Steps to help luxury hotels build loyalty through CRM

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By: Wise Marketer Staff |

Posted on January 16, 2007

Steps to help luxury hotels build loyalty through CRM

Customer relationship management (CRM) is a relatively simple concept designed to acquire, grow and retain profitable customers better and faster than competition. If done right it can create more loyal customers, more repeat business, and more referrals (through positive word-of-mouth). This is especially true for luxury hotels, according to hospitality marketing firm Madigan Pratt & Associates Inc.

Consider this: Hospitality companies with the strongest customer relationships have the most loyal guests, grow at twice the industry average, and are significantly more profitable. So if you had to increase room occupancy and profit at twice the rate of your competitors - as management may request - would you increase your sales force, increase your advertising, or step up your public relations? The best chance of achieving this, according to company managing director, Madigan Pratt, is to be committed to creating more loyal customers, by implementing an effective CRM programme.

Large hotel chains, casinos, cruise lines and airlines already know the advantages of CRM and are investing hundreds of millions of dollars to build more and more effective programmes. But CRM is also becoming affordable for the small and medium size luxury hotel.

A new credo for 2007 According to Pratt, luxury hotels should adopt a new credo for 2007: "I will completely embrace my customers. I will do everything possible to ensure my guests have the best possible experience and the most memorable vacation the hotel can offer while they are here. Providing a high quality product with a good perceived value is fundamental to building a strong brand and loyal customers. I will capture the essence of my brand experience and extend it into every aspect of my marketing - into every customer touchpoint including all customer service and reservations interactions and all my communications. My brand will be integrated throughout the entire customer experience; before guests arrive, while they are here and after they leave."

CRM audits A good starting point is to conduct a CRM audit. It tells you where you are and where you need to go. An independent CRM or database audit can provide valuable insights into your existing programme, find ways to make it more effective, and boost your return on investment.

At the very least it will help confirm that the direction you are taking is correct (or not), create greater internal support, and allow you to proceed more efficiently. Such audits should be conducted at regular intervals, and pay for themselves through improved productivity and return on investment.

Gather customer data Capture and protect relevant customer data. Be relentless in obtaining customer information that can be used to better serve and satisfy guests and prospects. Do not tolerate errors in collecting at least the name, address, telephone and e-mail address of each customer. Add staff to the front desk and devise programmes or incentives as needed to make sure the hotel captures customer data that will allow it to market more effectively.

Beyond basic data, capture only information that can be used to improve customer satisfaction and the relevance of future marketing messages. Above all, protect customer data and privacy and ensure it can never be misused. There can never be a relationship - or indeed loyalty - if there is no trust.

Budget for CRM Consider the benefits of CRM, not just the costs, when budgeting for the CRM programme. For many luxury hotels the majority of costs can be met by reallocating the existing marketing budget and eliminating "feel good" efforts with an uncertain ROI.

But part from the loyalty and competitive advantage benefits, there also needs to be hard financial data supporting the programme. Pratt offers this example of a fictional luxury hotel, and what it stands to gain by improving its data capture:

A 200 room luxury hotel averaging 70% year round occupancy and five night stays has 10,220 bookings each year. For this example let's assume the property has a 40% repeat rate and it has complete and correct information for repeat guests in its database (4,088 good contacts).

The front desk successfully collects 60% of first-time guest's names and addresses and correctly inputs all information into its database (add 3,679 more good contacts for a total of 7,767).

The hotel stands to lose contact with 2,453 first-time visitors this year. With its 40% repeat factor 981 potential guest visits are at risk.

If the average stay is US$3,000 (we are talking about luxury hotels) the property stands to gain US$2,943,000 in easy revenue if it improves its data capture, keeps in contact with these guests and gets them to return.

To keep things simple this example assumes that the 981 potential guests return only once (i.e. they don't become regular visitors), and also does not factor in any word-of-mouth referrals these guests may generate. Other things it does not consider is that the CRM programme should increase your repeat rate as well as the percentage of customers booking directly with the property - all of which are factors that directly increase revenue.

Be relevant Deliver relevant content to customers and prospects. If you're trying to build a relationship, send only information that potential guests can use and will want to act upon.

If you capture relevant information on guests and prospects and properly segment your database, delivering useful information to build relationships will be much easier and more rewarding. Relevance, relationships and loyalty go hand-in-hand.

By the way, it's not true that customers are only interested in deals. That attitude has only lead to the commoditization of far too many hotels.

Banish the 'e-mail blast' Just because the technology to send bulk e-mail messages to tens of thousands of consumers exists doesn't mean you should use it. In fact, while sending bulk mail can produce short term benefits, its effectiveness diminishes over time. Pratt argues that e-mail blasts are the epitome of lazy marketing - the absolute antithesis of the highly targeted, relationship-building approach your CRM system is trying to nurture.

Measure marketing effectiveness With the tools provided in any good CRM system you can measure the effectiveness of all your marketing efforts. Funds for media and promotions should ideally be allocated based on their ability to increase customer loyalty and improve the bottom line.

Marketing is now more of a science than an art, and it's a science of understanding customers on an individual basis, and of communicating one-to-one. You build relationships and loyalty through dialogue, not by pushing deals through mass marketing.

Keep top management involved CRM is a company-wide business strategy requiring true inter-departmental cooperation in order to be successful. That cooperation, even in a small hotel sometimes needs a gentle push from above to keep the programme on track.

The more top management can come to "own" the initiative, the quicker you will be able to build the relationships and loyalty you want. Hold regular progress meetings to report on performance and milestones, and be sure to emphasize the positive return on investment achieved. As ROI increases, so will management's ownership of the programme - and funding to expand CRM efforts.

Look outside if necessary Bring in outside resources as needed. While CRM is a relatively simple concept it is often difficult to implement. And because it isn't easy, few of your competitors will be able to build equally loyal relationships with their guests. Since there are so many different facets to CRM, don't hesitate to bring in outside expertise where it's needed.

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