June 28, 2023

Improving Customer Lifetime Value (CLV) with a Hotel Booking System

Posted By: Admin


Understanding the lifetime value of a customer is the foundation of successful hotels. In today's competitive market, guest acquisition costs continue to rise. It is crucial for hospitality businesses to build ongoing connections with their visitors, improve the guest experience, and have a profitable customer lifetime value (CLV).

Here’s how an advanced hotel booking system can increase your CLV and create brand advocates.


Hotel Customer Lifetime Value Explained


CLV Defined

Customer lifetime value is the expected revenue your hotel will earn from each guest over the lifetime of their relationship with your hotel. This factors in first-time bookings, repeat bookings, and the amount of resources used to retain guests.


Why It’s Important

CLV is an essential metric for determining the quality of guest experience your hotel provides. Since CLV can be positively influenced by a great guest experience and repeat business, it's important to also focus on existing guests. This can be a much more cost-effective way to boost bookings compared to acquiring a new guest.

Not only can customer lifetime value help save you money on acquisition costs in the long term, but CLV also:

  • Helps you understand how much you can spend to acquire new guests to make a profit
  • Represents a faster path to directly-booked revenue with repeat guests
  • Helps plan strategies to encourage loyalty, increase revenue, and drive profits


Calculating CLV

CLV can be calculated at a company level, a guest segment level, or an individual level.

To calculate it, you’ll need to know:

  • The average spend per guest per stay
  • The average number of stays per guest per year
  • How long the average guest will have a relationship with your hotel

Here’s a simple formula to help you remember:

(Average Order Value) × (Number of Repeat Sales) × (Average Retention Time) = (Customer Lifetime Value).


How a Hotel Booking System Improves Customer Lifetime Value


Reduces Guest Churn Rate

A high churn rate is one of the main reasons for poor CLV in the hospitality industry. When guests are unsatisfied with their experience at your hotel, they are less likely to return. The guests who don't return are part of your churn rate, and a higher guest churn correlates to a lower CLV. This can cause a continuum of negative return on investment (ROI) until resolved.

With a hotel booking system, you can take advantage of automated tools to gather feedback, discover which clients are dissatisfied, and then learn why they feel that way. 


Automated Tools To Reduce Guest Churn

Chat Bots

One helpful AI tool for improving your CLV is chat bots. A chat bot is a rapid and efficient hotel technology tool that lets you interact with visitors at multiple touchpoints.

Chat bots make it simple for you to streamline tasks, respond to guest questions, and improve their experience to reduce your hotel’s churn rate and improve your CLV.

Guest Satisfaction Surveys

Taking advantage of automated surveys and reviews for your guests is a simple, yet extremely effective way to improve your hotel’s CLV.

Automated surveys and reviews can offer actionable insights into your operations via direct feedback from your guests. Manually sending these to your guests is inefficient, causing your staff to miss out on other areas of improving your business. With automated surveys and reviews, however, you’ll optimize your operations and give your staff the ability to focus on other duties.


Streamlines Guest Communication

As simple as it seems, a simple check-in before, during, and after your guests’ stays can pay massive dividends. It not only boosts the guest experience, but it also provides multiple opportunities to upsell amenities and services to increase your bottom line.

A few ways a guest portal can enhance communication with your guests, and therefore, boost CLV are:

  • Greeting your arriving guests with a quick, polite text message or email
  • Including important booking details such as early check-in or transportation arrangements
  • Sending booking confirmations or checkout reminders throughout their stay

With your hotel booking system’s guest portal, you can automate these communications. These can further optimize your operations, offer instant information, and improve the guest experience — encouraging them to book at your hotel again and improve their CLV.


Incentivizes Guests To Return

Another common reason hotels struggle to increase their CLV is competition for guest loyalty. Standing out from competitors can be challenging when guests can discover their next place to stay with just a few swipes on their smartphones.

The key to cementing your hotel as a premier destination and maximizing your CLV is to establish strong relationships with your guests and earn their trust. 

A hotel loyalty program with your hotel booking system can accomplish both.

Loyalty programs can increase customer lifetime value and repeat business by rewarding frequent visitors for their stay. For example, you can reward guests with discounts for a certain number of bookings to encourage them to return to your hotel.

These rewards are entirely based on your parameters; you can adjust the number of points gained or depreciated as well as what they can be redeemed for. The customizable options for improving your loyalty program — and ultimately revenue and CLV — are nearly endless.


Utilizes Advanced Digital Marketing Tools

A vital component of improving CLV is your digital marketing. Without modern, advanced marketing tools, you risk missing out on opportunities to boost your revenue, encourage your guests to return, and ultimately improve your hotel’s CLV.

A hotel PMS can save information on your visitors — such as birthdays, anniversaries, and special requests — to maximize your digital marketing opportunities. With Electronic Digital Marketing (EDM) modules, you can structure unique messaging without increasing the amount of manual labor required. This enables them to concentrate on other ways of developing lasting connections with visitors and helping you increase your CLV.

By capitalizing on digital marketing tools with your hotel booking system, you’ll cultivate stronger relationships with your guests by providing personalized messaging, boosting your hotel’s CLV as a result.


Improving Your CLV with Solonis

Increasing your customer lifetime value to improve your bottom line begins with enhancing and cultivating the guest experience. However, improving your CLV is just scratching the surface of creating a profitable and enjoyable hotel. It’s essential to understand the other contributing factors to your guests' stay at your hotel and the processes that might stand in the way of a truly remarkable experience.

Learn more ways you can grow and streamline your business by downloading our guide, Achieving Operational Excellence, today.

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