Tuesday, September 14, 2010

Ritz Carlton Adds Loyalty Program

For years, Ritz Carlton hotels did not offer a royalty program. Of course, many mainstream hotel brands do (Starwood, Marriott, etc.). Now, facing reduced occupancy rates and pricing pressure since the financial crisis began, Ritz Carlton has decided to offer a program. The Four Seasons has responded by saying it has no plans to offer such a rewards program. What are the risks for the Ritz? The real issue is whether the program is simply viewed as a price discount. If all you are offering is free rooms after a certain number of stays, then you may be harming the brand and hurting margins over time. However, a loyalty program can be much more than just a discount program. First, you can capture information about your customers and use that information to enhance service and drive new revenue opportunities. Second, you can use a loyalty program as a vehicle for gathering crucial feedback from customers about how to improve your product or service. Third, you can use a loyalty program to offer unique, even tailored, benefits and services associated with their stay at the hotel. That tailoring can make customers feel very special. If the Ritz can fully capture these sorts of benefits from a loyalty program, they will be creating value, and perhaps even raising willingness to pay for their product, rather than simply offering price discounts.

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