Loyalty Program Hospitality Industry

Hotels get nearly half of their revenues from the small segment of travelers who spend about a month each year on the road: frequent visitors make up only 10 percent of all hotel guests but account for 44 percent of
hotel nights . In the early 1980s, hotel chains began to recognize the value of such customers by introducing loyalty programs patterned on the airlines’ frequent-flier model. These programs have succeeded in maintaining the loyalty of people who travel moderately often but are not as effective as they might be with other segments, our research suggests.

The frequent-traveler segment represents $40 billion to $50 billion in revenues each year. These guests spend some of that money in their preferred hotel chains, but their wandering ways leave $22 billion to $27 billion in play. Persuading such people to narrow the field from three or more chains to their favorite two could add seven to ten nights at the chain they prefer. To capture this opportunity, hotel executives must ask, “What do you get the person who has everythingor at least more points than he or she can use?”
Part of the answer might involve changing the way points are redeemed. Even for elite-status members of a loyalty program, redeeming them for free hotel rooms can be cumbersome at popular times and destinations.

2.Loyalty Club Members Habitat
The percentage of all guests who indicated club membership is “very important” when selecting their most
recent hotel stay increased steadily throughout 2003 with a 25-percent annual increase.
Frequent travelers are four times more likely to consider club
membership very important when selecting a hotel.
Among frequent travelers, club members have considerably higher incomes, pay slightly more per room
night, stay more nights per year in hotels and are more tolerant of price increases compared with
nonmember hotel guests
The average profile of a frequent traveler who joins a loyalty program is a 47-year-old male traveling on
business. He stays 31 nights per year in hotels, is very brand loyal, pays an average of $103 per night and has an annual income of $104,000


Electronic customer relationship management (e-CRM), in the context of the exploding Internet distribution and marketing in hospitality, is a business strategy supported by Web technologies, allowing hoteliers to engage
customers in strong, personalized and mutually beneficial interactive relationships, increase conversions and sell more efficiently.

e-CRM cannot exist in isolation
Today’s multi-channel marketing model requires a single brand image to be communicated across all channels. In the same time it requires interactive customer relationships to be established and maintained across all

Anytime an Internet user lands on a hotel website, a branding interaction occurs. This branding interaction can
be positive or negative . Unfortunately for some hoteliers on many occasions a
visit to the hotel website turns out to be the last point of contact with this particular customer.
Two key questions are facing hoteliers today:
Who owns the customer in this new online environment? The online intermediary, which made the
booking, or the hotel where the guest stayed?
How can hoteliers establish mutually beneficial interactive relationships with the customers in order
to increase repeat business, boost revenues, and retain loyalty?
Here are the main aspects in e-CRM in hospitality:
1. Know Your Customer
2. Customer Service
3. Personalization
4. More Efficient Marketing
5.Building Customer Loyalty

Knowing your website visitors is an extremely important consideration when conceptualizing and designing your hotel website and your e-CRM strategy. After all, addressing your key audiences and providing them with relevant information is one of the key aspects of any hospitality site. Different customer segments should easily identify areas on the site that speak to them. Internet users visit a hotel website not as John Smith or Jane Smith, but as a Business Traveler, Meeting Planner, Special Event Planner, Family Traveler, Spa Services
Seeker, Golf Outing Seeker, Vacation Planner, Convention Attendee, Wedding Planner, etc.

Case Study: Who Are Your Online Customers?
The 2004 RUSH Report, a joint effort by Hospitality eBusiness Strategies and iPerceptions, based on nearly
40,000 customer survey respondents on 30 major brand hospitality websites, shows that 56 % of all visitors on
hotel branded websites are Leisure Travelers and 32% are Business Travelers. The benefits are obvious:
Identify your most valuable customers with best lifetime value perspective
Allows guest-centric data mining: guest history, guest profiles, past bookings, preferences, etc.
Enables informed decisions in real time
Allows fast response times
Real-time Guest Lifetime Value
Deliver business insight to executives, marketers, sales
2. PERSONALIZATION Personalization is more than providing the right information to the right person at the
right time. Personalizing the customer experience on the hotel website is a powerful conversion and retention
tool. Customizing your interaction with your most valuable customers will provide significant long-term rewards.
Adopt a policy on how to address your guests via email Addressing the customer segmentation issues on the property website is a logicalnext step. Creating a targeted email marketing campaign is another good step.

For the major hotel brands, the personalization efforts are much more complex and expensive. Customization tools used by some major brands and airlines allow website users to actively personalize their website experiences using over 250 criteria. Here are some of the efforts by the major travel and hospitality companies to make the user experience more personable:
Personalization agents using a variety of customization applications, capable of creating Behavioral
Profiles and a Real-time profile for each customer
Collaborative filtering: Using preference matrix and artificial intelligence to capture and predict
customer interests
Decision-support applications utilizing various applications for Behavioral Profiling, Predictive Modeling, Collaborative Filtering and Click-Stream Analysis, capable to sense the purchasing behavior and patterns of the user. By providing a customized booking experience these applications can boost the conversion rates.
It is important to understand that customer service is only one aspect of e-CRM and is primarily a reactive function aiming to improve performance and efficiency, while e-CRM as a whole is a proactive long-term strategy.
On the Internet the customer support aspect of e-CRM is an extremely important trust building and customer retention tool. A well positioned Contact Us or Help button or Push-to-talk feature speaks volumes about the
hotel brand and builds trust. 57% of online shoppers actively seek sites with good customer service

Case Study: e-CRM Comp Analysis of 9 major upscale hotel brands.
HeBS uses its proprietary CyberScore system to evaluate various aspects of 9 upscale hotel brands. HeBS addresses e-CRM features and functionalities considered essential for optimum customer experience, such as customer support, ease of use and visibility of customer support throughout the site, customer support by phone and email, personalization, “Self-service” Customer Service Tools , “Live” Customer Service Tools, corporate and property level help desks and contact info. Evaluated were a total of 9 e-CRM features. The maximum score is 90

Live Service Tools: Push-to-talk functionality and real-time interaction with live agent; instant messaging and chat-room type of assistance; Voice-over-Internet Protocols (VOIP) applications; automation to pre-screen live
support (selective approach) E-Mal Service Tools: Inbound e-mail management; automated e-mail response systems, capable of
automating 80%-90% of e-mail volume with 98% accuracy, and dramatically improving service and reducing support staff by up to 40%.

eMarketing plays a crucial role in establishing interactive relationships with your customers. eMarketing is a
marketing strategy that uses the Internet as its medium.
The main issues facing eMarketers in hospitality today are:
Guest profiling and one-to-one marketing.
Accurate segmentation: focused segmentation equals higher response rates
Create narrow-focused marketing campaigns
Utilizing lifestyle data and personal preferences in the marketing
Building opt-in email lists and precision e-Mail marketing (fivefold higher response rates)
Internal benchmark of customer lifetime value
Cross-selling opportunities
Campaign tracking and ROI analysis
Developing a robust and effective eMarketing strategy requires not only an extensive knowledge of your
customers and precise customer segmentation, shifting marketing finds from offline to online channels, but
deciding what your marketing objectives are.
Display Ads (e.g. Traditional Banners): Steady decline: 2003: 21% (as percentage of total online
advertising spend); 2002: 29%; 2001: 36%; 2000:50% (PWC/IAB). Click-through rate 0.83% in
Feb 2003 (eMarketer)
Keyword Search (e.g. PPC, paid-inclusion, etc): Steady increase: 2003: 35%; 2002: 15%; 2001:
4%; 2000: 1%.

Classifieds: increased usage of this format: 2003: 17%; 2002: 15%; 2001: 16%; 2000:7%.
e-Mail Marketing: Currently between 3%-4% of total spend; Jupiter Research reports that US email
marketing spending will rise from $2.1 billion in 2003 to $6.1 billion in 2008.

Overall Site Satisfaction: How would you rate your website experience overall?
Excellent 18.80%
Very good 35.73%
Good 28.94%
Fair 12.22%
Poor 4.31%
Total: 100%
Different customer segments perceive the hotel website differently. While not dramatically different, Business Travelers appeared slightly more critical than other user groups. Even when they felt satisfied, Business Travelers
appeared more critical: 54.57% found the site to be Very good or excellent compared to 55.14% for LeisureTravelers.

Conclusion: e-CRM is an integral part of online distribution and marketing in hospitality. The Internet provides the best direct means to reach existing and potential customers. Establishing interactive relationships with your
customers, which is the essence of e-CRM, will help you retain your customers, increase revenues, and build brand loyalty.

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