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Customer Loyalty Equals Higher Profits |
keep the customer coming back Hospitality Business Review,
Volume 3, Number 5
by Joseph R. Kane, Jr., CHA
When you think of the word hospitality, it evokes images of friendly service, clean rooms where everything is in working order, and consistency of product, to mention a few. For hotel guests, that's what's expected. However, when we exceed consumer expectations-in other words, provide beyond their basic needs-we create guest loyalty and a highly successful hotel operation. Imagine the winter season in New England. For travelers, this means once again the annual ritual of scraping ice off car windows-or worse, brushing off inches of snow covering your automobile. Now picture that you are a hotel guest following an evening snowfall, trudging your way to your car, only to discover that it has already been cleaned off! You might think that you're still in bed dreaming! When I was a young general manager of a seventy-five-room hotel in Danbury, Connecticut, we routinely removed snow and scraped ice from our guests' automobiles. This was one of the little services that my team did to bring added value to our guests. It was also one of the things that kept our guests coming back, because my competitors, three brand new hotels in the area, were not giving their guests any memorable value added services. And it paid off! The hotel I was managing traditionally lost $50,000, bottom line, every December. Our forecast, taking into account my three new competitors, projected an even larger December loss. Due to a combination of teamwork, sales calls, a passion for guest service, and creating guest value, our December profit and loss statement reflected a loss of only $28. The ADR (average daily rate) of our hotel in those days was $28-if we had only sold one more room! Although there was no name for it at the time, what our team was doing was actually creating visible value for our guests. Everyone in the service industry has probably heard the old adage "You don't get a second chance to make a good first impression." That saying is particularly true in the hospitality industry, because we are constantly being challenged to deliver excellent customer service, a vital component in guest retention and particularly challenging for a franchise hotel chain of independent owners. Brand Differentiation So what does it mean to create visible value for your guests? By offering unique services during the guest's stay at your hotel, you've succeeded in creating the ultimate customer loyalty club. In marketing parlance, this is called brand differentiation. It's extending to your guest something they won't see or get from the competition down the street. With nearly 180 lodging brands today, product differentiation is a critical aspect of any property's marketing plan. It should include taking the time to greet your guests with a smile, thanking them for their business, and providing consistently clean rooms. In addition, a quick follow-up response to any request will go a long way in adding value to your guest's stay. Believe it or not, it's the little things that matter. Last year in Cornell University's Cornell Hotel and Restaurant Administration Quarterly, an article on creating visible customer value was explored. The authors found that when guests experienced value during their stay, sixty-one percent said they would definitely stay at the same hotel again. When no particular value was created-that is, when customers were not able to remember anything they liked in particular during their stay-those expressing a strong intention to return dropped to forty-one percent. As an interesting aside, plans to return to a particular hotel increased a dramatic fifty percent when visible customer value was created. According to Robert Passikoff, president of Brand Keys, a leading New York research firm, as a general rule of thumb in any business, it takes up to ten times the cost and effort to gain a new customer as it does to keep one you already have. Passikoff also maintains that a modest five percent increase in customer loyalty can lift a company's lifetime profits per customer by as much as ninety-five percent. Another study, by Bain & Company, said that a two percent increase in customers has the same effect on profit as cutting costs by ten percent. Back to Core Values of Innkeeping One would think the simple gracious act of greeting guests would be automatic, indelibly ingrained in every general manager's daily activities. Unfortunately, many times it isn't. There is only one instance in the lodging business that I can think of where it is routine that the top executive connects with each and every guest-the captain of a luxury cruise ship. The captain positions himself or herself at the ship's entrance to greet or bid farewell to every passenger. Then there is the captain's cocktail party, where, in fact, many of the guests are identified by name, as the captain has made it a point to meet with guests throughout the cruise. In my opinion, the same basic hospitality principles should be common practice by the captain's landlocked hotel brethren. I've noticed over the last several years a marked transformation styles. That is, some operators have gotten away from the core values of hospitality and making their guests their first priority. This is more important than ever, as today's guests have never been more demanding. Perhaps the push for stock earnings has reversed priorities, decreasing time spent with guests while increasing time for budget meetings and operational concerns. Many of our managers have become technicians rather than innkeepers. When a property demonstrates visible value, a general manager who understands that it all starts with the guest will station himself or herself in the lobby at peak times in order to greet and respond to guests and thank them for their business. These GMs know that the only way to understand what's going on in the minds of their guests is to approach them and find out. Examples for Creating Visible Value Here are some examples of how to create visible customer value for your guests. I have found these ideas to work wonders during my thirty-six years in the hospitality industry:
The Power of the Brand For those hotel brands that have the leadership position in their business segment, like Days Inns in the economy segment, they individually possess an advantage over the competition. The power of a leading brand is synonymous with consumer appeal. That means that consumers welcome a company they know and can trust. With so many choices, consumers buy what has proven satisfactory in the past-but by providing visible value, you more than double your chances of repeat business. The ability to create visible value isn't exclusive to one chain or hotel. Anyone can do it. So at the risk of tipping my hand, here are a few thoughts shared with over two thousand Days Inns franchisees during our spring regional meetings this year. To succeed you must
Joseph R. Kane, Jr., CHA ( Certified Hotel Administrator), is president and CEO of Days Inns Worldwide. Days Inns is the world's largest hotel franchise system, with over 1,900 properties in twelve countries: Canada, China, Colombia, the Czech Republic, Hungary, India, Mexico, the Philippines, South Africa, the United Kingdom, the United States, and Uruguay. The company is a subsidiary of Cendant Corporation (NYSE:CD). |
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Hospitality Business Review Dr. Ronald A. Nykiel, Publisher Conrad N. Hilton College, University of Houston Houston, TX 77204 |