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

Executive Summary:

An analysis of the loyalty programs for two groups of independent hotels demonstrated a notable lift in patronage after guests joined the program, even accounting for the fact that these were already the hotels' best customers. While ADR for the loyalty program guests increased modestly (1 percent for one hotel group and 5 percent for the other), the number of annual room-nights for each guest increased by nearly 50 percent for both hotel groups, increasing total revenue per year per enrolled guest by a similar amount. 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. In addition to documenting measurable financial effects from the hotels' reward program, the report demonstrates a logical way to evaluate program effectiveness with the paired customers approach.

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• Assessing the Benefits of Rewards Programs: A Recommended Approach and Case Study from the Lodging Industry By: Clay Voorhees Ph.D., Michael McCall Ph.D., and Bill Carroll Ph.D.