lifetime Value (CLV). The CLV is a prediction of the anticipated revenue and net profit attributed to the entire future relationship with a customer. Although the metrics and the calculation of Customer Lifetime Value are complex, technology is making it much more manageable and effective. The idea behind implicit loyalty to be able to calculate in advance how much a hotel can or should invest in any one customer, and enable it to optimize its loyalty budget.
At HotelAppz, we use the latest technology to help hotels get their arms around the CLV concept and provide them with the actual and actionable calculations. Our solution enables hoteliers to assess CLV by using different data sources. For example, as part of the loyalty solution, our clients are able to classify guests based on their booking channels. This means that the loyalty points awarded to a guest depend on how they actually booked their reservation. For example, a direct booking is awarded 2 times the value of the booking, while another booking coming through an OTA is only awarded 1 point for every Euro spent. Another example is when hotels capture information on guests that come during the low season or people with special attributes such as travel professionals, tourist guides, influencers, or those who might bring MICE businesses. This information can then be incorporated into the loyalty program and used to reward guests / influencers / bookers with appropriate incentives.
Use loyalty benefits to surprise your guests!
Once the data is captured and the points are allocated, the CLV can be calculated for each individual guest, reflecting the value that they contribute or potentially will contribute to the overall revenue / profit of the hotel. In turn. The hotel can then determine a loyalty budget for every guest segment and decide what type of personalized incentives should be offered as rewards, rather than from some structured reward scheme that would require them to redeem the points.
With this new approach, there is a much higher chance that 1) guests will return to the hotel and 2) they will book direct. In addition, hoteliers can expect much a more genuine loyalty as a result, which also means:
- Loyal guests are more likely to come back to the hotel when returning to the same destination
- It is very likely that they will naturally become your promoters, given the fact that in the hotel industry, 25% of new guests come through word of mouth, and around 40% of travel loyalty program members are already willing to recommend the program to friends and family if they have a positive experience.
After all, a client is loyal when, coming back to the same destination, they come back to your hotel, and book direct, regardless if they are enrolled in your loyalty program or not. It means that hoteliers’ mindset about loyalty should shift from a generic membership centric program, to surprise / delight / experience focused programs that can be stand-alone or integrated with a more traditional scheme.