The study, "Assessing the Benefits of Reward Programs: A Recommended Approach and Case Study from the Lodging Industry," offers a graduated set of methods for hotels to measure the effects of their guest loyalty programs. The researchers, Clay M. Voorhees, Michael McCall, and Bill Carroll, then demonstrate one of those methods. They found a substantial jump in revenues when guests joined the Stash frequent guest program at two groups of independent hotels. The report is available from the CHR at no charge.
"What we found is that the frequent guests became even more frequent after they joined the program, and the result was a 50-percent increase in revenue compared to those who did not join the program," said Voorhees, an associate professor at Michigan State University. "It's important to note that these guests are already some of the hotels' best customers, so the program is not only attracting the best subset of customers, but also fundamentally increasing their patronage too after they join."
"The interesting thing here is that the ADR paid by the loyalty-program guests increased only modestly, and it was the increase in the number of annual room-nights that caused the revenue increase that we noticed," added McCall, who is a professor at Ithaca College and a visiting scholar at the Cornell School of Hotel Administration. "We must acknowledge the hotel groups for sharing the data from tens of thousands of guests. Both of these hotel groups are participating in the Stash Hotel Rewards frequent guest program."
"One purpose of our study is to offer different approaches for hotels that want to measure the effectiveness of their frequent guest programs," said Carroll, who is a senior lecturer at the Cornell School of Hotel Administration. "We know that most hotels offer a loyalty program to match the competition, but a complete analysis of program return on investment may be too involved for some hotels. That's why we are suggesting ways to determine the value of programs with more accessible methods."
In addition to making a paired assessment of incremental revenue lift of members versus non-members, as demonstrated in the report, the authors suggest the following approaches for gauging the value of loyalty programs, ranging from simple to complex: asking consumers about their attitudes toward a program, measuring consumers' attitude change, measuring customer behavior change, and conducting a complete ROI analysis.
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. To learn more about the center and its projects, visit www.chr.cornell.edu.
Logos, product and company names mentioned are the property of their respective owners.