Q: We’ve introduced a new feedback scheme asking customers how we can improve and what else they’d like us to be doing. Several of our regulars have requested a loyalty scheme which we don’t currently have. I’m loathe to launch a scheme when they’re visiting regularly anyway. I’m worried it will affect the bottom line and overall takings, but I’m keen to keep customers happy. Any suggestions?
I actually think that a loyalty scheme can be a boon for hospitality businesses… as long as it is designed well of course! You are right in so far as a loyalty card, when linked only to discounting, is likely to take money off the bottom line, particularly when you already have these regulars. In reality this simply comes down to having a poorly designed loyalty scheme; an effective scheme should actually add money to the bottom line, by encouraging additional visits from customers not yet regular and also by encouraging regulars to spend more, not less, as well as diversifying spending into new avenues.
Loyalty and discounting are often treated as synonyms, despite being two distinct and very different strategies. Discounting incentivises an initial visit but it doesn’t necessarily foster repeat stays, nor does it develop a value in your brand, instead creating an association with value or bargain. A loyalty scheme on the other hand is designed to specifically reward those already committed to your brand, and to encourage specific behaviours that boost your revenue. It’s a careful balancing act, supporting your own agenda while nurturing a sense of being valued for your customers. Interestingly, a report by Cornell University in America quantified the value of a loyalty scheme last year and found that an effective scheme increases annual room nights by an average 50% and overall annual revenue gains by 57% from those guests.
Sound good? Here’s some example strategies that are working for hotels:
- Focus on the extras: first, understand how your customers operate and what they look like. Are they business travellers, families, couples? How often do they visit? Weekly, monthly, quarterly? This will help inform what you can offer as an extra that’ll invite the behaviours you want. For example, if primarily you get couples visiting for two nights at the weekend, offering them a third for free will increase occupancy and residual spend. Offering a mid-week bargain stay works too. For business travellers whose stay patterns are dictated by work, offering them personal benefits such as free laundry and ironing, or free tea or coffee during their stay will give them a personal boost. It’s worth thinking about incentives that will help to diversify behaviours too; how do they normally behave in a visit, and what else can you introduce them to that will boost overall revenue?
- Reward direct booking: While discounting is effective, extended offers can decrease the perceived value of your brand. However, when you’re already giving OTAs a cut of 10% upwards for each booking, you can afford to spoil direct bookers and still boost your income. I recently worked with a hotel whose commission fees averaged 16% across all the platforms, with an average room rate of £110, and average stay duration of two nights. This represents £35 spent in commission for a £220 booking. For those placing a direct booking, we created an offer of free breakfast upgrade and two free bottles of wine with dinner. Cost to the hotel was circa. £20 per couple (a £15 revenue boost), but as an added bonus, it pushed in-house dining up from 67% to 74% of guests adding thousands to the bottom line.
- Partner with other brands: there are plenty of businesses across the country looking to leverage smarter and more direct ways of promoting themselves to potential visitors. Take advantage of this by partnering with other brands – restaurants, entertainment parks, tourist attractions etc. – to offer their facilities as a benefit in your loyalty scheme. Largely, this is a more attractive incentive for leisure travellers, but frequent partner rewards can keep them coming back. You win from loyalty; your partner wins from more visitors and residual spend.
- Reward business partners: having read all your points, I appreciate you don’t have many business travellers, so this is perhaps a strategy for others, but worth a mention nonetheless. If you accept regular travel bookings, then it is unlikely that the guest is actually in charge of the booking – more likely their procurement team or a booking agent is. Don’t forget to reward those ‘on the ground’ who are responsible for placing the bookings – they might appreciate a free stay in exchange for their thousands of pounds of annual business. It also gives you a chance to show off the facilities, discuss additional upsell opportunities e.g. food & drink voucher packages, and will build loyalty with the company and not just the frequent traveller.
I think a loyalty scheme will be perfect to support your guests – they’re asking for it and it’s in your capacity to give it. Just remember, design it in a way that they feel rewarded, but that works for your business and underpins your revenue first and foremost.