59% Increase in ROI for Starwood Hotels.
By Scott Hornstein
Saturday, 28th November 2009 |  |
Starwood is a large hospitality conglomerate comprised of many resorts and hotels nationwide.
We will be discussing one of their holdings: Caesars Pocono Resorts, a luxury resort comprised of four “all inclusive” unique properties. Located in the Pocono Mountains of Pennsylvania, the resort boasts the “world’s most spacious and luxurious suites” including features such as in-room pools, heart-shaped tubs and their patented 7-foot-tall Champagne Glass Whirlpool.
Once the mecca for honeymooners and couples, Caesars enjoyed one of the highest occupancy rates in the industry. Increased competition from Caribbean resorts, however, eroded market share. Economic downturns caused further challenges.
While honeymooners remain a highly profitable portion of their business, now vacationing couples represent the bulk of revenue.
The Goal
Caesars’ goal and challenge: Increase occupancy and revenue without increasing marketing budgets. This case history clearly illustrates the efficacy and efficiency of the three components of my marketing methodology:
- Voice of Customer (VOC) Depth Research
- Integrated Direct Marketing
- Opt-In / Consensual Marketing
We’ll explain each by example. Here is Caesar’s action plan and the results:
Start by Learning From Customers
The first step was to conduct Voice of the Customer (VOC) Depth Research, a powerful qualitative process designed to elicit customers’ opinions regarding marketing messaging and communications. Findings indicated a substantial opportunity for enriching the customer relationship and generating repeat business. Customers wanted to know:
- What’s new, what’s improved at the properties?
- What are the seasonal activities and sports?
- What are their special packages and rates?
- What big-name entertainment will be appearing and when?
Customers also expressed a great deal of interest in one of Caesars’ underutilized assets: a frequent stayer program entitled “Forever Lovers.”
Generating the Highest Return on Investment
Next was an analysis of the database and segmentation by the number of stays for each guest. Tiers or levels of stays were established to identify “best” guests – those who may have the greatest loyalty.
 Caesars conducted regression analyses to understand the historic probability of a one-time guest returning for a second stay, a two-time guest returning for a third stay, etc. Why?
So they could invest their limited marketing resources in the guests with the highest probability of returning, thus generating the greatest return on investment.
Each customer segment was further divided:
- One group would receive the new Caesars’ communications plan
- The other group would be the Control Cell – they would not experience anything new
Additionally, baseline statistics were established for key indices:
- Response rate
- Conversion from inquiry to reservation
- Average revenue per reservation
- Return on investment measured as the ratio of marketing expense to revenue
These baseline statistics were compiled from actual results for the same time period in prior years. A great deal of care and attention went into the effort to eliminate variables, such as seasonality and economic conditions.
Getting the Word Out
To “get the word out” to customers, Caesars relied on two important methodologies, Integrated Direct Marketing and Opt-In / Consensual Marketing Process.
Integrated Direct Marketing is the proven process for helping marketers achieve a precise, synchronized and highly relevant deployment of multiple media and field sales channels. It is the precision deployment of multiple channels that consistently achieves double-digit response.
The Opt-In / Consensual Marketing Process is a strategic rethinking of how you and your customers engage, resulting in an unprecedented exchange of information and value.
Customers Prefer Mail
Customers told Caesars that they preferred direct mail for in-depth information regarding the resort (e-mail, was seen as a vehicle for short relevant messages such as special rate promotions). Thus direct mail was reconceived as a newsletter to feature the specific amenities that guests liked most:
- Unique activities
- Upcoming entertainment
- Special offers which were versioned by customer tier
Newsletters were designed with variable sections to be able to present different groups with personalized messages. For instance, each newsletter featured both the upcoming big-name entertainment and improvements to rooms and facilities. However, rate offers were geared to generate reservations now from target groups and to encourage customers to book during historic times of lower occupancy, such as mid-week.
Caesar’s highly skilled Inbound Reservation Agents were diamonds in the rough – these Res Agents were so well versed in the properties, rooms, and amenities that each could paint a compelling verbal picture. A retraining initiative was begun to migrate them from being reactive to customer requests to have them provide proactive expertise and advice. This included:
- Viewing themselves as a key corporate resource – thus their job was to make the Caesars experience real and compelling for every caller
- Becoming proactive and guiding the call
- Actively listening and probing to clarify needs
- Attaching Caesars’ benefits to the guest’s needs
- Sending highly personalized fulfillment
- Screening and qualifying per a “propensity-to-visit” scoring model
- Asking for the reservation
- Determining next steps, as appropriate
Test Results
Test results were substantially above baseline and speak for themselves:
- 32% increase in qualified response. A “qualified” response is defined as:
From a high-performing source (e.g., direct mail list)
Originating from a “feeder” market or higher potential zip code
A prospect with specific travel dates in mind - 18% conversion rate to reservation
- 27% increase in average revenue per reservation
- 59% increase in return on marketing investment
- Expense to Revenue (E:R) under 10%
- 15% increase in revenue versus “business as usual”
Customers said, and source code analysis proved, that TV and radio were not important to customers and would not stimulate bookings and were thus eliminated. This resulted in approximately a 30% reduction in marketing spending.”
Provide Value-Added Service
While vacationers represented the majority of reservations and revenue, honeymooners were always the most profitable. These were longer stays (5 nights versus 2 – 3 nights for vacationers) and increased mid-week occupancy (vacationers were primarily weekends).
To address the needs of this unique market, Caesars introduced a value-added honeymoon service as a competitive differentiator. As honeymoon inquirers were received, their initial “propensity to buy” was calculated based on criteria which included:
- the location of the inquirer (e.g., state and city)
- immediacy of the wedding date
- reactions to probes concerning budget
- the source of the inquirer (e.g., what direct mail list, what bridal publication)
High propensity inquirers become high priority leads. Each lead received an outbound call from a specially trained Honeymoon Planner who was titled the Honeymoon Concierge (the idea came from VOC Depth Research, offering to help the bride with every aspect of her honeymoon:
- Transportation
- What to pack
- Meeting them when they arrive and introducing the new couple to the resort
- Arranging for amenities in their room, like champagne and bubble bath
- Helping them to meet other newlyweds
- Ensuring a wonderful time while on-property
Honeymooners Test Results
The results:
- 38% conversion of all prospects contacted by the Honeymoon Concierge
- 4% E:R
Introduce Line Extensions
Demographic overlays, database analysis and common sense showed that today’s Honeymooners could become tomorrow’s Vacationers. But then, as the Vacationers grew into young families, they came less frequently to Caesars. Why – because Caesars is seen as a couples resort. In fact, a growing percentage of the database was Vacationers whose pattern of stays was declining.
To address this opportunity presented by the maturing of the database, Doug and Chris tested repositioning one of the four properties as a family-specific resort. The risks:
- Would the increased presence of families impact core business – Honeymooners and Vacationers? Clearly, loud frolicking kids might not be what these folks had in mind.
- If the test was successful, it would mean redesigning many of the honeymoon-specific rooms. The current accommodations, replete with 7-foot-tall champagne bubble baths and heart-shaped whirlpools would be both inappropriate and a safety hazard.
The upside was significant, giving Caesars the opportunity to:
- Retain these long-term customers who had, in the past, shown a preference for Caesars
- Capture a greater percentage of their vacation dollars
- Minimize the cost of sale
Line Extension Test Results
The test was remarkably successful, and created a new profit center. These families were delighted to embrace Caesars as a family resort. They identified Caesars with quality and value. The decision to bring their young families was easy. Given the following results, the investment to retrofit all rooms to be family-friendly was also easy:
- 10% conversion to a family vacation
- Cost per reservation: less than $20
The following case history is adapted from my latest book, Opt-In Marketing: Increase Sales Exponentially with Consensual Marketing. This book provides the rationale and “how to” information for engaging customers in unprecedented levels of dialogue and information sharing. It is this ability to define and deliver value over time that solidifies relationships with customers so they stay longer and buy more.
Scott Hornstein is an author, lecturer and consultant, with over 30 years experience in all phases of marketing, research and implementation. He is president of the consultancy Hornstein Associates. His latest book, Opt-In Marketing: Increase Sales Exponentially with Consensual Marketing, was just published by McGraw-Hill. Scott can be reached at scott@hornsteinassociates.com or 203.938.8715.
www.hornsteinassociates.com |
