What drives customer retention strategies in hotels is the first question we need to ask. To answer this question, it is important to first understand that not all guests who check-in are of equal value to your hotel. From a purely financial point, loyal hotel guests are more valuable than one-time tourists who never return. According to a study reported in Harvard Business Review, it was found that acquiring a new customer costs anywhere from five to twenty-five times more than keeping an existing customer. Furthermore, Reichheld discovered that boosting client retention rates by 5% improves profitability by 25% to 95%. The necessity of client retention strategies for hotels is one of the clear consequences of this study.
Hotels that place a greater emphasis on maintaining long-term relationships with existing customers rather than pursuing new consumers would benefit from lower expenses and higher profit margins. Therefore, retaining existing customers is a higher priority than acquiring new customers. Consider acquiring new customers as a valuable secondary strategy.
Advantages of customer loyalty in the hotel industry –
Apart from financial gains, having a strong customer retention strategy can be useful in the long term, as well as have several other important benefits:
- Build a consumer base that is both loyal and profitable.
- Reduce the expense of acquiring new guests.
- Develop a strong promoter network.
- Minimize OTA commission payments, encourage direct booking.
- Upsell and cross-sell your services to existing customers.
In an increasingly dynamic world of OTAs, non-traditional hotel options, increased competition, and rapid feedback and reviews online, hoteliers need to learn to differentiate their products and design a customer retention strategy even before their guests have arrived.
1. Reduce dependency on OTAs and booking sites
Online travel agents, or popularly OTAs, are a mixed blessing for the hospitality industry. While they help hotels fill rooms fast and meet occupancy and revenue objectives, they also charge what many hoteliers consider to be an excessive commission. Consumers may be likely to be loyal to an OTA rather than a specific hotel brand. This has a negative impact on hotels’ ability to create long-term guest connections and retention rates.
Hotels must be able to convince their prospective guests to book directly with the hotel in order to gain ownership of the guest relationship. Hotels can start by ensuring that their own website or booking engine is quick, simple, and intuitive to counteract OTAs’ competitive advantages. Guests who book directly receive a discount, or other additional value-added benefits such as late check-out or free breakfast. These strategies to drive more direct bookings are picking up in the hospitality industry.
2. Offer some incentives
Although there has been an assumption in the hospitality industry that millennials are not fond of loyalty programmes, it is not true. Just like everyone else, young travellers can easily be motivated but their preferences differ from those of ordinary business travellers. However, since the primary audience for most hotel loyalty programmes are business travellers, adventure-seeking millennials can often time be ignored. Research shows that millennials consider room upgrades to be a great push which is not the case for business people.
3. Identify your VIPs and be ready for their arrival
Even if your hotel does not provide a loyalty programme, customer retention strategies can be effective. Begin by concentrating on your most valuable consumers. Once your VIPs have been identified, make sure that all of your employees are aware of who they are and have been trained to greet them by name and cater to their demands. When guests feel like they’re part of the family and have a sense of belonging, they’ll become happy, high-value customers who help your hotel retain customers.
Once your guests have arrived, it’s time to add value. Dig up their stay history and make note of any previous hobbies, activities, or behaviours demonstrated by the guest and use that information to enhance their stay.
4. Show that you care with exceptional customer service
Everything you do once your guests walk in should be focused on personalization. At the end of the day, one of the most effective customer retention methods is plain old-fashioned customer service. When a guest is dissatisfied, prompt and courteous customer service can reverse any harm, prevent a negative online review, and improve the possibility that the guest will return to your hotel for another stay.
5. Create a memorable experience
If you want your guests to keep coming back, create a guest experience that they won’t get in any other place. The number of millennials and members of Generation Z travelling today is at its peak. For these guests, having individualised and authentic experiences at every step of the journey is important. In order to do this, some hotels showcase local artists and chefs, while others emphasise eco-friendly features or partner with local restaurants and wineries. The notion that millennials can’t be loyal customers is untrue – they are simply choosy and know what they want and don’t like.
6. Make the most of technology
There may be no greater customer retention strategy – especially, for your millennial and generation Z guests – than integrating technology at all levels of your business. Some hotels currently use technology to simplify and streamline the check-in process and to provide unique in-room experiences for their guests, such as curtains that open and close at the click of a button and TVs that automatically turn on to a guest’s favourite show.
Hotels that use technology to automate monotonous activities find that it frees up staff to focus on serving guests and developing stronger relationships, which leads to higher retention rates and a higher bottom line in the long run. Hotelogix’s cloud-based hotel property management system assists hotels in leveraging technology to reduce expenses and increase profit margins.
7. Focus on the room quality
Investing in the quality of a room is always a good investment. According to PwC’s 2016 study, “What’s driving customer loyalty for today’s hotel brands?” room quality is the most important consideration for both business and leisure tourists when choosing a hotel. Improving room quality is without a doubt one of the most critical customer retention strategies for hotels of all sizes.
8. Pay attention to the details
In the hotel industry, customer retention takes time and effort. At check-in, who wouldn’t want to receive a gift basket with a variety of locally sourced items? Small gestures like a handwritten message of welcome (better than a text or email) or leaving their favourite beverage in their room (ensure it’s in the house) will not only showcase top-notch guest service but will also develop customer loyalty.
It is extremely sad to see your guests leave. But remember that just because they are leaving, doesn’t mean you should cut ties. Drive your initiatives on strengthening and refining the guest relationship, as well as keeping your brand top-of-mind even if your guests are away.
9. Continue the conversation
Send a personalised thank-you card to your VIP guests, or set up an automated email to all guests seeking a review. Encourage them to write and post a favourable review because it establishes social trust, which is crucial for attracting repeat customers. The focus in the weeks and months ahead should be on continuing the dialogue; after all, you don’t want them to forget about you. This may be done using content marketing, a well-executed email campaign, and social media engagement.
10. Reputation = Retention
It’s crucial to keep an eye on the social media universe at all times. It helps you know that your happy guests are spreading positive word of mouth. On the other hand, it also reveals that they are gossiping behind your back. Do not become defensive if you come across a negative review. Respond graciously and, above all, quickly — time is of the essence. If it goes on for too long, it could cause serious damage to your brand and jeopardise your efforts to retain guests.
To develop guest relationships, avoid bombarding them with sales messages and instead use email to establish genuine connections. Invite your guests back with a special offer as your relationships grow stronger and trust is established. On their birthday or anniversary, let them know you’re thinking of them and offer a special promotion to help them celebrate.
Customer retention is not a new concept in the hotel industry. It’s been around for as long as there have been hotels. The only difference is that hotels used to rely on a good offer on a room or a convenient location to win repeat business. Customer retention today demands a lot more effort and technological investments. However, hotels that focus their resources on maintaining superior service have noticed a higher number of satisfied loyal customers.
Nevertheless, no business, including hotels and resorts, can afford to overlook new customer acquisition. It’s worth noting that hotel customer acquisition and retention techniques aren’t mutually exclusive; retention methods like rewards or a positive customer review can also be successful in attracting first-time customers. In fact, every new guest is an opportunity for your hotel to turn them into a loyal, long-term, and high-value customer.