Hotel loyalty schemes 'usually improve income'

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By: Wise Marketer Staff |

Posted on November 12, 2008

While the benefit of hotel marketing expenditure depends in part on the hotel's market segment and on the type of expenditure involved, the offering of frequent guest loyalty programmes usually improves hotel income, according to an article published by the Cornell Hospitality Quarterly.

An analysis of marketing expenditures published in the November 2008 issue of Cornell Hospitality Quarterly shows that the return on marketing expenses depends in part on the hotel's product segment, or chain scale.

For the article, entitled 'The relationship of sales and marketing expenses to hotel performance in the US', authors John O'Neill, Bjorn Hanson and Anna Mattila, analysed the marketing budgets of 2,815 hotels in the US, and found that luxury, upper upscale, upscale, independent, and midscale hotels enjoyed a significant positive connection between loyalty programmes and net operating income. The authors assert that this shows the importance of customer loyalty in the hotel industry.

Another marketing expense, franchise fees, also boosted income primarily for mid-market hotels, the study found, most likely indicating the importance of brands for midscale hotels.

At the same time, certain expenses were associated with lower operating income for some hotel types. The study found a significant, negative relationship between marketing payroll expenses and income for economy hotels, for example. In contrast, some hotel types benefited from higher marketing payroll expenses (most notably luxury and upscale properties).

Overall, the study found that marketing expenses are clearly related to hotel income, but that hotel managers also need to analyse the effect of each type of expense.

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