Customer Loyalty Programs: What’s the Real ROI?

interior of hotel lobby with neon red "welcome friends" sign at front desk


ow many amazing offers – from free cell phones to zero percent interest rates – have you seen for “new customers only,” while you’ve been loyal for years and can’t even get a five percent discount? It’s frustrating, and not likely to make you loyal to the brand.

Most businesses won’t succeed with new customers only, so it’s imperative that they give love to their loyal customers as well in order to retain their business in the future. Still, studies show that most marketing plans only focus on acquiring new customers.

How does that look for hotels and resorts?

First Things First: Here’s How to Measure ROI

The formula for calculating ROI is straightforward: ROI = (Net Profit from Loyalty Program − Program Costs) / Program Costs. Breaking down those top-line numbers is where things can get complicated.

Like any other marketing strategy, a customer loyalty program should begin at the end (the desired outcome) and work backwards from there in order to achieve your business goals. To help you get started, we’ve put together a list of our most recommended measurable KPIs:

Essential Data
It’s important to treat your data collection with care, because you get out what you put in. Incomplete data, gathering too small of a data set, or analyzing the wrong trends can give misleading results. Our customer loyalty strategies always include these data points:

  • Customer Data: Comprehensive data on loyalty program members, including their spending patterns, booking frequency, and preferences.
  • Cost Data: The expenses associated with running the loyalty program, including marketing, rewards, staff training, and technology.
  • Revenue Data: Revenue generated from loyalty program members, including room bookings, dining, spa, and other on-site services.

Audience Segments
Categorize your loyalty program members based on their behavior and spending habits. This allows you to analyze the performance of different customer segments separately. Here are our recommended metrics:

  • Customer Retention Rate: The percentage of loyalty program members who continue to book with your hotel over time.
  • Average Spend: The average spending of loyalty program members compared to non-members.
  • Churn Rate: The rate at which loyalty program members stop engaging with your hotel.
  • Customer Lifetime Value (CLV): The total value a loyalty member brings to your hotel over their entire relationship with your brand.
  • Conversion Rate: The percentage of loyalty program members who redeem rewards or special offers.
  • Cost Per Acquisition (CPA): The cost of acquiring a new loyalty program member.
  • Net Promoter Score (NPS): This is a measure of customer satisfaction and loyalty, gained through surveys to assess program impact on customer sentiment.

Attribution Analysis
It’s also helpful to monitor metrics along the customer journey, such as email open rates, website metrics like time spent on site and bounce rate, and social media engagements, to see which channels are driving the highest ROI.

Control Group Comparison
If possible, create a control group of non-loyalty members with similar characteristics and spending habits. Compare the behavior and spending of loyalty program members to this control group to determine the program’s impact.

Other metrics that can help you paint a robust picture of your program’s success include A/B testing to assess the effectiveness of various strategies and promotions and customer feedback and surveys for direct, firsthand information on what’s working and what isn’t.

Beyond the Balance Sheet

The real Return on Investment (ROI) for your hotel customer loyalty program depends on various moving parts, including the program’s design, the effectiveness of its implementation, and the specific characteristics of your property and customer base. Some of the monetary benefits of a successful customer loyalty program include increased revenue, direct bookings (vs. third-party sites), customer retention, referrals and word-of-mouth marketing, reduced marketing costs, cross-selling opportunities with additional services like dining packages, and more.

It’s about more than just dollars, however. ROI can also include intangible benefits – those that don’t directly translate into revenue, but serve to drive loyalty, enhance your reputation, and entice new customers.

Some of the most important intangible benefits that come with customer loyalty programs include an upgrade in your brand reputation, increased customer engagement and feedback, richer data and insights, higher guest satisfaction and long-term loyalty, a competitive advantage, and more.

Something important to keep in mind: The ROI of a loyalty program may not always be immediately apparent. Building strong customer relationships and brand loyalty often takes time, and the full impact of a loyalty program may not be realized until guests become repeat customers over the long term.

End at the Beginning: Develop a Winning Strategy

If you start your planning at the end, with the business objectives and goals, then you work backwards until you get to the nitty-gritty: the tactics themselves. For any program to be successful, your strategies must ladder up to the main goal of building long-term relationships with guests – but this is the fun part!

This is where you get to be creative and think outside the traditional program perks like points-based rewards, free or discounted stays, special offers, and referral programs (although those are all essential). Beyond the monetary perks, your imagination is the limit for creating a loyalty program that works for your unique clientele. In need of some inspiration? Here are some ideas to get you started:

  • VIP Status: Loyalty program members often receive special recognition and status within the hotel, such as personalized greetings, welcome amenities, and exclusive check-in/check-out areas that allow them to skip the line.
  • Enhanced Services: Room upgrades, priority booking, complimentary parking, or personalized concierge assistance alone can turn someone from a one-time guest into a repeat customer.
  • Priority Access: Amenities like spa facilities, dining reservations, or other first-come-first-serve amenities can cause a bit of a flurry during popular times. Reducing the hassle of making arrangements ensures that loyalty members will have a seamless, stress-free experience.
  • Flexible Booking: Late check-out, early check-in, and the ability to modify reservations with ease add a layer of both convenience and reassurance.
  • Exclusive Events and Experiences: Hotels can offer loyalty program members access to exclusive events, such as wine tastings, cooking classes, or cultural tours, providing unique and memorable experiences.
  • Customized Offers: Loyalty programs allow hotels to personalize offers and promotions based on member preferences and behaviors, ensuring that members receive relevant and appealing deals.
  • Advance Notice: Members may receive advance notice of upcoming promotions, sales, or special events, giving them the opportunity to plan their stays and take advantage of exclusive offers.
  • Surprise and Delight: Hotels can surprise loyalty members with unexpected gestures, such as complimentary amenities, room decorations for special occasions, or birthday gifts.
  • Exclusive Content: Access to exclusive content, such as insider travel tips, destination guides, or behind-the-scenes hotel tours, can be provided to loyalty members, adding value to their membership.
  • Local Partnerships: Offer joint promotions and discounts at local restaurants, event venues, and activities to help drive revenue for both businesses.
  • Family-Friendly Benefits: Discounts on connecting rooms or complimentary access to the kids club can be welcome perks for traveling families.
  • Pet-Friendly Benefits: Make fur babies feel welcome with pet beds, treats, and even pet-sitting services.
  • Business Traveler Benefits: Ideas here include meeting room discounts, express check-in and check-out, airport transfers, and access to airport lounges for frequent travelers or high-tier members.

A Final Note

This isn’t an exhaustive list, nor is it all mandatory. And what works for another hotel may not work for yours. Take the time to do some customer analysis, either through data analysis or firsthand feedback, to find out what perks will align with your brand identity and satisfy your guest preferences. The more relevant your customer loyalty strategy is to your unique clientele, the higher your ROI will be.


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