Generating new business and attracting new guests requires significant investment in marketing and advertising. Media campaigns, improving your search engine optimization, or paying online travel agents such Booking.com a higher commission hurt your bottom line and are drag on your capital resources.

It is far more logical to develop a steady flow of repeat business from your past guests. Research carried out by Second Opinion Marketing found that it cost five to eight times less to retain existing customers than attracting new customers.

One of the best ways to boost your hotel's repeat business is to establish a guest loyalty program. This blog will provide you with an overview of hotel loyalty programs and the benefits a loyalty program can bring to your hotel.

How Hotel Loyalty Programs Work
A hotel loyalty program works in very much the same way as frequent flyer miles work in the airline industry. Guests accumulate free awards when they make repeated purchases with a hotel. Typically a hotel loyalty program will offer guests (depending on the amount of points they have earned) value-added benefits such as free room upgrades, early check-in and late check-out, free spa treatments and guaranteed room availability.

Jennifer Nagy in her blog, The Importance of Hotel Loyalty Programs, argues that the so-called ladder format is the best format for a hotel loyalty program. As members of the loyalty program earn more points, they are able to redeem their points for higher-value rewards. "This format makes the ladder system effective at incentivizing loyalty amongst hotel guests," writes Nagy.

The format of the ladder system also means that guests with a small or medium size budget to spend can benefit from a hotel's loyalty program. Many hotels make the mistake of solely targeting their loyalty program on elite guests who are able to spend huge sums of money when staying at a hotel. To get the most out of a loyalty program you will have to make sure there are attractive rewards on offer to all guests and not just guests with big wallets.

Communication To build loyalty and generate repeat business among members of your loyalty program you will have to find an effective and efficient way to communicate with your program's membership. Members of your loyalty program will need to know how many points they have, how they can redeem them, and what rewards they are entitled to. Some hotels have introduced a standalone app for reward management, while other hotels communicate with members through general hotel management apps that also provide guests with information about check-in and check-out as well as information about loyalty points. You can also simply send your members an email notifying them of their points and what their entitled to.

The Benefits of a Hotel Loyalty Programs

Hotel loyalty programs have been around since the early 1980s and were developed by large hotel chains to ensure guest retention and to encourage active purchases. However in recent years some experts in the tourism and hospitality industry have started to question the value of loyalty programs for hotels.

Critics of loyalty programs point to the fact that it costs hotels somewhere between 1% and 5% of room revenue to create, promote, and operate a loyalty program.

So do loyalty programs benefit hotels or are they a waste of time and money? The Centre for Hospitality Research carried a study of 50,000 hotels in North America over two years to determine if hotel loyalty programs were worth the time and money hotels spend on them.

The study found that, once a guest signed up to a hotel's loyalty program the frequency of stays booked by a guest at that hotel rose on average by 49%. The study also found that loyalty programs accounted for a 57% rise in bedroom revenue.

The authors of the report wrote, "Hotels in the study are seeing a substantial revenue increase when their guests enrol in a properly conceived and executed program." The authors went on to write, "Loyalty programs can and do deliver positive results in terms of revenue, stay frequency, and guests spending."

Loyalty programs also provide hotels with a wealth of information on their guests. Hotels that operate a loyalty program have insight in to who their guests are, what they like, and where there from. All this valuable information can be used by hotels to create laser focused marketing campaigns for various different kinds of guests.

Conclusion

There has been a trend recently amongst big utility companies to offer very good deals to new customers while simultaneously raising prices for existing customers. I have argued throughout this blog for hotels to do the opposite, and to concentrate on guest retention and less on attracting new guests. It makes far more sense for hotels to generate more repeat business than constantly trying to drum up new business.

Loyalty programs are becoming an increasingly important factor in determining what hotel a guest decides to book a stay in. A study carried out by Market Metrix found that the desirability of a hotel's loyalty program ranked fourth in the top deciding factors that influence guests when booking a hotel.

If your hotel doesn't have a loyalty program then get your team together and make it your top priority to develop an efficient and effective loyalty program for your hotel.

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