In today’s competitive market, guest retention is as important as attracting new guests to your hotel. One of the best ways to ensure your guests keep choosing your brand is through well-crafted loyalty programs. In order to achieve high retention, you have to make sure you not only reward frequent visitors but also craft an experience and offer benefits that turn one-time visitors into lifelong patrons.
This question is: “Why should hotels invest time and money in a loyalty program, and why should the guests even use it?” There are some interesting statistics that can be useful for taking this question into consideration:
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Loyal customers spend 22.4% more and stay 28% longer, and loyalty members contribute between 30% and 60% of the overall room revenue.
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With booking sites having increased their commission rates from around 10% to an average of 15-30% over the past few years, waiving this fee for a significant percentage of your bookings is a compelling reason to invest in loyalty programs.
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73% of customers are more likely to engage with a brand that offers a loyalty program vs. one that doesn’t. Moreover, 72% say that joining a loyalty program causes them to spend more money with that brand. (Formation’s Brand Loyalty Report 2022)
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According to Microsoft, the customer loyalty market is worth $5.57 billion globally.
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Marriott Bonvoy loyalty program grew to over 196 million members in 2023, and according to their annual report, the program’s mobile app contributed 22% more room nights in 2023 than in the prior year.
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According to the Hotel Tech Report, guest loyalty is the primary objective for hoteliers who utilize technology to enhance the guest experience, with 77% identifying it as a key priority.
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77% of hotel guests engage with loyalty programs, and 88.5% of respondents trust loyalty programs to help them overcome the inflation crisis and potential recession. (Antavo’s Global Customer Loyalty Report 2023)
Moreover, with almost 95% of all major hotel chains having some form of royalty program, it is safe to say that they are a tried-and-tested way for hotels to generate revenue while keeping their guest experience up to par. Chains are not the only benefactors, though. Larger and even smaller individual hotels can also offer unique perks through their loyalty programs, such as personalized welcome packages, exclusive local experiences, and direct interaction with the hotel owner or manager, highlighting the hotel's personal touch and uniqueness.
What is a hotel loyalty program?
A hotel loyalty program is a marketing strategy designed to encourage repeat business by offering rewards and exclusive benefits to frequent guests. These programs typically feature a points system where members earn points for each stay, which can be redeemed for free nights, room upgrades, meals, and other perks. Many programs have tiered membership levels (e.g., Silver, Gold, Platinum) that offer progressively better benefits as members accumulate more stays or points. Major hotel chains like Marriott Bonvoy, Raddison Rewards, Hilton Honors, World of Hyatt, and IHG Rewards Club each offer distinct loyalty programs. Marriott Bonvoy allows members to earn and redeem points at over 7,000 properties, with perks like free Wi-Fi, mobile check-in, and access to exclusive events through Marriott Moments.
To set up an effective loyalty program, a hotel should first define its goals, such as increasing repeat bookings and enhancing customer satisfaction. Once these goals are established, the following steps can be taken:
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Design the program with a points system, membership tiers, and rewards.
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Select a loyalty program platform that integrates seamlessly with your Property Management System (PMS) and Customer Relationship Management (CRM) systems.
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Develop a marketing strategy using appropriate tools for email campaigns and marketing automation.
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Train staff on the program’s features, launch with a promotional campaign, and continually monitor and optimize the program using analytics tools.
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Additionally, promote the loyalty program using in-room technology to send push notifications that highlight exclusive benefits, current promotions, and easy sign-up options, ensuring guests are informed and encouraged to join during their stay.
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Why Would Guests Invest In It?
It is also beneficial to look at who uses loyalty programs the most and why they would do so. Hotel loyalty programs offer guests a multitude of benefits that enhance their travel experiences and provide significant value. Members often enjoy exclusive discounts, special rates, and early-bird deals, which can lead to considerable savings. By earning points with each stay, guests can redeem rewards for free nights, room upgrades, meals, and other perks, making their stays more enjoyable and cost-effective.
Personalized services based on guest preferences, priority check-in and check-out, and complimentary amenities like Wi-Fi and breakfast further elevate the overall experience. Additionally, loyalty programs frequently offer members flexibility with early check-in, late check-out, and access to exclusive events and experiences, ensuring that every stay is tailored to their needs.
1. Loyalty Programs Increase Customer Engagement
Loyalty programs encourage regular interaction between the brand and the customer. By offering rewards for frequent visits or purchases, businesses keep customers engaged and coming back. The hotel can implement a newsletter campaign to stay in touch with its VIP guests and, through consistent communication channels, offer special deals to those who are members of the newsletter. Repeated engagement with the brand creates a sense of community, where guests will feel included in the overall guest experience.
2. Loyalty Programs Provide Customer Insights
Loyalty programs generate valuable data on customer preferences and behaviours. Businesses can use this data to improve their offerings, tailor marketing efforts, and anticipate customer needs. And with the data gathered through these programs, hotels can send push notifications to their guest via in-room tablets at the right time and place.
3. Loyalty Programs Facilitate Personalized Guest Experiences
Many loyalty programs leverage customer data to offer personalized rewards and recommendations. According to Formation’s Brand Loyalty Report, 73% say the brands they engage with the most recognize them on a 1:1 level. This personalization makes customers feel valued and understood, which strengthens their bond with the brand.
4. Loyalty Programs Provide A Competitive Advantage
There are estimated to be more than 700,000 hotels in the world, with most of them concentrated in popular tourism hotspots. This number means there is fierce competition to attract guests and stand out among 700,000 others. Even the smallest advantage over a competitor can make the biggest difference when it comes to attracting new guests and retaining those who are part of the hotel's loyalty program. By providing extra perks, the hotel will stand out and attract guests who value those benefits.
5. Loyalty Programs Can Increase Revenue
Loyalty programs can significantly boost customer spending. Members often spend more to reach reward thresholds or to benefit from exclusive offers, thereby increasing overall revenue. For instance, leveraging technology for guests to book their next stay or redeem points can streamline the process, making it more convenient for loyal guests. After all, 76% of consumers say that ease of use is the most important factor in their loyalty program experience. This ease of access encourages them to either book their next stay promptly or spend more to reach their point targets. Furthermore, existing customers have a 60-70% chance of making a purchase when compared to the 5-20% chance with new prospects, making them a more reliable source of revenue.
6. Loyalty Programs Can Help With Cost-Effective Marketing
Retaining existing customers is generally more cost-effective than acquiring new ones. One reason for this is the high costs associated with Online Travel Agencies (OTAs), which can be avoided by building a loyal customer base. Loyalty programs help maintain this steady customer base, reducing the need for expensive marketing campaigns and the commissions paid to OTAs with each new booking. Over time, this loyalty can turn guests into brand advocates who promote the hotel through word-of-mouth, which is incredibly valuable as 86% of loyal customers will recommend the brand to friends and family. By adding certain benefits with referral codes for recommending the hotel, loyal guests can also work as multipliers. This organic promotion not only enhances the hotel's reputation but also attracts new customers at a lower cost.
7. Loyalty Programs Facilitate Long-term Relationships
Loyalty programs facilitate long-term relationships between guests and hotels. Over time, these relationships can evolve into partnerships, where customers feel a deeper connection to the brand. As a bonus, loyal customers have a 306% higher lifetime value (CLV) compared to non-members, according to a report by Bain & Company. This indicates that long-term relationships fostered by loyalty programs can significantly boost a brand’s revenue over time.
8. Loyalty Programs Optimise Capacity Utilisation
Loyalty programs for hotels can significantly optimize capacity utilization by fostering repeat business and ensuring a steady stream of bookings, even during off-peak seasons. By offering incentives such as discounted rates, exclusive deals, and rewards points, hotels can encourage repeat visits from loyal customers who are more likely to choose the same brand for their future stays. This consistent flow of returning guests helps maintain higher occupancy rates throughout the year. Additionally, data collected from loyalty program members allows hotels to better predict booking patterns and tailor their marketing strategies to fill rooms during slower periods.
Best Practice: A Chain Hotel in Amsterdam
A chain hotel in Amsterdam has found a smart way to combine its hotel tech with its loyalty programs. When guests decide to skip room cleaning for certain days via the hotel’s in-room tablets, they are given three reward options right on the tablet, making it simple to pick their favourite.
This digital method reduces the hotel's workload by eliminating the need for printed materials to ask guests for their choices. It also helps the hotel learn which benefits the guests like the most. By seeing what guests choose on the tablets, the hotel can better understand and tailor their offering to their guests' preferences. This setup not only improves the guest experience but also streamlines hotel operations, benefiting both the guests and the hotel.
Conclusion
Overall, understanding the importance of loyalty programs and eventually dedicating time and resources to improving the guest experience will not only increase the hotel's customer retention rate but also reduce the need to pay hefty commission fees to OTAs. Additionally, offering guests unique value for their money helps the hotel stand out amidst the competition. After all, the question on guests' minds is simple: Why would they choose this hotel over another? A well-crafted loyalty program can be the decisive factor, providing the hotel with a competitive edge.