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Loyalty programs: tactics to boost results in 2014
By Bram Hechtkopf
With March just around the corner, it's "business as usual" for the hospitality industry. Brazil is building 25,000 new hotel rooms in preparation for the 2014 World Cup while in the US, research firm STR has projected a decrease in revenue per available room (RevPAR) for 2014. For hotel managers worldwide, RevPAR is critical: how many people are traveling and what price will they pay for a room?
Loyalty, too, is crucial in helping hotel brands attract and retain customers, generate revenue and remain competitive. Brands have found that, rather than raise program reward thresholds - a 2013 tactic that created "mattress runners" and did little for guest loyalty - they should genuinely invest in their guests.
In order to do this, hotels should focus more on data analysis, understanding customer segments, and measuring behaviors before, during and after program participation. Only then can hotel brands consider specific loyalty tactics to boost program results - including tiered rewards structures, marketing to Millennials, targeting potential brand ambassadors with exclusive offers for area residents and incorporating augmented reality (AR) into the customer experience.
First, let's start with the axiom of the moment: data.
1. Data analysis should reflect company goals
Recently, Cornell University conducted a study on hotel loyalty programs which emphasized that loyalty programs must be measured by their objectives. Programs that just want to be a "switching barrier" and reduce churn rate would be measured differently from programs geared towards customer acquisition and increased spending. The researchers did their own study of a loyalty program at two groups of independent hotels. Among the results: frequent guests became more frequent after they joined the program, with a 50% increase in revenue compared to those who did not join the program. Hotels have to define their program's objectives before they analyze data. Maybe a hotel's frequent guests have not increased spending, but is that because loyalty doesn't work within their construct or because the program is not designed for that result?
2. Tiers are gaining traction
Loyalty levels or tiers, characterized by increasingly exclusive offers and segmented by level of customer engagement, give hotel brands a wealth of opportunities to connect creatively with guests by offering perks like discounted or free daytrips, concert tickets, wine tastings, nightlife, restaurants and retail opportunities. Westin hotels, for example, offered guests 3 p.m. Monday checkouts as part of its "Make Mondays Better" program - yet another way to promote product differentiation.
3. Millennials mean business
Some 86 million individuals born between 1980 and 2000 are poised to dominate global travel and retail spending as the group's older half enters their peak earning and spending years. That means hotels must seriously consider the Millennial segment - for whom continuous digital connectivity and communal space are essential.
That's why the Marriott in Tysons Corner, D.C. removed the barrier separating its Shutters Bar & Grill and the lobby, bringing together a business-networking and recreational space. One of Marriott's goals in the US and abroad is to attract Millennials by appealing to their tech-savvy and design-conscious lifestyles. Just recently, the hotel brand announced the availability of a mobile check-in option for guests at 329 Marriott locations nationwide - and 20 international properties - to accommodate today's core traveler: you guessed it - Millennials.
4. Localizing local loyalty
Beyond Millennials, it's equally vital that hotel managers engage potential guests who live within 50 miles of a property - regardless of age. These are people who may opt for a staycation or to have dinner in a hotel restaurant. Locals often want their hometown brands to succeed, while neighborhood staples attract out-of-towners, increase foot traffic, enhance an area's ambiance and support the local economy.
Case in point: Kimpton Hotels & Restaurants, a U.S. hotel chain that takes its inspiration from the intimate boutique hotels of Europe. Kimpton has monthly "Like a Local" initiatives that aim to make guest experiences more genuine to the area and a Wine Hour (borrowed from Europe) to bring together staff and guests. The chain also distinguishes its restaurants from its hotels to give them their own identity. Kimpton executive Mark Jennings drives home the local loyalty point saying, "Over 80 percent of the business we get in all of our restaurants is local. I can't tell you how important it is to attract a locale clientele. The local business and people driving in have kept us extremely busy and highly occupied."
5. The augmented reality experience
Juniper Research predicted that by 2017, 2.5 billion mobile augmented reality (AR) apps - which mix the real and virtual worlds - will be downloaded to smartphones and tablets per year. Hotels can monetize those apps and drive loyalty by designing virtual (and real) experiences that enhance their guests' hotel stays. Last year, Omni Hotels & Resorts and Marriott launched new print advertising campaigns featuring AR smartphone apps that make physical paper come to life using the device's camera.
But this is only the beginning. Imagine if hotels made services like this a loyalty program perk. Hotels could create AR tours of their properties, complete with virtual "famous guests," or allow them to see what their room and its views would look like in their preferred season. AR apps such Architip, which re-creates ancient tourist sites, could likewise improve excursions for hotel guests. The key here is differentiation and creating a unique hotel brand experience.
The hotel loyalty landscape in 2014
So far, US hotel numbers don't look bad in early 2014. For the week of January 19-25, in year-over-year measurement, the US hotel industry's occupancy increased 2.4% and RevPAR was up 5.5%, according to STR. Of course, hospitality is a regional industry and in Thailand, there are reports that some hotels near Bangkok are less than 50% full, due to political unrest. And in Brazil, some poor favelas are renting to World Cup tourists because of the room shortage.
Regardless of region, the industry's uncertainty highlights the pressing need for competition and brand differentiation. Already planning ahead for Q2 and Q3, hotel brands should also consider new ways to put their guests front and center of improved loyalty programs, utilize data more effectively and implement creative strategies that turn infrequent travelers into frequent guests.
About the author
Bram Hechtkopf is Vice President of Business Development & Marketing at Kobie Marketing. He consults with current and prospective clients on new business opportunities, helping to develop customer retention and loyalty marketing strategies and solutions that drive increased retention and spend. To learn more about hotel loyalty program success and guest engagement trends download Kobie Marketing's Kobie Quarterly Review Travel Edition.
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