A new study from the Center for Hospitality
Research (CHR) at the Cornell School of Hotel Administration
highlights how well designed hotel loyalty programs encourage
frequent guests to become even more frequent.
The study, "Assessing the Benefits of
Reward Programs: A Recommended Approach and Case Study from the
Lodging Industry" offers a graduated set of methods for hotels to
measure the effects of their guest loyalty programs.
The researchers, Clay M. Voorhees, Michael
McCall, and Bill Carroll, then demonstrate one of those methods.
They found a substantial jump in revenues when guests joined the
Stash frequent guest program at two groups of independent hotels.
The report is available from the CHR at no charge.
"What we found is that the frequent guests
became even more frequent after they joined the program, and the
result was a 50% increase in revenue compared to those who
did not join the program," said Voorhees, an associate professor
at Michigan State University. "It's important to note that these
guests are already some of the hotels' best customers, so the
program is not only attracting the best subset of customers, but
also fundamentally increasing their patronage too after they
McCall, who is a professor at Ithaca College and
a visiting scholar at the Cornell School of Hotel Administration,
added, "The interesting thing here is that the ADR paid
by the loyalty-program guests increased only modestly, and it was
the increase in the number of annual room-nights that caused the
revenue increase that we noticed. We must acknowledge the hotel
groups for sharing the data from tens of thousands of guests. Both
of these hotel groups are participating in the Stash Hotel Rewards
frequent guest program."
Carroll, who is a senior lecturer at the Cornell
School of Hotel Administration, said, "One purpose of our
study is to offer different approaches for hotels that want to
measure the effectiveness of their frequent guest programs. We know
that most hotels offer a loyalty program to match the competition,
but a complete analysis of program return on investment may be too
involved for some hotels. That's why we are suggesting ways to
determine the value of programs with more accessible methods."
In addition to making a paired assessment of
incremental revenue lift of members versus non-members, as
demonstrated in the report, the authors suggest the following
approaches for gauging the value of loyalty programs, ranging from
simple to complex: asking consumers about their attitudes toward a
program, measuring consumers' attitude change, measuring customer
behavior change, and conducting a complete ROI analysis.
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