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How Vulnerable Is Your Hotel Brand?

Study Says Carlson, Best Western, Wyndham Are Most at Risk

Here’s a tidbit of information that should come as no surprise to any hotel brand executive or owner/manager of a franchised lodging property: An incompetent or unprofessional staff is the number-one reason travelers won’t stay loyal to a hotel or hotel brand. Of course, this issue is also the most difficult management challenge any hotelier faces.

A provocative new study from Connecticut-based consulting firm cg42 uncovers bad service and ill-informed staffs as the most-common frustrations of hotel loyalty program members. This issue, as well as other related problems, can make a brand vulnerable to defections among its loyalty club members. The researchers surveyed 3,229 frequent travelers who are primary members of loyalty programs in one of nine major hotel brand organizations. The study yielded a Brand Vulnerability Index that assesses what service and facility deficiencies might drive loyalty program members to another brand. And the study calculated that as a whole, the nine brand groups could lose more than $10 billion in traveler spend in a year from frustrated customers. Since presumably these travelers would most likely switch loyalty from one major brand group to another, some chains could actually see net gains in business.

“The frustrations of a loyal Carlson guest, for example, and the amount the chain stands to lose is somewhat offset by what they stand to gain from other programs,” says Steve Beck, cg42 managing partner. “If, on average, a frequent traveler has two or three [loyalty] programs in his wallet, one of which is primary, we’re able to predict what frustration they feel with their primary chain will cause them to switch to one of the other two in their wallet, or even to a third chain.”

The study looked at frustrations guests have with both loyalty programs and with the experiences they have at hotels. Besides incompetent, unprofessional and ill-informed staff members, which was the number-one frustrations in both instances, the other most-common complaints with loyalty programs center on recordkeeping: not having points properly credited for stays, not having deals or promotions honored or credited and difficulties in redeeming points. And, as the study notes, the frustration of not having points properly credited is the issue guests are most likely to share with others, either in person or presumably through social media.

On the guest experience side of the study, other most-often-cited frustrations include lack of guestroom cleanliness and “being nickeled and dimed” with extra charges for items such as water, access to a fitness center, Internet usage, etc.

“It is one of the signature frustrations on the rise and one of the flashpoints that can make a frequent traveler switch loyalties to another brand,” says Beck. “This information becomes very powerful because it presents an obvious strategic question for a brand: ‘If I’m a consistent violator of this frustration, how much incremental revenue does this drive versus how much does it put into risk the overall value of a customer.’”

Now to the results. The Brand Vulnerability Score takes into account a number of factors surrounding the issues that upset loyalty program members the most: the frequency of the frustrations, the likelihood they’ll share their disappointments with others, how issues may impact guests’ decision to switch loyalties and how unique each frustration is to individual brands. The brands and their loyalty programs are listed in order of highest to lowest vulnerability, along with the projected net loss or gain in the next 12 months from frequent hotel guests either switching away from or into their loyalty program:

1. Carlson (Club Carlson), $225 million net loss
2. Best Western (Best Western Rewards), $342 million net gain
3. Wyndham (Wyndham Rewards), $388 million net loss
4. Marriott (Marriott Rewards), $1.521 billion net loss
5. Hyatt (Hyatt Gold Passport), $631 million net gain
6. Choice Hotels (Choice Privileges), $112 million net gain
7. Hilton (Hilton HHonors), $602 million net loss
8. Starwood (SPG), $403 million net gain
9. IHG (Priority Club), $811 million net loss

The dynamics of net gain/loss in business from loyal customers depends on a number of factors. Best Western, for example, stands to gain because it has a relatively large pool of members who don’t consider it to be their primary brand; thus, the chain has the potential to capture a significant number of defectors from other chains. On the other hand, neither Carlson nor Wyndham have large secondary or latent membership bases, making it difficult for them to counteract their vulnerabilities. Significant net losses are forecast for brands like Marriott and IHG due to the high number of travelers who consider them to be their brands of choice compared to relatively small pools of non-primary customers.

As a result of the study, Beck advises hotel chains to focus less on traditional measures of customer satisfaction that typically analyze the strengths of an organization rather than the touch points that cause guests, even ones who stay with a brand on a frequent basis, to become disloyal and look for new favorites.

“These companies need to become smarter on the critical points of failure because there is a high likelihood they’ll lose customers as other chains improve,” says Beck. “And not all frustrations are equal so each brand company should prioritize their areas of investment to be able to go on the offensive. “If I’m Starwood, for example, and within specific geographies and categories of guests I have the opportunity to displace Hilton, I need to know what parts of my experience I should invest in to become even more attractive to the current Hilton frequent traveler.”

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