Policy Changes & The Customer Lifetime Value

In May 2015 made a change in their policies that, at first glance, many hoteliers may have viewed as a slight nuisance but nothing more: no longer does the Online Travel Agent (OTA) share the customer’s email address with the hotel in advance of the guest’s arrival.

Whilst indicated they were making this changes for security purposes, this also has a knock-on effect of the overall relationship between hotel & OTA: Where once was the provider of a service to the hotel (a distributor), there is a shift toward the hotel simply being the fulfilment end for’s business – in other words, the customer belongs to

But is this really that important? In a nutshell, yes.

The real value in a hotel booking lies in the lifetime value of the customer; whoever owns the customer has the opportunity to breed loyalty and repeat business. know this well, and hoteliers need to look at adapting their own marketing efforts to also learn this valuable lesson.

Below are our top 3 tips for how hoteliers should be viewing & changing their own marketing accordingly:

1. View marketing ROI in terms of Lifetime Value of the customer

In marketing (particularly in digital) we are often guilty of looking at the return on investment only as the amount of revenue generated from bookings. However, this is only one piece of the puzzle – the true value lies in the Lifetime Value of the customer. Consider for example, a business traveller who stays in London every other month, typically dines in the hotel restaurant or takes room service, and occasionally extends his visit to a long weekend in the city with his family – the lifetime value of such a customer is extremely high, certainly much more than the value of a single booking. Surely this therefore warrants spending more on marketing & advertising to encourage this customer to book direct rather than going via an OTA for every visit?

This should be an important factor in determining your marketing budget and strategy – would you spend more on marketing if you considered the full lifetime value of new customers? How much of your marketing budget & efforts are focussed on loyalty & repeat business?

Hotels should seek to calculate the typical Lifetime value of their customers and use this when considering the return on investment of their marketing efforts.

2. Compete with OTAs to retain customers directly

We have previously discussed how to work with OTAs efficiently on our website, and one of the key elements is firstly to ensure you are maintaining parity with the OTAs and, wherever possible, to offer guests an added incentive to make their booking direct. Hotels cannot expect to retain their customers directly if they can get the same or better deal through another well-known & trusted provider.Similarly, hotels need to compete within the same spaces as OTAs and ensure that their brand is not being misrepresented or taken advantage of. Specifically, hotels should consider running Brand PPC to limit the exposure of OTAs in search results for their hotel name, and use Meta search marketing to show the direct rates & availability on popular travel sites in the same way that OTAs already do so well.

3. Convert OTA customers into direct customers next time around

Whilst may be withholding the email addresses of their customers before arrival, hotels still have the opportunity to connect with guests during their stay and turn them into direct customers in future.Hotels should capitalise on this opportunity to increase the lifetime value of their customers. Using loyalty programmes, exclusive offers for existing customers through email & social media, etc. hoteliers can encourage those guests who have enjoyed their stay to book direct on repeat visits and thus reduce OTA commission as a result.

If you are a hotelier seeking to understand and increase the lifetime value of your customers, we would love to hear from you so please get in touch »