Taktikons Blog about Revenue Management

Taktikons Blog about Revenue Management

Revenue Management

In this blogg I aim to give a background on Revenue Management and Distribution. It discusses both organizational issues as well as lectures regarding Revenue Management and Distribution. Many of the blogs can be used as preparation to the Courses and Workshops in Revenue Management and Distribution that Taktikon organizes.

The power of Loyalty

SalesPosted by Annemarie Gubanski Jan 28, 2014 17:29:57

The power of Loyalty
In an article that Cornell University published recently, the implementation of loyalty programs for two groups of independent hotels showed a positive effect. Both ADR (between 1-5%) and number of room nights (nearly 50%), booked by the loyalty program guests, increased. Interestingly enough, the analysis included even the hotels’ best customers.

November 2013, I listened to Tom Savigar from The Future laboratory who held an excellent talk about the implications of a changing demography on the Hotel Industry. He predicts the end of Business-To-Business (B2B) and says that the hospitality industry should have a direct dialogue with the guest. This is even in line with the recent article from Bryan Kramer “There Is No More B2B or B2C: There Is only Human to Human (H2H)”, where he states that “Marketing increasingly strives to become one-to-one, with solutions to collect and wrangle the big data about us to serve up more personalized offers and experiences.”

In a world where direct contact with the guests is increasingly important, what is the most effective way to create loyal guests?

The impact of Loyalty
As Cornell University’s study shows; a loyal guest can be a profitable one and having a direct dialogue with each individual guest is a powerful factor to create loyalty. Loyalty is even an important factor in the negotiation process, as companies should and would like to offer discounted contracted rates to their most loyal corporate accounts.

In my role as a consultant, I often come across companies that would like to discuss the best way to increase loyalty and the need for a loyalty program is often raised. This is a very important question as not only such a program obviously can increase Total Revenue (as Cornell University’s study showed), it can also be used to encourage guests to book directly with the property. However, the cost of such a program should be taken into account as well, as the benefits to the guests come with a cost.

Karin Eriksson from hotel chain Scandic recently spoke on the first Hotel Market Seminars on Distribution and Social Media held in Stockholm. She says that especially Hotels and Restaurants have a big potential in using Social Media as many of their potential guests are using these types media and would like to tell that they are staying at a specific hotel and are eating a fantastic dinner. I would like to add that, in my opinion, this counts for the whole hospitality industry. Social Media offers a great opportunity to create direct contact with your guests and increase loyalty. Yes, it does mean a high level of involvement, but it is fun and offers the possibility to increase result.

To identify a profitable loyal customer
In a world where many of our guests carry a number of Loyalty Program Cards; how do we know which of these guests are really loyal to our brand? In a commercial world, it is important to identify the loyal customers that impact result positively, as many times these customers are usually the ones that are paying the lowest rate. I often hear hotels identifying their best customers by the number of times they visit the bar or restaurant, with which they see prove that their loyal guests also are profitable guests. This might be true; it might also be compared to my favorite clothing store. It has clothes that match my taste and is located within five minutes walking distance from home, which means that my husband and I visit the shop regularly. The shop owner identifies us as one of his most loyal customers and often gives us an additional discount when we do make a purchase. Though, I doubt that we are the most profitable customers, as we usually only buy the articles the shop offers on Sale.

The ultimate way to identify a profitable loyal customer is to have your statistics in order. This gives you the opportunity to not only calculate the Total Revenue per customer and per Market Segment, it also gives you the opportunity to match your offer to each individual market segment, right down to matching it to each individual customer. What does a certain group of customers value the most? What are they willing to pay for this? How can I make sure that I offer what they want?

Conclusions
Loyalty programs can be used, but make sure that these types of programs do give you the additional loyal guests and increased revenue you desire. Take into account the fact that there is a cost involved.

  • Involve your guests by using Social Media strategically. Do not only use these platforms to only inform your customers about your offers. Involve them by asking them questions and to encourage them to write reviews about all your products. Make sure to react on all reviews.
  • Make sure you have your statistics in order and find out how to create profitable customers.


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