Assessing the Benefits of Reward Programs: A Recommended Approach and Case Study from the Lodging Industry

Abstract

Two groups of independent hotels experienced an average 50-percent increase in annual revenue when customers joined their loyalty programs, almost entirely due to increased patronage. These guests were already the hotels’ best customers, but the number of annual room-nights they purchased increased by an average of 50 percent after they joined the program. On the other hand, ADR for the loyalty program guests increased modestly (1 percent for one hotel group and 5 percent for the other). The analysis compared customer behavior of matched pairs of hotel guests, where one member of the pair had enrolled in the hotels’ loyalty program and the other had not. By identifying matched pairs of the guests before enrollment, the analysis could record the differential behavior of guests after one member of the pair joined the loyalty program.