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Indian Hotels: Who Says Loyalty Pays?

World over hotel chains have made Guest Loyalty Programmes (GLP) the juiciest marketing bait to attract and retain guests. Vyas Sivanand tries to find out how Indian hotels have stitched GLPs into their marketing fundamentals as compared to international brands and the benefits brought in by them

The ultimate purpose of a GLP is to build sales. Though the realisation seeped into India's hospitality industry in a rather lackadaisical manner, it is now considered to be pertinent taking into account the benefits it holds. It becomes even more relevant considering the high revenues and occupancies garnered by most international brands due to GLPs. But even though home grown brands have a ready reckoner to chart out their programmes, there still is a huge lacuna.

While there are only a handful of luxury chains in the country, the manner in which hotel chains are trying to increase the per-bill amount customers spend and expand the frequency of visits by existing customers, needs a revival. Indian hoteliers are lagging behind in comparison to international brands, when it comes to designing loyalty programs in a focussed and measurable way, while also trying to have the flexibility to execute all functions.

Among the Indian chain hotels, it is only Taj and ITC which have traveller centric GLP in place while all other viz. Oberoi, Leela, and Sarovar do not have a GLP. Oberoi had a GLP named TOP till sometime back but they dropped it after realising that many aspects were proving redundant.

They are now planning to re-launch it soon. Leela does not believe in GLP but in a Guest Recognition Programme, where they try to understand the needs of the guest and upgrade services. Sarovar has GLPs at individual hotel levels and not at the central level. They are planning to launch one soon.

International Vs Indian Hotels

Guest loyalty has faced tepid reception among Indian hotels, mainly due to the previous limits of the technology involved in administering these programs. Worldwide, beginning with simple punch card systems, GLPs have evolved into 10 percent across-the-board discounts once a customer reaches a certain level of spending. Now, new Point-of-Sales (POS) integrated systems allow management to harness robust database platforms gathered from customer transactions and offer flexible reward options while using proven tactics borrowed from the supermarket and travel industries.

Hotel schemes, despite having a potentially greater appeal, have not taken off in the same way as the airline schemes, world over. In India too, the GLP concept is not as widespread or strong in hotels as in the airline industry. Most hotels tend to latch themselves on to this aspect and thus have tie-ups for mileage programs. "In India, not every hotel chain has a GLP as elaborate as those prevalent in international brands. The programmes are just beginning to get more elaborate and the change is beginning to show. Initially there were several issues which hampered such programmes especially the one with redemption, wherein there were taxation issues when it came to redemption of a guest's free air ticket, etc. Compared to the international brands or even the hotels in the West, we are still to go a long way especially considering the fact that the presence of international brands in high volume cities like Bangalore, Hyderabad, Chennai, etc is not deep. While India is a hot destination, it is still not on the map of many airlines especially the American network," says Sunil Mathur, head-development - India & Middle-East, Cendant Corporation.

While world over, market economies are on the high, in India the market is still to mature. There is seems to be a huge gap between marketing fundamentals. "We are at par with the west in terms of procedures and products but we are not, when it comes to the number of people using them. Also, it is not yet part of our culture. Our culture currently is to go for something that has immediate results, but not on building the result. It will definitely take some time before we have it in our culture," says Rahul Bubber, sales & marketing director, Le Meridien.

Response from travel agents on the best loyalty programmes (No. of Respondents - 100)

GLP Benefits

Hooking repeat guests allows companies to optimise marketing budgets in an increasingly competitive and commodity-driven time. Hotel brands that have realised this are making frequency programs more expansive as well as expensive. They are adding new features, tossing in value-added benefits, and devoting more resources to promoting the programs via the Internet and direct mail campaigns.

"Not all GLPs are effective. An effective GLP has to abide by two principals; one is to add value to customer spending pattern and secondly, it is meant to recognise and reward the patronage of the customer. If these two principals are in place, the programme is bound to be effective," says Ratnesh Verma, area director - South Asia, Hyatt International Hotels & Resorts.

A comprehensive loyalty programme improves all areas of guest revenue. It defines the brand, increases repeat visits, shifts guests into higher-value properties, fills lower-value properties earlier using reduced or delayed discounting, reduces marketing costs and provides a foundation for superior Customer Relationship Management (CRM). The benefits of CRM and loyalty programs in related industries are undeniable.

According to most hoteliers the incremental benefit through these GLPs are huge and it has become very necessary for hotels to stitch the programme in their strategies. "There is always an incremental change of about 5 to 7 percent, which if quantified would be huge. I feel hoteliers should take up the GLPs more seriously, as they are bonus business. GLPs are very necessary to hold on to in any market, today," says Mathur.

Agrees Anil Madhok, managing director, Sarovar Park Plaza Hotels & Resorts, "I feel any sensible hotelier would bank on the GLPs even if there is a boom, because the good days will not last forever. It is during such times that hoteliers need to be more careful with GLPs, otherwise guests are bound to misunderstand their behaviour. GLPs are a very effective tool in getting repeat guests, which reflects on the revenue. Hoteliers usually set aside 3 per cent of their room revenue towards rewards."

Market Flexibility

Most hoteliers feel that GLPs cannot be market oriented. Even if there is a boom or if the occupancies are low, hotels should have a consistent GLP across the board. "I do not believe that the programme is meant to attract customers, but are meant to recognise and reward the guest for their patronage. So why should we provide them GLPs only when times are bad for us? We at Hyatt have a consistent programme worldwide, so even in India, it is the same as anywhere else in the world," says Verma.

But Bubber provides a more insightful view. He says "There is no such thing as a quick win. For GLPs to be successful, there has to be a combination of the right brand, the right market, the price and the right product. I think, it should be market oriented because then they can be leveraged. For example, Taj can easily and successfully leverage on the popularity of certain products in different markets. They have done that successfully in Kerala. But with brands which manage properties and have multiple owners, it becomes too difficult to leverage. But while GLPs should be market oriented, it should necessarily be driven by value and not price. For example, in the retail sector, Shopper's Stop has a GLP and Pantaloon does not, but both are equally successful."

Another example of market sensitivity is Choice Hotels. Choice's international loyalty programme is not available in India as it does not support large travellers into the country. According to Sandeep Gupta, executive director, Choice Hotels, "We have not yet launched a GLP for the Indian market as we want to modify the programme according to the Indian requirement and see how much redemption we can offer."

Conclusion

Over the years, GLPs have proved to be a successful tool for hotels around the world, but in India, it has not yet been used to its full potential.

This is especially because, other than two chains (Taj & Oberoi), there are no others with large number of properties. Considering this, Indian hotels have a long way to go in terms of GLPs in comparison to the international brands. Even the number of members as well as the packaging of the GLPs needs to be consolidated in a more mature manner. But it will definitely take a while before home grown brands fall in the same league as international brands in their offering of GLP.