The Most Expensive Problems

Problems cost money. But some problems cost a LOT of money. Not because they occur frequently, but because they have a much bigger impact on guest loyalty. (See The Most Frequent Problems May Not Be The Ones to Fix). Specifically, that means when guests experience a problem, fewer of them come back, and fewer of them pass along referrals to others. That means less revenue.

So this begs an obvious question. Which problems cost the most money? We dug into nine million guest surveys to look for an answer. Here’s what we found:

Guests are a lot more understanding about product problems than they are service problems. Guest room problems, although they make up the biggest problem category at nearly 42% of reported problems, have the lowest impact on guest loyalty. That’s interesting since ultimately what guests are paying for is a place to sleep.

Service problems, on the other hand, make up a much smaller portion of reported problems, but have a much more dramatic impact on guest loyalty. Just look at staff-related problems in the table below. They are only 4.7% of reported problems. But staff problems punch way above their weight causing loyalty to plummet by over 26 points when they do occur.

There is a lot of good news here. Service problems can often be very inexpensive to fix. One of our clients was recently trying to decide where to invest to improve guest loyalty and revenue. Based on our cost-of-problems analysis, they had two big opportunities to reduce problem-related losses. Both were worth over $2,000,000. One was a product-related improvement they estimated would cost $1.8 million. The other was a service-related problem they estimated would cost just $20 thousand to fix. That’s easy math!