Airlines have loyalty programs, supermarkets have loyalty programs, and the big hotel groups have loyalty programs. The reason all these industries have chosen to follow the loyalty path is because it brings about long term benefits to the business in terms of revenues and growth. Why wouldn’t you want better revenues and growth?

In the hotel industry, the largest loyalty programs such as those offered by InterContinental already boast around 90 million members, while Marriott/Starwood are not far behind with around 75 million. Industry-wide we see between 30-50% of all room nights accounted for by loyalty program members.

Interestingly, small independent hotels also have an opportunity to benefit from creating loyalty programs, and can often do better than the major players, and derive greater direct benefits from doing so. The problem for many of the big programs is that active membership is often much lower than the total membership numbers would promise, with around 60% of loyal guests failing to use their membership perks at all. The reward levels are often set in such a way as to fail to motivate many of these customers so the programs are not as effective as they should be.

Smaller hotels therefore have an opportunity to design a loyalty program in such a way as to increase active participation and therefore reap greater advantages from its implementation.

There are five main reasons for setting up a loyalty program, depending upon the precise objectives you’re hoping to accomplish. You may wish to enhance the guest experience and acquire new customers; you may wish to increase the average spend of your guests; you may be hoping to generate more repeat business; you may be trying to challenge the OTAs by encouraging direct bookings, or you might want access to customer data in order to use carefully targeted marketing promotions.

Furthermore, when guests are booking a hotel, the three most important factors are price, location, and reviews. Number four on the list is the existence of a loyalty program, so if you don’t have one, you are automatically putting yourself at a disadvantage. In particular, customers who are members of a loyalty program consider this factor to be especially important when choosing where to stay. This may sound like a self-fulfilling prophecy, but the effect seems to be that while it may be your best customers who sign up, they will subsequently become even better customers once they have become members. The evidence is quite clear that spending per stay will increase, as will the number of direct bookings.

Of course, not all loyalty programs are the same – although when a good idea is discovered, other hotels will quickly catch on and implement something similar. The chance to design a program from scratch is therefore a wonderful opportunity to focus on the exact benefits you want to achieve. You can influence booking decisions, boost customer satisfaction, and gain lots of additional word-of-mouth support if your program can deliver what your guests really want – and when you get it right, you’ll be sure to reap the benefits in the revenue column.

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