22 Oct Loyalty Programs: Increased Revenue 50%
Are Loyalty Reward Programs truly effective? Sure, they are popular. Virtually all the larger brands have “reward points” as a component of their franchise & fee structure. But do these programs really “work”? Before we answer that question, let’s assume the following items would be valuable to your Hotel or Resort:
- A rewards program which increased your Average Daily Rate (ADR)
- A rewards program which increased the number of nights a guest stays per year, or Revenue.
- A program which provided a measurable, and positive Return on Investment (ROI) (IE- the cost of issuing and redeeming points at your property was less than any increase in business you realized)
We don’t have to guess about points one and two above. Cornell University’s Center for Hospitality Research completed a study called: “Assessing the Benefits of Reward Programs: A Recommended Approach and Case Study from the Lodging Industry”
The Cornell researchers found that ADR, increased only about 1 and 4 percent in the two Hotels they studied. However, the number of average room-nights, and resulting revenue, for members enrolled in the Loyalty program, increased by about 50% in both Hotels studied.
So, item number 1 and 2 were addressed. But what about the most important item – number 3; ROI or profitability..? Is the program worthwhile, considering the costs? The study says: “only the largest firms can conduct such an analysis” This is a good point. It’s tough to measure all the positive effects. However, it is easier to measure a program’s costs.
What if a Hotel & Resort Loyalty Rewards program was comprised of measurable low costs, and metrics were available to measure the positive benefits and revenue impact of a Loyalty Program? That’s what we’ve created with IndyKey.com
Are you motivated to read Scholarly articles? Wait no longer. Here’s the report in full: 2014 Cornell Hotel Loyalty Rewards Study
Here’s a summary of Cornell University’s findings: