CLTV Case Study
Customer Lifecycle and Segmentation : Home Away from Home hotel

Like many industries, hospitality has been negatively impacted by the recent economic downturn. Year-end occupancy rates and average daily rates for 2009 were down 9% from previous year. Forecasts predict that 2009 year-end occupancy rates and average daily rates will both be down almost 9% from previous year. Consumers are traveling less as other household expenses take precedence. While reservations are down, cancellations continue to go up. According to industry experts, cancellations of existing reservations are running up to 50% above normal at full-service hotels.

Corporations and associations are delaying meetings and business events in order to minimize business spending, deeply impacting hoteliers as corporate travelers are a significant segment of their customer base. As a result, hotels are focusing more on leisure travelers and corporate transients and less on corporate group events.

A leading company in the hotel, convention and entertainment industry came to Five x Five for help with target marketing to their leisure travel customer base in hopes of acquiring new customers and retaining their best ones. Like other hoteliers, this company was experiencing an increase in cancellation and attrition rates and a decline in their revenue per available room (RevPAR).

We proposed a two-phased approach that included customer profiling and a market study.

Phase 1: Conduct a transient leisure customer analysis that included customer segmentation and profiling.

Phase 2: Conduct a market penetration study to measure the addressable market around each of the hotel properties or within the client’s seasonal source markets.

We were able to develop an actionable custom profile of the client’s current customer base based on available demographic and lifestyle data. Using demographics, behavioral characteristics and previous stay characteristics, we created a profile of customers who were most likely to stay at a client property. Combining the customer profile information with the results from the market penetration analysis allowed the client the ability to design segment- and market-specific campaigns and offers.

Because our client was able to target their promotional offers and messaging to customers who were more likely to respond, marketing effectiveness for these campaigns is expected to increase by 50%. The client will also use our segmentation and penetration analysis to determine the markets in which they should run mass marketing campaigns in addition to direct marketing.

Through our analytics, we also provided this client with a better understanding of a customer’s estimated value using room rates, length of stay and non-room purchases. With the customer value information and a prospect’s likelihood to stay, our client is now able to substantiate its marketing plans, enhance its measurement of key marketing activities with significant analytics, and drive higher returns on marketing investment.