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by Frances Kiradjian

We all know the power of loyalty in the hospitality industry, as our most valued guests are those who stay over and over again. One enticement to promote this behavior is the loyalty discount, which offers guests a financial incentive to return. It also encourages them to book direct, cutting out those hefty online-agency fees and keeping the hotel in direct contact with that all-important customer base.

But for hotels, the downside to free loyalty schemes is the cost. If a discount is offered to one customer, it should be offered to all, and so we face a situation where regular revenue streams dip significantly as the same discount is provided to everyone. A promotional enticement can thus quickly become a worrying loss leader.

To resolve this issue, an alternative approach is growing in popularity in hospitality: the fee-based membership scheme, in which lower rates and various other perks are offered in return for an annual or monthly fee. The regular charges balance out the booking discounts over time, and the schemes often include other benefits to seduce guests and keep them engaged with your hotel brand.

But what would convince a hotel guest to sign up to such a scheme? If they’re committing to a membership fee they will be looking to extract value of some kind to justify the cost. Besides loyalty discounts, this can include other perks that give a feeling of prestige, such as priority booking, members-only areas, complimentary refreshments, or any number of other goodies that will make loyal members feel special.

One benefit to the paid membership model is commitment. Fee-based schemes encourage more engaged, loyal behavior among members than their free equivalents, as a focus on the ‘sunk cost’ encourages patrons to engage with your small brand or individual property more enthusiastically than ever before.

Depending on the terms of the scheme, membership schemes can also be used to attract a broader customer base – for example, in country club-style arrangements that allow local area residents the opportunity to use leisure or spa facilities in return for regular payments.

Whatever the specifics of your scheme, it won’t be enough to simply persuade guests to join; you should also work to keep existing members apprised of the benefits of their commitment. Studies of fee-based programs frequently show a flurry of activity in the first few months after joining, as members look to make the most of their investments, which trail off after a period of time as the novelty wears off and the inspiration to join becomes a distant memory. Neglect your existing members and you might notice your revenue tailing off as their payments are left to lapse.

So a fee-based membership might involve more work than your existing arrangements, but the results of a successful scheme are well worth the effort: a committed customer base who are kept in regular contact with the hotel, and a new, regular stream of income from membership fees. Overall, it sounds like a club we’d like to join.

About Frances Kiradjian

Founder of the Boutique & Lifestyle Lodging Association (BLLA), Frances Kiradjian, a 25-year hospitality and travel industry seasoned professional, created BLLA to give a  voice to independent properties as well as small brands around the world, offering them the opportunity and the means to compete on a level playing field with major hotel  companies. BLLA serves more than 750 members, including hotels and the suppliers that sustain them.

Frances states why she created the BLLA. “My passion for independent boutique & lifestyle hotels are what drove me to create a place where leaders in this hotel sector can meet on common ground,” said Frances. “I wanted to institute programs for enhanced awareness to global travelers and offer vendors the opportunity to focus their marketing efforts through sponsorship of BLLA programs, events & conferences.”

Kiradjian is a graduate of the highly respected Marshall School of Business at the University of Southern California (USC).

Contact: Frances Kiradjian / 818-264-4810

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