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A study released this month in the Cornell Hospitality Report identifies a substantial increase in spend and stay frequency after a guest enrolls in Stash Hotel Rewards, the nation’s largest points-based loyalty program for independent hotels.
The researchers found that after guests enrolled in Stash, they returned to a hotel nearly 50% more often and increased their annual spend by a similar amount. That shift translated into incremental annual per guest revenue of $405−$780.
The study, “Assessing the Benefits of Rewards Programs: A Recommended Approach and Case Study from the Lodging Industry,” was written by hotel loyalty program experts at Cornell University, Ithaca College, and Michigan State University.
The researchers compared guest behavior at 24 hotels participating in Stash, with the hotels providing over two years of transactional data for more than 50,000 guests, both members and non-members. The team measured the change in spending after a guest enrolled in Stash, employing a methodology that controlled for self-selection bias – the tendency of a hotel’s best guest to enroll in a loyalty program.
Stash Hotel Rewards CEO Jeff Low participated in a Q&A with Loyalty360 to discuss the study.
What prompted this study?
We reached out to Clay Voorhees and Mike McCall more than two years ago to talk to them about Stash. Clay and Mike, professors at Michigan State and Ithaca College, respectively, are two of the leading experts (if not the leading experts) on hotel loyalty programs. We all agreed that Stash provided a unique research opportunity. Since the program is so new, Stash’s impact on guests could be studied more easily than with a program that had been around for longer. For them, Stash was a brand new laboratory where they could run experiments.
It says the study revealed significant changes in guest behavior that can be directly attributed to Stash. Specifically, what were some of these significant behavioral changes that impacted their engagement at the Stash hotels?
There were really two significant behavior changes – an increase in how much a guest would pay for a room and an increase in how often a guest stayed.
1. Change in how much a guest would stay – aka Average Daily Rate Increase: The study showed an increase in the price of the room that a guest paid for after joining Stash. At Hotel Group A, the ADR (average daily rate) for a guest increased by 4%. At Hotel Group B, the ADR increased by 1%. Those aren’t huge numbers and really isn’t where the impact was seen.
2. Change in how often a guest stayed – aka Increased Frequency: This is where the big change occurred. The study showed that after joining Stash, a guest stayed a lot more often at the enrolling hotel. At Hotel Group A, guests stayed 45% more often after joining Stash, moving from nine nights a year to 13 nights a year. At Hotel Group B, guests stayed 49% more often after joining Stash, moving from six nights to nine nights a year.
These two changes work together, which resulted in substantial increases in annual revenue per guest. Hotel Group A – a 57% increase or $405 per guest enrolled. At Hotel Group B, a 49% increase, or $781 per guest enrolled.
How long did the study take?
About two years. The research team spent a lot of time collecting and then analyzing the data. Developing the right methodology was the most difficult part.
One of the challenges in measuring loyalty program effectiveness is separating correlation and causality. Is the program making your guests loyal or is it just that your best members are enrolling in the program? The research team applied a methodology used by epidemiologists and social scientists to create a control group so that the self-selection bias could be accounted for. They did this by matching each guest enrolled in Stash with another guest whose behavior up to that point was essentially identical. That was no easy task. The team’s computers needed to run for days to identify these pairs and often crashed. Eventually the team had to find more powerful computers at their universities to complete this matching process.
The report is arguably the most thorough behavioral analysis of a loyalty program ever published. Not just among hotel loyalty program – buy all loyalty programs. Our understanding is that no one has ever conducted a study like this before – a statistical analysis of actual behavior pre- and post-enrollment in a loyalty program, using a methodology that accounts for self-selection with a robust control group.
What is your biggest takeaway from this study and what does it say about the engagement power behind the Stash Hotel Rewards loyalty program?
The impact of the program is actually much greater than what we had hoped for. And I think it underscores just how important points and other forms of recognition are to travelers.
Stash is just getting started. We don’t yet have elite status, soft benefits, a credit card, etc. (Though those are all in the works.)
Right now, Stash is mostly just a points program. And yet we’re already seeing these enormous shifts in behavior. As we add those other loyalty benefits, we’d expect to find even more loyalty to the hotels participating in Stash.
How many Stash Hotel Rewards members are there?
There are more than 300,000 Stash members. We launched in 2010 and our membership doubles about every 14 months.
While 300,000 members is dwarfed by the membership of chain programs, the average Stash member is more engaged in the program and travels more often than the members of any other program. For example, our average member spends more than 38 nights a year in a hotel.
Why do you think guests are increasing spend this much at your participating hotels?
And at the end of the day, it’s the amazing independent hotels that are part of Stash. Most people agree that independent hotels are just better. Surveys by TripAdvisor, Condé Nast Traveler, and Travel + Leisure all show that. Who wants to stay at a cookie-cutter chain hotel that looks exactly the same wherever you go when you can stay at an independent hotel with a distinct character and a guest experience that truly reflects the place you’re visiting?
But many travelers are trapped by their need to earn points – which is often the reason they’re staying at the chain. Stash changes that. Travelers don’t have to compromise on their hotel choice just to earn points.
And I think that’s what underlies the shift we’re seeing in this study. It’s not that people are traveling more often. The 50% shift is the result of travelers choosing not to stay at a chain hotel. Because they can now walk past the generic Courtyard or the Hilton Garden Inn to the great independent hotel – knowing that they’ll also earn points.
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