The Case for Modernizing Your Customer Value Score

Scores, status levels and ratings have long been used in the hospitality industry to assess the revenue generating potential of customers and prospects alike. In the lodging sector, customer scores can influence the upgrades and perks given to good customers, like a free room upgrade. They also are used to determine the amount of marketing resources directed at customers, the messages used to woo them, and the level of customer service support committed to retain them, such as VIP help lines. In other words, customer scores drive a lot of important resource and staffing decisions.

Unfortunately, most customer scores being used in the hospitality industry to drive these critical decisions are incomplete and highly flawed. Here’s why: customer scores are derived primarily from data that your company can see, based on your own real-world transactions with the customer. It’s natural that your customer score includes customer spend with your brand and that you take that into account; it’s a key ingredient. But if that’s the beginning and end of your real-world booking information about the customer, you are left with an extremely limited view of the customer’s actual overall travel behavior. 

Let’s look at the case of two of your customers who spend identical amounts each year in your properties, say $1100 apiece. For the first of these customers, that $1100 might represent 90% of their overall lodging spend for the year. They simply don’t travel that frequently. For the second customer, $1100 might represent a mere 8% of their annual hotel spend, as they use your brand as their “backup plan” when their preferred brand is sold out. That second customer deserves much more of your attention as you have a real shot at growing your share of wallet with them.

Fortunately, it’s now possible for the travel industry to use a ‘full customer and full journey’ view of the traveler by bringing together booking data from across travel verticals. (air, ground, hotel, etc.) By building a unified view of the customer and their potential to spend, travel brands can put these insights to work to better direct marketing spend, to better serve customers during their travels, and to make more efficient use of staff resources timed to arrivals, departures, and individual customer needs.

A Customer Value Score (or CVS) can now operate like a FICO score for the hospitality industry. This type of scoring indicates the customer’s relative value based on their characteristics and booking behavior - both past and present - using data from across the travel journey. The attributes factored into the score should include loyalty, frequency, recency, domestic/int’l, business/economy, long/short haul, LoS, and hotel star rating. Scores can be refreshed regularly to account for changes in travelers’ habits.

A robust CVS system can also help brands identify leisure vs. business travelers, identify luxury travelers, and predict the price flexibility of the customer. When coupled with a brand’s proprietary customer data and internal score, the CVS becomes a much more powerful tool in making critical decisions about how to deploy limited financial and staff resources. It also helps brands much better hone their marketing messages to the unique needs and preferences of the customer. A high spending leisure traveler who only uses your properties for their business travel, for example, should be introduced to your property’s entertainment, fitness, and spa services to grow your share of wallet.

In an industry where guests demand individualized attention and care, set amidst critical staffing constraints and constant competitive pressures, a much more robust CVS helps you to work a whole lot smarter. It’s time to put your outdated customer value score to bed and start filling more beds with the kind of customers that fuel growth.

ABOUT THE AUTHOR

Jeffrey Katz is founder and CEO of travel technology company Journera, which provides full journey insights and customer value scoring. He was previously founding CEO of Orbitz, CEO of Swissair and President of Sabre.