How hotels can drive greater customer lifetime value

When it comes to hospitality, your customers are at the heart of everything you do. You want to create experiences that exceed customers’ expectations, ensuring they return time and time again. 

One of the key metrics to measure that success is customer lifetime value (CLV). This metric provides insight into how much revenue a customer can generate for your business throughout their lifetime.

Keep reading to learn everything you need to know about CLV and how to enhance your customers’ relationship with your brand. 

What is customer lifetime value?  

The definition of customer lifetime value is a pretty straightforward one: CLV represents a customer’s value to a company over a period of time. CLV takes into account the amount of money a customer is likely to spend on repeat stays with your hotels, referrals and other interactions with your brand. 

You can calculate a simple customer lifetime value model for your brand with this formula:

But simply calculating customer lifetime value isn’t the most important part - it’s how your company benefits from that calculation that actually matters. 

Why is customer lifetime value important for hotels?  

Customer lifetime value calculations are so essential because they answer an extremely important question: How much money should you spend to acquire customers? 

Your customer acquisition costs (CAC) might equate to more than what the customer spends on their first stay at your hotel. But that doesn’t take into consideration the entire length of their customer lifespan with your brand. Are you still making more from that customer in the long run? Calculating the lifetime value of a customer to your company will give you that answer. 

For hospitality professionals specifically, there are certain challenges that come with fueling greater customer lifetime value that can factor into the equation. They are:

• Customer retention. Are customers enjoying their experience with the hotel? Are they looking forward to their next experience? Are your marketing strategies also helping to foster brand loyalty? For companies to appropriately facilitate customer retention, those questions must be answered. Hoteliers must also have a deep understanding of their customers’ journeys and be able to anticipate and predict future behavior. 
• Access to real-time customer data. Change is a constant in the hospitality industry. Because of this, hotel brands need to be able to personalize marketing communications using real-time customer data, all while taking into account the near constant updates to pricing, availability, and customer behavior. If “real time” doesn’t truly mean “real time,” you may be wasting money unnecessarily. 
• Staying one step ahead of the competition. Customer expectations are higher than ever. Having the right strategy to foster customer loyalty and the right marketing technology to differentiate yourself from your competitors and stand out in a crowded marketplace is crucial. 

With these challenges in mind, hospitality businesses can understand the lifetime value of their customers and craft the right marketing campaigns that speak directly to their needs.

Create valuable customer experiences with omnichannel marketing  

Omnichannel is much more than just a marketing buzzword in today’s crowded digital marketplace. Hospitality professionals all over the world are using artificial intelligence in their omnichannel marketing efforts to ensure that their customers are satisfied.

What exactly is omnichannel marketing? Essentially, it’s a multichannel approach to marketing that’s focused on providing seamless customer experiences, no matter where the customer is engaging with your brand.

While omnichannel vs. multichannel strategies might seem similar, the key difference is that omnichannel connects all your channels so that every touchpoint that your customers have with your brand informs their next interaction. An omnichannel strategy focuses on the entire customer journey and not just the customer’s individual experiences on different channels.

Adopting an omnichannel strategy is essential for building long-lasting and valuable relationships with your customers. Here are six specific use cases that are designed for your hotel to win with omnichannel marketing:

• Increase conversion rates with price drop campaigns. If your collected customer data tells you that a customer wanted to stay with your hotel chain in a particular location, why not notify that customer when a room there goes on sale? You can send a personalized email campaign detailing the discount and follow up with an SMS notifying the customer of when that sale will end (as long as they’re opted in to receive mobile communications). 
• Improve engagement and conversations with AI-based personalized recommendations. Use AI-driven recommendations to recommend your best rooms or other accommodations based on a customer’s past behavior. AI can also base recommendations on available inventory in real time.
• Increase revenue-per-visitor (RPV) with upsell and cross-sell campaigns. This is great for customers who have already made a booking with your hotel. Since you know they have a trip coming up, why not try to offer additional services or experiences that’ll go along perfectly with that stay? Crafting these campaigns the right way with an omnichannel mindset will lead to improved RPV.
• Optimize personalization by showing the offer that customers will most likely convert on. Using AI to determine which one of your offers a customer is most likely to convert on will lead to customer satisfaction and brand loyalty. For example, would your customer prefer a discount code or a service upgrade as a hotel booking add-on? Use contextual personalization to serve the right offer — it’s proven to work. 
• Reduce customer acquisition costs (CAC) by optimizing your ads with high-intent lookalike travelers. Automatically send customer segments with the highest lifetime value to social platforms and create lookalike audiences to find more potential hotel guests with similar purchasing potential. This retargeting strategy ensures you aren’t wasting your ad spend on people who aren’t interested in traveling right now. 
• Improve conversions with best channel prediction. Using AI to make predictions will allow you to determine which channels customers are most likely to convert on. This will make your channel distribution more effective and increase conversion rates.

The best campaigns for hospitality companies are grounded in omnichannel marketing principles. Connecting customer experiences for your customers will help make their experience meaningful and boost customer lifetime value. 

Make customer data management a priority 

No matter what your plan is to increase customer lifetime value or how you intend to capitalize on the advice offered here, your first step has to be unifying your data and upgrading your customer data management. 

If you don’t know or don’t have access to basic customer attributes, like whether a customer is staying in your hotel for the first time or the 50th time, you can’t cater your marketing campaigns to their unique needs. Consistently meeting your audience where they are is your best bet at increasing customer lifetime value.