• Part 1: Keep Customers in a Virtuous Loyalty Loop

    Have we all become promiscuous comparison shoppers, surfing to find the best deal? Indeed, recent studies have suggested a decline in consumer loyalty to travel brands[1]. But not so fast. Based on a recent Market Metrix study into the behaviors of travelers over the past 6 years, results revealed that customer loyalty[2] has increased 17.9% (from 56% to 66%). Loyalty increased in each and every year.

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    One reason why travelers have become more likely to return to previous hotels and casinos is because the guest experience is improving.  As initially discussed in our ‘It’s About the Experience’ post, guests are giving higher ratings to “can-do attitude”, “value for price”, and “room cleanliness” compared to their evaluations in 2007.  These three elements represent the areas that are most correlated with guest loyalty for this period, and they have all increased significantly since 2007.

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    Another possible explanation for the rise in guest loyalty is the expanding popularity of loyalty programs.  Guests are joining hotel and casino loyalty programs in record numbers.  From 2007 to 2012 membership in loyalty programs grew by 50% (from 27% to 43%).  Today, more than 40% of hotel guests are members in one or more hotel loyalty programs. Hotel companies have made their loyalty programs more attractive with compelling incentives to join and stay with these brands.  During this period people enrolled in droves to take advantage of the improved benefits.  The result:  higher rates of loyalty for a growing number of guests.

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    Members of guest loyalty programs are considerably more loyal compared to non-members (76% vs. 51%). Elite members were even more devoted, with 88% of these special guests pledging their future business to the brand.  And members of these programs are more likely to recommend the hotel, spend more per room, and are less sensitive to price increases compared to non-member guests.  Keeping customers in a virtuous loyalty loop is critical to spur both brand advocacy and sales. Hotels are catching on and providing better experiences, improving overall guest satisfaction and boosting loyalty.  Stay tuned for part two of our Loyalty Program series where we will examine why loyalty programs are getting even bigger, how they are driving guest retention and which segments tend to have the most compelling programs.Loyalty Program Blog Series 1 of 3

    [1] See for example, a recent study by Deloitte, “Customer Loyalty in the Hotel Industry

    [2] Measured by the question, “If you return to this area, how likely is it that you will visit this property in the future?” 2012 results based on modeled data.

Dr. Jonathan Barsky is Co-Founder and Chief Research Officer of Market Metrix, as well as a professor of marketing at University of San Francisco’s School of Business and Management.

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