Revenue Strategy Report: The Hotel Industry’s Big Bet on Personalized Loyalty

Each time I visit our San Francisco office, not only do I have a favorite hotel that I stay in, but I have a specific junior suite at that hotel that is perfect for me. I’ve stayed in this same room more than a hundred times.

Yet, each time I call or visit the brand website to book a room at this hotel, they always offer me a standard king room. Why? Why doesn’t this hotel know me by now – at least enough to recognize that I’m most likely going to want a suite?

In reality, I know there are a bunch of reasons why hotels have been so slow to adopt even the basics of personalization. Integrating technology systems that communicate and serve up the data can be complicated and costly, and guest profiles are replicated across multiple systems, often times inaccurately. Cloud computing is solving many of those issues, but hoteliers still spend too much time manually entering data and are often unable to discern which system is giving them the most accurate output.

So one of my major goals for 2018 – and my challenge to our team at Duetto – is to help hotels realize the need for a major overhaul to the traditional loyalty program, and use true guest personalization as the driver of a new, innovative way to look at traveler loyalty.

The Relationship Between Personalization, Loyalty and Direct Bookings

Hotel brand efforts to better understand and reclaim bookings from OTAs took a major step forward in the first half of 2016 when most introduced “book direct” campaigns that enticed loyalty members to book in exchange for a discount.

The campaigns were met with some early skepticism, as hotel owners saw themselves bearing the cost through lower ADRs. Many in the industry thought the premise of discounting its best customers was unsustainable.

But a recent study by Kalibri Labs showed the brand efforts did have net positive impact on both ADR booked and on cost of that customer acquisition. Compiling data directly sourced from more than 12,000 US hotels and an estimated 52 million transactions, Kalibri found a shift in consumer behavior toward sites with more consumers than ever before choosing to book direct.

Data from May-December 2016 found that even by offering discounted rates to consumers, net ADRs from loyalty bookings were higher than those from OTAs, totaling positive revenue in a range of $9,000 to $33,000 per hotel.

 “I didn’t think the percentage of loyalty contribution and how much it’s grown would be that high across the board,” Cindy Estis Green, CEO and co-founder of Kalibri Labs, told Skift. “I came to appreciate how central loyalty is to what’s going to happen going forward.”

Another study by Hitwise looked at brand and OTA conversion data from bookings in May 2016 vs. May 2017 and noted direct bookings “appear to be in a slight upswing.”

Out of the top OTA sites in the industry, only two — and — showed an increase in bookings compared to the same time last year, according to the study. Meanwhile, out of the top hotel brands, five showed an increase in direct bookings over last year.

On the brand side, Marriott brands had the highest volume of direct bookings, but IHG showed the largest year-over-year increase, with a 10% jump in bookings, according to Hitwise.

The Next Steps: Personalized Offers and Prices

I’ll continue to argue that these initial efforts are simply scratching the surface of the dynamic and profitable pricing these programs can afford.

Yielding the loyalty discount based on overall demand is a good first step, and now hotels and franchisors must get more innovative and get ahead of the OTAs in how we attract and retain guests, as well as build true loyalty.

We need to quickly get to a place where if 1,000 travelers are showing up to your website every day, each of them sees a different offer with a tailored rate attached.

The casino industry has been innovating, advancing and accelerating in this space for decades. It started with giving customers different rates for different room types, and then once revenue managers were able to yield the room types independently, it paved the way for giving loyal guests more incentive – through rate or amenities – to book the room types of which you have most inventory. Casinos also reward their guests more if they stay during low-demand periods.

A more dynamic and personalized loyalty experience is all about giving your customer more options and choices, but it also places a better value on your inventory. If a guest chooses to come during the Super Bowl, they will not be rewarded as richly; if perhaps a more price-sensitive traveler is willing to come at a time that is of more value to you, you are able to offer a better incentive.

Ideally a strategy like this would eliminate today’s dated and mostly obsolete points programs. RLHC, owners of the Red Lion and Vantage brands, are headed down this path with the ability to flex discounts by segment and create varying offers that reflect a guest’s level of loyalty and total worth to the hotel. They’re seeing strong boosts in loyalty membership as a result.

Where casinos thrive today is in their ability to value a guest and determine a proper “reinvestment.” When a guests stays in a casino and gets a casino loyalty card, the casino knows everything about that guest. Based on his or her value to the property, the casino then makes an assumption on what they should reinvest in that guest.

With Open Pricing, revenue managers can independently flex a guest’s reinvestment percentage based on a number of supply and demand factors – day of week, room type, booking channel, etc.
Duetto launches PlayMaker to help hotel industry address challenges

Results are waiting

With a precise personalization and reinvestment strategy, now your loyalty program becomes more than just offering a better price than the OTAs. Your new loyalty program has the ability to combine a member’s value and your reinvestment rate to stimulate future trips by offering travelers the right room types and offers that they’re looking for.

Your “points junkies” may groan, but ultimately it’s better for them, too. No longer do they have to stay 10 times and collect 100,000 points to spend a week in Hawaii. Now they can spend the week in Hawaii when they want with the instant gratification of being rewarded for their value.

This will allow hotels to create an inspirational cycle where the more a guest stays with you and the more lifetime value they bring, the more discounts and amenities you can give.

It has already been proven that a more personalized offer will swing the pendulum for consumers toward booking direct. If done well with coordination between revenue management, sales, marketing and operations, one-to-one tailored offers will accelerate hotel suppliers’ ability to convert more business at the lowest cost for owners.

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Marco Benvenuti, Chief Marketing and Strategy Officer and Co-Founder

As co-founder and chief marketing and strategy officer for Duetto, Marco guides product vision, direction and implementation. Prior to Duetto, he was Executive Director at Wynn and Encore resorts in Las Vegas, where he founded and managed the Enterprise Strategy Group. Marco was also recently named the Entrepreneur in Residence at Cornell University’s School of Hospitality Administration, and can be seen speaking or lecturing at industry events and hotel schools worldwide.

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