Phil Benson discovers that longer-term customer relationships could be at risk from the need to make short-term profits. Do you have a clear customer strategy?
Hoteliers should find themselves in a much better bargaining position than they were two years ago and have the upper hand when it comes to pricing. However, it is important that short-term gains do not affect the building of long-term customer relationships.
It is vital to recognise how crucial long-term relationships can be for a business and how to increase effectively the average daily room rate, especially as group travel and business travel appear to be re-emerging. Even leisure travel has seen an up-turn from two years ago.
Customer strategy is changing: customers will once again be chasing rooms, as opposed to rooms chasing customers, so with capacity being filled as travel increases, rates are expected to start to rise. Short-term gains made at the expense of one group of clients, will be remembered by others as the pendulum of business swings the other way.
Building long-term customer relationships should be a partnership between clients and hoteliers, with both sides needing to understand the overall objectives and goals that each have. However, developing these long-standing associations does not mean that good business sense should be replaced. As the hotel industry continues to recover, rate increases should be targeted. If hoteliers are finding themselves at full capacity, then why not be more aggressive on rates?
Perhaps the answer lies with dynamic pricing, a strategy that many hotel corporations are looking to implement. A dynamic pricing model shifts corporate rates according to the best available rate advertised by the hotel. If the best available rate goes up, so in turn does the corporate rate and vice versa.
Corporate buyers will see the incentive of sacrificing consistency for a discount based on the number of rooms they book per year with one particular hotel. Dynamic pricing has led to some companies being able to add their hotels to more and more corporate travel accounts.
Is dynamic pricing really a win-win situation for both hotel and client though? The more commitments hotelier’s receive, the more a corporate client will save in discounts. Most people are prepared to pay a fair price for a fair product.
Customer Strategy: Loyalty
Of course offering competitive rates is one way of attracting initial or repeat custom, which then leads to the long-term customer relationships every hotel wants. What the hotel product offers and the overall customer experience is what breeds customer loyalty also and encourages these established connections to blossom.
In a recent interview, Chris Talbot, Managing Director of Assured Customer Experience said, “Customer Loyalty is built by treating customers how they want to be treated. It is built by treating your team well so they treat your customers well. Customer loyalty can be improved by acting on customer feedback to enhance the customer experience.”
As the hotel industry does start to recover, it is important that customer loyalty that has been built up is not harmed by hoteliers looking to make short-term profits at the expense of what could potentially be long-term business. It is going to be a fine balancing act between good aggressive commerce and respecting the business that has been so helpful during this difficult economic period.
By Phil Benson