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Customer Relationship Management and Loyalty for Resorts: Technology, Process and The Human Touch

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June 16, 2006
Customer | Relationship Management
Cindy Estis Green - cme25@cornell.edu

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© 2006 Hospitality Upgrade. No reproduction without written permission.

Recent History: CRM and Customer Loyalty

Much has been said about improving customer relationships and building customer loyalty. In hospitality particularly, there has been a time honored tradition of doing "whatever it takes" to satisfy the customer. Over the years, the industry has shifted in its pursuit of customer delight and implemented many systems and processes to achieve an even closer relationship with its most valuable assets, its customers.


1980-1995: The Era of Guest History
Before the 1980s, the most advanced system underlying all CRM initiatives was the index card. The concierge in most four and five star hotels would generally exhibit such impressive recall of guest history, that a recorded system was not needed. However, many knew they could not work every shift and trusted the important information to a lined 4 inch x 6 inch card. Since the 1980s, when property management systems began to be deployed more often in hospitality, the traditional method underlying CRM was finally supplanted by an automated module usually called guest history. It was revolutionary and exciting.

The only problem was it added another task for an already overcommitted front desk or reservation agent. It required a reservation agent to ask a caller if they had visited the hotel before (rather than allow the automated system to prompt the agent that they had). When an agent with four calls already on hold (or a desk clerk with a check-in line backed up through the lobby) didn’t have time to ask about prior visits, another guest record was established for the caller and the guest history data was well on its way to full corruption.

There were tremendous advantages though (once the correct Mr. John Smith was found out of the six records in the system), because it was now possible to "remember" that Mr. Smith was allergic to feather pillows and preferred the New York Times rather than the local newspaper. All this information could be recorded in Mr. Smith’s guest history record. When he had a problem in the restaurant and didn’t get his steak cooked the way he wanted, this could be documented and a welcome back note with a bottle of wine from the restaurant manager could effectively diffuse Mr. Smith’s past negative experience.

The only hitch with this great breakthrough was keeping the thousands of guest records from multiplying and making sure these important tidbits collected over time were not dispersed on the half dozen visit records that no one had time to consolidate.

1995-2000: Guest History Gives Way to Database Marketing
By the mid-1990s, the guest history files, bulging with valuable guest preference and past spending information, and filled with duplications, misspellings and inconsistent service and segmentation codes, were poured into new databases mainly to generate mailing lists. The guest history data was used in a small percentage of hotels to support retention efforts that would generally give tokens of recognition to returning guests that might vary from a welcome back basket of fruit with a bottle of water to a personalized bathrobe, chocolate dipped strawberries and bottle of champagne. These levels of recognition were usually tied to a system the hotel established that reflected number of recent visits.

The primary formal loyalty schemes used first by airlines in the 1980s and then by large hotel chains were a separate system in which a guest would usually register, get a frequent user number and then this number would more accurately track their stays. Free rooms and other giveaways were associated with various usage levels that were all carefully tracked through the unique frequent user number.

These formal systems were substantially more accurate in tracking usage than the PMS guest history records, but they were limited to those who registered in the program. While they may have included hundreds of thousands of a hotel chain’s guests worldwide, many hotels might only have a handful of these loyalty program customers visiting in any given day or week. For those hotels that were not using their guest history system effectively, this left a large number of a hotel’s customers unrecognized by either the local hotel or the hotel chain. In the case of independent hotels and resorts, and in the absence of a functional guest history system, the only safety net was the old reliable concierge or front desk staff who just "remembered" from year to year when the loyal guests came back. And this safety net actually worked very effectively in many cases. But it couldn’t be relied upon indefinitely.

The database marketing systems utilized in the mid-1990s would take the guest history data and clean it up. They would consolidate the multiple entries of the same guest and standardize some of the mailing address information. With a concerted effort, much of the coding used for market profiling such as market segments, channel codes, reservation dates etc. was more carefully entered. These database systems were the beginnings of marketing intelligence for hospitality. Once the data was tidied up, additional outside information could be appended such as advanced geographic codes to indicate MSA or DMA, indications of a guest being a weekday or weekend user, seasonality codes such as winter or summer and other factors that would facilitate the direct mail campaigns.

CRM and Loyalty: Applications for Resorts
When the interviews were conducted for the HSMAI report and resort executives talked about what they thought CRM was, they responded in a variety of ways. Some said it is in-house customer service training. Others said it is their direct mail program that is targeted to specific customer groups. Many think of it as the e-mail system that interacts with their guests before and after their visit. Some more sophisticated marketing executives talked about a data warehouse that maintains all their customer data and helps them create models of customer segments to better target products, services and communications.

After conducting the research for the HSMAI report, the following outlines a fundamental list of many customer relationship management (CRM) applications that are appropriate for use in resorts.

• Loyalty/retention programs
• Operations-based customer service
• Campaign management
• Sales/service programs
• Product optimization
• Customer segmentation modeling
• Call center customer service

There was a general understanding of the concepts of CRM and there were a few resorts deeply engaged in many elements of CRM, whether or not they defined it formally as a CRM program. All resorts had implemented some basic components of CRM applications. The most common applications were onsite operational customer service programs and pre- and post-visit e-mails. The pre-visit e-mails were largely driven by the need to ensure guests could get those desirable time slots for spa or golf reservations due to limited availability of these appointment or tee times. Post-visit e-mails were most often facilitated by vendors who supply guest satisfaction surveys via e-mail.

While some of the branded chain resorts participate in their company’s point-based frequency/loyalty programs, few of the independent resorts had a similar system. For those with a loyalty program, almost all had a tiered reward scheme in which repeat guests were given amenities on arrival commensurate with their number of visits. For the most part, the guest was not aware of participating in a structured program. They just unexpectedly received a gift or welcome back amenity.

The Current State of CRM in 2006
The database marketing systems are still in use in many hospitality organizations. There are still many hotels and resorts that are not using anything more than guest history or other internal records but there are some pioneers that are gradually giving way to more strategic integrated solutions in which customer usage information, preferences and some outside profiling data is being integrated in data warehouses for customer relationship management (CRM) applications. The move from the more tactical database systems to the more strategic approach is one that is still rarely found in hospitality.

Other industries have pushed ahead in this arena. Retail, technology, financial services and telecommunications all invested heavily in CRM and are now moving toward what is known as customer experience management (CEM). This is a more strategic use of information to address all aspects of customer contact before, during and after sale. It is meant to support customer service, customer communications to generate additional sales and facilitating the customer experience.

Hospitality has not moved to CEM yet. However, there are many niches in which CEM techniques are being applied, albeit in a limited way. The goal for customer experience management is to make it easier for customers to interact with a company in any way they want, using whatever channels they want, engaging in dialogue using the communication tools they prefer, using any language or currency, having the power to create the product or service combinations they want and (if this isn’t challenging enough), they want the organization to recognize them as a known customer at every point along the way.

No, hospitality is not there yet. It is an industry struggling with integration of the systems underlying their business processes. Reservations, PMS, Web sites, call centers, concierges, customer satisfaction surveys, sales automation, work orders systems—they are not all singing off the same hymn sheet. There is no lack of interest in better integration, just a lack of ability, limited funds for the needed infrastructure and to some degree a lack of focus on the need to integrate as fully as other industries have succeeded in accomplishing.

There are, however, dozens of examples of exceptional applications of pieces of the CRM puzzle. There are many applications for CRM in hospitality. There are many ways a resort can expand its grasp of CRM tools and processes to improve its relationships with its customers. The HSMAI Resort Best Practices report itemizes the building blocks for a full blown CRM solution and then illustrates best practices for each both within the participating group of resorts as well as from outside sources (some hospitality and some from other industries).

This article was based on an excerpt from the latest Resort Best Practices study published by HSMAI in April 2006. This study was conducted for the HSMAI Resort Sales and Marketing special interest group through the Best Practices Initiative. For more information and a downloadable PDF of the study’s table of contents, refer to www.resortmarketing.org or contact Cindy Estis Green at cme25@cornell.edu.


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