Guest Acquisition versus Retention

Your hotel or resort spends a fortune on acquiring new guests. How much do you invest to retain them? What are the costs of acquisition versus retention? 

The average 100 unit independent hotel actually spends $225,000* a year on acquiring guests through OTAs and another $200,000 on marketing and other commission costs. That’s roughly $425,000 a year on acquisition. We know you can do the math, but that’s actually $1164 each and every day.

Let’s explore what retaining more guests can do for your hotel or resort. Here’s a great infographic on and article on customer retention VS customer acquisition, the costs associated and best marketing channels.

customer-retention-vs-acquisition

The OTAs are valuable partners. But they are pure acquisition channels. They have their OWN loyalty programs. It’s our job once they are at the property to convert them to loyal guests for the long term.

But how can we do that? What tools do small and medium size hotels & resorts have to help with guest loyalty & retention? The fact is, most Independent Hoteliers & Resort operators don’t have the resources or tools to pursue robust loyalty and guest retention initiatives.

Even worse (in some cases) we’ve learned, is that many hoteliers don’t even realize they are spending huge amounts of money on acquisition, because it flows out benignly.

Here’s an example:

  • OTA “E” charges a guest $200.
  • Hotel gets a check from “OTA E” for $150.
  • 25% commission has been paid through a discounted rate to the OTA.

I actually had a hotelier tell me that scenario wasn’t a commission. We’ve also had had one hotel sales director tell me they don’t want to reduce their share of OTA business.  …??? (this particular hotel generates 45% of its business from OTAs and pay about $350,000 a year to OTAs at an average commission cost of 20% – the sales director is no longer there.)

So we know the problem. What are the solutions to retain & engage more guests?

Hotel News featured 1o tips on how to retain guests – here a few, and some of our own.

  • Last impressions. Make sure you create an experience that no matter what’s happened, the guest leaves with a positive lasting impression.
  • Keep in touch. Some of your guests may come back only once a year. But keep your hotel or resort top of mind. (IndyKey helps do this too)
  • Reward guests with exclusive deals. You’ve already spent money to acquire the guest. Offer them a deal to come back again, more often. This can be times when your supply exceeds demand. Think of it this way. Who would you rather reward? An OTA or a loyal guest?
  • Remember them. Guests are people. People love to be remembered and made to feel special. This is free and easy to do.
  • Get a competitive advantage. If guests can stay at a hotel where they get a meaningful, useful reward – on their first stay. All things being relatively equal, that’s where they are going to stay.

 

STR reports that the average independent hotel OTA share is 32%. We’ve calculated using an average occupancy of 65% and used an ADR of $150 and average OTA commission of 20% come to $227,000 a year. Even if your OTA share is much less, a solid loyalty program can help you replace OTA business, with direct bookings.