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Thou Shalt Have No Other Guests Before Them

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June 16, 2006
Customer | Relationship Management
Michael Schubach - michael.schubach@clubcorp.com

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© 2006 Hospitality Upgrade. No reproduction without written permission.

The Gospel of the Repeat Guest

In this issue, Michael Schubach, one of our regular contributors, has teamed up with co-worker and marketing industry veteran, Lisa Phillips. Together they have produced a new take on a familiar subject.

Sociologists would find hotel people to be a strange and curious breed. Many of us are nomadic, spending an entire lifetime moving from one location to another. We speak our own dialect and have our own customs and shared beliefs. Some of those beliefs are sacred, and we know the litany by heart: What are the three most important factors in the success of any hotel? Location, location, location. Why is a room-night the world’s most precious commodity? Because you can only sell it one time and then it disappears forever. Who is our most valuable guest? The repeat guest. Amen.

At the risk of starting a holy war, we would like to shake a bit of the dust off that last sacred relic and take another good hard look at it. (This is somewhat like that time, several decades ago, when the Catholic Church took another look at the calendar of saints and downgraded St. Christopher to Mr. Christopher, thereby shattering a thriving dashboard medallion industry.) Without disputing the underlying goodness of our repeat guests, their value may be… somewhat misunderstood.

With that last sentence in print, we can already imagine IT and marketing professionals throwing themselves between us and their guest history database. How could we give voice to such an insane blasphemy? From a historical perspective, heresy seems to hang out at the intersection of Old Faith Way and New Technology Avenue – just ask Galileo. He would also be able to confirm that sometimes heresy results from nothing more than a shift in perspective. Decide for yourself as you read our inquisition transcript:

What Is a Repeat Guest?
It would seem beyond obvious that a repeat guest is someone who has patronized your hotel or resort in the past. Also obvious is that the major chains with loyalty programs that offer points, nights and miles have very specific legal answers to this question. However, independent hotels and resorts are an entirely different story and there is some confusion here, to say the least. If our industry is to discuss with any credibility their statistical outbursts of how many repeats repeat, or what value they represent, it would stand to reason that we are all working with a common definition of "repeat." That is hardly the case: a potential repeat guest can be qualified on one, some or any of the following criteria variations:

Previous Stays: Are you a repeat guest when you arrive for your second visit – before you’ve actually repeated – or after you depart the second stay?

Time Period: Is a repeat guest anyone who has visited once or twice within the past year? Within the past two years? Five? Or is it anyone who has rented a bed since World War II?

Purpose of Visit: Are you a repeat guest if your previous stay was as a transient guest and on your current stay you are a group attendee? (This isn’t as far-fetched as it sounds; operationally we welcome returning guests who arrive as group delegates, but statistically we do not add them in our repeat totals. We look at repeats in terms of their non-group election to return; it is our delicate mix of religion and politics.)

Method of Identification: How do you know if this is a repeat guest? Did your system tell you or did your guest? (An informal "straw poll" of several front office professionals indicated that they expect the guest history results displayed at the front desk to be about 70 percent accurate. The 30 percent of system inaccuracies typically result from stays that predate the available database, name/address matching failures in reservations, and "no match possible" scenarios where names are furnished without addresses or other discernable matching information from an outside source such as group delegate list.)

At a recent conference of small independent resorts, the contributing properties reported an average repeat guest factor of 30 percent, but the range of response ran from a low of 8 percent to a high of 75 percent. Were these resorts all measuring repeats the same way? Sadly, we’ll never know: each property applied their own criteria in order to furnish their response.

What Is a Repeat Guest Factor?
Remember those independent resorts that said repeat guests represented either 8 percent or 30 percent or 75 percent of their business? What exactly does that mean? Is that a percentage of the total guests who are on at least their second sleepover? Is it percentage of hotel stays? Is it the percentage of year-to-date room nights sold? Or is that revenue tracking? Our resorts track all of those factors, and our combined repeat factor is either 14 percent or 19 percent or 21 percent or 32 percent. Guess which number we publish? Correct – our answer is 32 percent. We are pleased to announce that puts us ahead of the average – the average of what, we’re not certain, but it’s nice to know that we are on the leading edge of whatever this arena may be.

Do Repeat Guests Save Marketing Dollars?
Even hotels with great repeat guest percentages could never rely on their frequent sleepers to fill them to capacity, so marketing dollars are spent to recruit new guests through the doors and into the beds. No one foresees that changing. If our adoration of the repeat segment is strengthened by the belief that having repeat guests lowers the marketing expense, we would have to ask ourselves exactly how that might be happening. The idea that repeat guests are cheap to keep is based on the cost of guest acquisition, which implies that there is little or no marketing cost associated with selling rooms to those guests we’ve already acquired. In this brave new information era, we can talk to anyone and everyone at any time. Perhaps we send a different marketing message to the repeaters, but we still speak to them as frequently as we can. Remember CRM? It’s a given that one must know who the customer is in order to manage the relationship, and most hotel and resort CRM pools are populated almost exclusively by… you guessed it… repeat guests.

There is another distinct possibility to this paradigm: your repeat guests might actually be inflating your marketing and operating expenses. Often overlooked is the fact that the repeat courtship can have a variety of its own hidden expenses attached. What do you spend welcoming guests back? What revenue do you forego in upgrading repeaters into higher rated rooms at discounted rates? Do you set special amenities? Are there other program perks? Are there specialized communication pieces? None of that is free but it may not be included in the total cost of guest acquisition and ownership.

So Should We Really Care about Repeat Guests?
Of course we care that our guests are happy enough with the stay experience to visit us more than once, but remember that subsequent stays do not necessarily lower total marketing expenses. Also remember that not every return guest spends like the first time; this could be specific to resort guests, but our statistics indicate that some of our returning guests find their way into shoulder rate seasons and bargain accommodations, and may well spend less in the outlets on subsequent stays. We are always honored to have these folks as our guests, but repeating doesn’t always equate to repeat spending. The issue is not just getting guests to repeat, but getting the right guests to repeat under the most favorable circumstances.

The bigger concern may be that the religious fanaticism with which we worship the repeat guest can cause us to lose sight of the value of those who do not repeat – the majority of everyone’s guests (except that one resort) by virtually any measure. What is their value? Ask any resort marketing person and they will all confirm that the best source of business for new non-group guests is personal recommendation – word of mouth. Just because a guest may not stay more than once (or is it twice?) doesn’t mean that he or she can’t have happy memories of a great experience. It doesn’t mean that they aren’t out there telling the world where to visit and what to do. As our ability to marry guest history with demographics and pyschographics becomes a more finely honed art, we believe the most valuable guest will not be identified exclusively by the trinity of return (recency, frequency and monetary value), but also by their proclivity to return and their willingness to refer. Those guests that feel the spirit are a goldmine of potential, both in marketing dollars we spend inviting them back and in the marketing dollars they spend for us, by telling others about how much they loved their experience. We believe that those with the desire to return could deserve as much attention as those who actually do get the chance to visit again. The Holy Grail of identifying our true believers is to find a way to rate our guests on their experience and perceptions as effectively as we tabulate their spending. Perhaps this is a subtle variation on our established core beliefs, but our faith in the difference is crucial and unwavering. Amen.

Michael Schubach, CHTP, is the VP of resort technology for ClubResorts, the resort division of ClubCorp, based in Dallas, Texas. Mr. Schubach’s office is at Pinehurst, where he has the opportunity to watch many guests come and go… and come back again – up to 32 percent of them. He can be reached by e-mail at michael.schubach@clubcorp.com.

Lisa Phillips is the director of ClubResorts' guest centric marketing. When Lisa is not running data models, she’s running trails with her dog, Roo, near Denton, Texas. She can be reached at lisa.phillips@clubcorp.com.

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