How well do you understand the value of guest retention?


As a hotel manager, you’ll already know that attracting new customers is a costly business. With the cost of sales increasing all the time as a result of high commissions paid to OTAs and independent booking sites, to make money, now more than ever, you need your customers to return time after time.

The fact is, in almost every business you care to think of, winning a new customer is costly, and time consuming: to secure a new room booking from a new customer likely requires lots of re-marketing, a discounted rate (to get them through the door), and perhaps even an up-sell (carrot) that you know will appeal to their senses.

Yes, we all need new customers but the real key to success for your business is in turning these new customers into loyal customers who will return to stay with you, rather than one of your competitors, time after time.

To help you identify the best ways to prevent customer churn and increase customer retention, we look at the three key areas of revenue, cost, and marketing.


1 Revenue

1. Use lifetime customer value as a metric

Very often hotels look at customers solely on the basis of what they spend during the course of their stay. So, by way of example, in the case of a customer who stays one night and spends €150, the tendency could be to value this customer purely on the basis of this spend.

However, this way of thinking is extremely short-sighted because what if this customer were to become a regular/repeat customer, staying three to four times a year every year, for the next 10 years? By looking at the potential lifetime value of a customer to your business, rather than seeing them purely in a once-off context, their potential value to the business becomes a lot more significant.

2. Repeat business & churn rate

How many of your customers will stay with you once, but never return, or conversely, how many are regular/repeat customers?

Calculating this data will be very revealing for your business: if you have a high churn rate then you need to survey your guests in order to establish to what extent customer service was a factor. Because once you know the reasons why your guests are not returning, you can fix the problem and entice them back over time.

3. Focus on returns

Not giving the customer exactly what they expect, based on what your offer suggests, can lead to a very high returns ratio. Your customer has very high expectations and is sophisticated enough to know whether the service they have received represents good value for money or not. Of course your hotel should aspire to achieve zero returns (though that would be nice!) because this is the service industry and you will never manage to keep all your guests happy all the time.

However, what you should be striving to do is understand the exact reason for each return, by tracking them, analysing them over time, and looking for distinct patterns: doing this will allow you to fix recurring issues, and ensure that level of returns diminish, rather than continue, over time.

4. Lost sales & upselling

Unlike other industries where sales is the sole responsibility of a dedicated sales team, every member of a hotel’s front-line staff must think of themselves as sales people, first and foremost.

If a guest wants something they will find the nearest available member of staff and them for whatever it is they need. It doesn’t matter what job title this member of staff has, the customer will expect a resolution to their request as quickly as possible.

Investing in customer service and sales training – although an additional cost to your business – will not only result in a lower churn rate, it will also encourage proactive up-selling, result in higher customer satisfaction rates, and ultimately increase return and retention amongst your guests.

2 Cost

1. Give something away to get something back

Sometimes in order to keep a guest happy, you need to give them something which will cost your business money, but not them.

If for whatever reason a guest is not fully satisfied with the service they’ve received in one area of their stay experience, offering them a service discount (ie a freebie) can actually benefit your business in the long term. Because not only will a freebie ensure that your guests are made to feel valued, important and listened to, it will also mean they are more likely to return in the future (and therefore spend more money on repeat visits), and more likely to recommend you to others, which is critical in terms of new business generation.

However, just a word of caution: in order for this approach of “giving something to get something back” to be cost effective, every customer service discount must be logged and tracked over time. This will allow you to identify whether the same problem is occurring time and time again and if so, will enable you to find the source of the problem and fix it.

2. Maintain healthy staffing

Sometimes, when economic conditions deteriorate, the first (and often wrong) reaction of the hotel manager is to reduce the number of lower wage staff, and instead get the higher-paid managers to cover the resulting shortfall by plugging the gaps as they appear.

Unfortunately, such an approach is very short-sighted for a number of reasons:

  • When staff numbers decrease, customer service becomes a fire-fighting exercise, staff morale decreases, and customer service deteriorates;
  • When customer service levels plummet, service discounts invariably increase, which results in an increased financial cost to the business;
  • All of the above results in reputational damage (customers inform other would-be customers of their experience), less returning customers, lower sales, and most likely, a reduced room rate into the future.

3 Marketing

With social media – including ratings and hotel review sites – resulting in real-time analysis of every aspect of a hotel’s customer service delivery, negative guest reviews can have wide reaching and damaging consequences. Bad news always travels fast so if even just one guest has a bad experience at your hotel, this is likely to be relayed online, causing untold reputational damage for your business and brand, which can be very difficult to repair.

Fortunately, you are not alone as this is an issue which every hotel is faced with. However, the solution is actually relatively straightforward: as a hotel manager, you have got to invest in your online presence by employing dedicated, suitably qualified, digital marketing staff to manage you brand’s reputation online. There really is no alternative: if your guests are complaining about your hotel through various online platforms, you cannot afford to ignore this and hope that it will go away. It won’t.

That’s why, as a hotel manager, it is vital that you protect and manage your hotel’s reputation by being proactive and positive in dealing with online customer service complaints in real time, as they happen: doing this will ensure that any negative customer issues can be resolved quickly and a bad customer experience can be turned into a positive.

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