What is the relevance of Customer Lifetime Value (CLV) in

Hotel Industry?
• Measuring CLV requires knowledge of the variable revenue and costs from an individual customer
• Determined by the nature of the customer’s activity with the hotel
• Enables predictions for customers that have minimal or no historical purchase data
• Response to changes in factors that affect behaviour such as price changes, loyalty campaigns and
product enhancements
• Once a Hotel has an effective CLV metric in place, it can monetize that investment through
customer acquisition efforts
• An effective customer acquisition tactic is to offer discount offers to prospective customers
• Can guide Hotels as they decide what offers should be presented to individual customers
• Channels that should be used for the communication of those offers
Contd.
• Some customers are more receptive to the price of the room, some value the amenities of the
property, some want proximity to other destinations
• Understanding which type of incentive is most important to a customer can dramatically
improve the ROI on marketing investments
• CLV adds value to a hotel is through performance measurement, particularly in comparing
operations in different geographic regions
• Components of CLV are helpful in providing guidance on how best to improve operating
performance
• Incremental revenue, incremental costs and expected future purchase activity – can indicate
on what margin an operation can improve
• Through the CLV, Hotels would be able to identify the "low-hanging fruit" in its operations
• Quantify how much improvement in that one metric will affect overall operating margins
• CLV enables an estimate of what improvement in each metric will have on customer profitability
How will it be different from other industries?
• The retail industry is one in which customer loyalty is low and the propensity to switch is high
• Classed as a highly price-sensitive, disloyal and commoditised sector
• In automotive industry customer demand is typically driven by a range of factors
• Technological advancements, public opinion, cost, life stage and fashion
• Factors are extremely difficult for companies to control or influence
• The media and technology and telecoms industries also face a similar challenge
• Firms in these two industries are impacted by a wide variety of factors
• Factors- quality of aftersales, perceived quality of product, influence of friends and family and
competitive pressure
Contd.
• The highest loyalty (and lowest switching rates) are within the professional services sector
• Due to the personal, one-to-one nature of client/company interaction
• In the utilities industry, customers are amongst the least likely to switch to a competitor
• 60% of customers are neither likely nor unlikely to switch
• Two-thirds of gas and electricity customers have never changed supplier
• The perception of an extremely lengthy and tiresome procedure.

Source of data: digital- marketing magazine


What changes in
organization structure will
you recommend when the
Hotel implements the
customer profitability
approach?
- "Don't fix what ain’t broken“
Since the hotels have been performing very
well on their own and have withstood the
changing scenarios over the years and
proven themselves there is no need to
change the hotel organization structure at
grass root level.-
- Ensuring plan execution
Since the hotel managers are quite attached
to the success story of individual hotel
branding, we need to ensure their resistance
does not come in the way of execution, and
a brand manager need to be appointed to
ensure successful transformation of brand