Benefits of the customer loyalty scheme and brand loyalty programmes of Accor Hotels: A case study based on Mercure London City Bankside Hotel

 

Table of Contents

Executive summary. 4

Introduction. 5

Accor Hospitality. 5

Loyalty schemes. 5

Aims and objectives. 6

Background of organisation and the loyalty program.. 6

Mercure Hotel — London Bridge. 7

Le Club loyalty program.. 7

Literature review.. 9

Types of loyalty. 10

Importance of loyalty in service industry. 13

Rewarding for loyalty. 14

Importance of relationship. 15

Importance of loyalty programs in the hotel industry. 15

Summary. 17

Methodology of research. 19

Aims and objectives. 19

Research philosophy. 19

Research approach. 20

Research design. 20

Data collection. 21

Primary data collection. 21

Data analysis. 22

Results analysis. 23

Role of customer satisfaction in loyalty. 23

Individuality of hotel 24

Satisfaction and loyalty. 24

Multi-brand loyalty program – advantages and disadvantages. 25

Data and information from membership. 26

Negative characteristics of loyalty programme. 26

Characteristics of Mercure London Bridge hotel 27

Promotion of the loyalty schemes. 28

Design of the rewards/benefits to customers. 28

Conclusion. 30

Aims and objectives. 30

Advantages to the customers. 31

Implications for Accor group. 31

Implications for Mercure London Bridge hotel 32

Further research. 32

Recommendations. 33

Capturing the restaurant customers. 33

Strategy for management 33

Bibliography. 34

Appendix. 37

Questionnaire for interview.. 37

Transcripts of interview.. 37

 

 

Executive summary

The below research on the subject of customer loyalty in the hotel industry and fostering such loyalty through a multi-brand loyalty programme by Accor group of hotel evaluates the concepts relating to behavioural and attitudinal loyalty. It was found that loyalty programs not only reward the customers for repeat purchase behaviour, but also has an important strategic role in collecting the information about the customers. The various viewpoints relating to the implementation of loyalty programs, design of reward schemes and the utilisation of information collected from the customer are discussed. In the case of Accor hotels, there are several brands with differentiated service offerings and the reward scheme is an integrated one. The Accor hotels reward scheme provides points to the customers for staying in the participating hotels/brands such as Sofitel, Pullman, MGallery, Grand Mercure, Novotel, Suite Novotel, Mercure, Adagio, Ibis and Spa.

Through convenience sampling method two managers and four junior managers in the marketing department were interviewed. From the research, and mostly through the interview data it was found that the customers are able to accrue the points for their stay and spend at the hotel, and redeem their loyalty benefits at more than 2500 participating hotels from the lower end Ibis (budget hotel) to the upper end luxury Sofitel and Pullman hotels. The customers are able to exchange these reward points at various points of sale such as at the airports, taxis and related travel services. All the redemptions are targeted at the travelling customer and their needs and hence travelling customers are benefitted. The loyalty programme is also inducing the customer to spend more as the rewards collected can be redeemed against the services of the different hotel properties.

Since there is collaboration between travel and hospitality organisations, Accor hotel is benefitting significantly. It is clear that with the entire organisation the Mercure Hotel is also benefitting from the multi-brand loyalty scheme. The customers at the bottom of the pyramid in the brand structure of Accor group would be moving upwards and there are a considerable number of properties under the lower mid-scale and lowest scale such as the Ibis. The recommendations is to target and capture restaurant customers with the help of direct sales approach from the waiters and customer facing employees in the restaurant to become member in the loyalty programme. The customer-facing employee’s right from the lobby to the restaurant should be provided training to give special service to such repeat customers.

 

Introduction

There are several hotel groups, which operates hotels in different industry segment from budget hotels to luxury brands. The customers of one of the segment can be considered as the customers of the entire hotel group itself. Accor hotel is a French multinational hotel chain, which operates several hotels in different sectors such as Ibis, Mercure, and Novotel etc. The following are the different hotel brands operated by Accor hospitality group

Accor Hospitality

• Budget brands
  • EtapHotel, Formule1, Ibis Budget, Motel 6, Studio 6
• Economy brands
  • Ibis, All Seasons
• Midscale brands
  • Novotel, Mercure, Adagio, Grand Mercure
• Upscale brands
  • MGallery, Pullman
• Luxury brand
  • Sofitel Hotels and Resorts

(Accor group, 2012)

Loyalty schemes

The Accor hotels group has a customer loyalty scheme and a brand loyalty scheme where not only the loyalties to specific brands are rewarded but also the customers using the different brands in the hotel chain are rewarded for the loyalty. The development of loyalty scheme for not only the brands but also as customers for the entire group is not only seen in the hotel industry but in other industries such as retail. Taking an example Tesco operates several retail store formats and the customers to one store can avail the loyalty schemes from all the different retail formats. Moreover, Tesco is expanding the loyalty scheme to include the other operations such as insurance and banking (Allaway, Huddleston and Whipple, 2011). Using this method of inducing the customers to use a variety of different brands has the potential of promoting the entire group and not only one single hotel brand (Huang and Huddleston, 2009). This has consequences in increasing the visibility of all the hotels in the group and thereby improving the level of customer loyalty towards not only one brand but also the other brands in the hotel chain.

Moreover, the hotel industry is having a global exposure and the customers travelling to different destinations can utilise the loyalty scheme at different brands of the same hotel chain in different destinations. The hotel chain may not have all the brands or the preferred brand of the customer in all the destinations across the world. Promoting a loyalty scheme based on the group can increase the performance of the entire group (Taylor, Celuch and Goodwin, 2004). However, the customer from an upscale segment of hotel when moving to the budget segment may be less satisfied because of the services provided in the budget segment. Hence, the loyalty scheme spanning across the group must also consider the requirements and needs of the customers based on their preferences. It may be advisable to implement a loyalty scheme for the customers who prefer certain brands in some specific segments with reward schemes to utilise the brands in the higher categories. Taking an example a customer using the midscale brands of Mercure and Novotel can be provided with the same kind of reward schemes for the higher segment such as Pullman and Sofitel. This can motivate the customer to move up the chain and provide increased profits to the entire group. The proposed research will evaluate the loyalty scheme provided by the Accor hotel group and whether one specific hotel segment is able to capitalise on the loyalty scheme across the group.

Aims and objectives

The aim of the research is to critically evaluate the concept of customer loyalty and analyse the effectiveness of the group loyalty scheme for the entire group and its benefits to Mercure Hotel at London City Bankside. A case study approach will be taken with the Mercure hotel, which is a midscale brand of Accor hotel group.

The objectives of the research are

1. To critically evaluate the concept of customer loyalty in the hotel industry
2. To analyse the reward strategy and different types of consumer loyalty
3. To evaluate the concept of providing a group loyalty schemes for the customers of the entire group of a hotel chain
4. To analyse the benefits of the group loyalty scheme to all the brands in the organisations
5. To analyse the potential benefits of the group loyalty scheme to the midscale hotel brand of Mercure hotels

Background of organisation and the loyalty program

Accor hotel group is an international hotel chain with several brands under its portfolio. Mercure Hotel is the midscale hotel brand of the Accor portfolio operating in 49 countries, having 730 hotels and a total strength of 90,000 rooms. Ibis brand has the most number of hotel properties under the Accor group followed by Mercure hotels. The Mercure brand is a combination of international network and quality standards based on community linkage due to the unique franchising concept adopted by Accor group. The Mercure hotels are located in city centres and in the outskirts thereby focusing on both the business as well as leisure travellers.

Mercure Hotel — London Bridge

The Mercure hotel at London Bridge combines classic and contemporary styles. It is a four-star hotel located in central London situated to Bankside area and is very close to the popular attractions in London. The hotel’s restaurant is called Loft Restaurant and bar offering modern and comfortable dining experience with seasonal menus. One of the unique attractions of the restaurant is the outstanding selection of fine wines at low prices. The hotel has 144 bedrooms with a range of accommodation options from classic to privilege rooms to suits. The hotel provides Wi-Fi if access, 24-hour room service several communities in the room and free parking on the site. The hotel also has meeting rooms and conference facility.

Le Club loyalty program

Le Club is the brand name chosen by Accor hotels for its loyalty program, where the concept is to reward the customer for staying in any of the 2500 participating hotels under the Hotel group. There are several travel related advantages, discounts, exclusive Accor hotel services, airline miles and partner discounts. The loyalty program of Accor group is a multi-brand programme valid for almost all the brands under the Hotel group. It was initially called the A club and was converted to Le Club only in the last year. According to Accor hotels currently, there are around 8.5 million members with 41% being active members and roughly, about 7000 new members are added every day. Majority of the customers of Mercure hotels are in Europe. Similarly, majority of the hotel properties with different brands of Accor hotels are in Europe (Accor group, 2012).

The Le Club loyalty program is divided into four tiers, starting from the classic where the customer’s staying less than 10 nights per year comes under the classic program. The next tier is the silver where customers above 10 nights per year and below 30 nights per year are classified. The next tier is the gold, where customers pay more than 30 nights per year and less than 60 nights per year are included. Customer’s staying more than 60 nights per year in any of the Accor group of hotels is classified under the highest tier — Platinum category (Accor group, 2012).

When considering the average spending of numbers with that of the non-members for the different hotel brands it is seen that the upper crust of the brands chain mainly the Sofitel and Pullman hotels receive quite a premium from the members of the program. 29% of the customers of Sofitel under the loyalty program spend higher than that of the non-members. 36% of the members of the loyalty program spend higher than that of the average members for the Pullman brand. For the Mercure brand, 21% of the members spend higher than the non-members (Accor group, 2012).

 

 

 

Literature review

The research on the subject of marketing indicated a definite shift in focus towards relationship marketing contributing to the position adopted by organisations that a loyal and stable customer base is the necessity for long-term growth prospects. Associated with relationship marketing, customer loyalty and the various modes and methods to improve the loyalty of customer has been an important research subject. The loyalty of customers are displayed and denoted in various fashion. The customers may purchase repeatedly from the organisation, even though Allaway, Huddleston and Whipple, (2011) denotes such repeated purchases may not be flowing from a loyalty perspective. Any increase in the purchasing value or frequency has also been defined based on customer loyalty (Wong and Sohal, 2003) but again criticised by Capizzi and Ferguson, (2005) as not stemming from any kind of loyalty. Customers also seem to promote the products and services by way of word of mouth marketing (Allaway, Huddleston and Whipple, 2011) which again may not be because of any kind of loyalty to the organisation or the products and services. Significant research studies have indicated that customers will perceive a value from the perspective of the money they provide and the utility they receive, which forms an important factor in repeated purchases, increased value and frequency and advocating the products (Wong and Sohal, 2003). However, this may not contribute to sustained loyalty from the part of the customer to the organisation or the brand (O’Malley, 1998).

A flurry of loyalty schemes were seen in the United Kingdom from the early part of 1990 onwards with several retail organisations and service-based organisations introducing their own loyalty programs. Tesco introduced the Club card scheme that is still considered as a standard and a benchmark for the reward schemes developed by many organisations. However, many researchers who have studied the loyalty programs of product based on service-based organisations have indicated that they have not contributed to significant improvement in customer loyalty, although may have improved repeated purchases, increasing value and frequency and possibly advocacy. On important factor of the characteristics of the customer, loyalty program is that, the customer as well as the organisation is benefited and is a zero-sum game (McIlroy and Barnett, 2000). The customers get rewards for their supposed patronage and loyalty to the brand or the organisation. The organisation on the other hand, gets to know more about the customer through the data about the type and nature of the purchases made by the customer.

One significant concept of the loyalty scheme is that, the organisation is able to collect data about the customers purchase behaviour especially in the case of retail organisations, where numerous brands and products are sold under one roof. In the case of a retail organisation such as Tesco, with a variety of brands and products, the knowledge gained from customer’s specific behaviour about purchase decisions, timing etc. can significantly improve the ability of the organisation in marketing and brand promotions. In this manner, an organisation would be able to know precisely the way the customer behaves to price changes, introduction of new brands, advertisements, brand promotions, cyclical variations etc. This knowledge is an important factor for an organisation and according to Ramanathan and Ramanathan, (2011) the rewards to the customer is given not only for the loyalty to the organisation but also for the knowledge they unknowingly contribute/provide to the company through the loyalty schemes.

The concepts used to develop the loyalty scheme and the rewards by many organisations have been criticised in recent research studies. Since most of the loyalty schemes of service-based organisations are based on relationship management concepts, where trust, dialogue, frequency, value addition and satisfaction are important constructs, the development of loyalty has been based on consumer’s interaction, attitude and behaviour (Allaway, Huddleston and Whipple, 2011). From the perspective of an organisation, the loyal consumer would improve their profitability by maintaining relationship through positive action such as repeated purchases and recommendations. Out of all the constructs defined and the noted previously, customer satisfaction is a significant aspect in introducing loyalty.

Types of loyalty

The different types of loyalty defined by Huang and Huddleston, (2009) are spurious, latent and a sustainable loyalty. According to Taylor, Celuch and Goodwin, (2004) when a customer makes frequent purchases of product/service or a brand, without observing significant differences with that of substitute products/services or brands mainly because of no alternative or purchase decisions based on past experience/habit could or would promote to spurious loyalty. The latent loyalty has been defined as a strong preference or an attitude toward a product/service or brand of an organisation, without exhibiting any repeated purchase behaviour. This could be because of the lack of accessibility, price and such situational variables. Sustainable loyalty on the other hand is the most positive and effective loyalty construct that benefits both the customer and the organisation. Sustainable loyalty develops positive preferences and attitudes towards product/service or brands of an organisation that further contributes to repeat purchase behaviour. Sustainable loyalty improves/increases the value of purchases, frequency of purchases and advocacy of the product.

Figure 1 – Types of loyalty

(Source – Adapted from Allaway, Huddleston and Whipple, 2011)

Spurious loyalty is often displayed by consumers in response to product promotions, special deals/offers, and accessibility/convenience or because of external influence. However this kind of repeat purchase of a particular product/service or brand because of the immediate rewards, does not translate into long-term/sustainable loyalty. Any competitive/alternate product that can compete with the product in the market with the same kind of rewards can attract the customers. Hence, the switching cost of consumer is not increased in the case of spurious loyalty generated by special offers/deals of products and their promotions. However, Taylor, Celuch and Goodwin, (2004) have indicated that many retail organisations with undifferentiated products often try to promote spurious loyalty, mainly to protect the consumer base from competitive products. Hence when any new/alternative/competitive products is rolled out in the market, the existing product/services also try to compete in order to protect their customer base by providing deals and discounts which are immediate rewards.

Research conducted by Wright and Riebe, (2010) have found the attitude of latent loyalty where consumers have a positive attitude towards one product/service or brands, which is not evidenced through purchases. A consumer might have positive attitude towards a particular brand, which may be inaccessible due to situational reasons. The price of the particular brand may be high and the consumer may be forced to take up alternative products and services or brands even though unsatisfied with the same. There are other situational factors that influence the negative purchase behaviour, such as non-availability, in-accessibility, in-convenience, out of stock etc. However McIlroy and Barnett, (2000) indicates that it is difficult to surpass the latent loyalty attitude of many consumers as they are very difficult to be analysed from the data collected by the organisation. Since no purchases occur, no type of consumer purchase behaviour or attitude is expressed and collected by the organisation. Sustainable loyalty according to Huang and Huddleston, (2009) is the most preferred type of loyalty by organisations as the consumer not only has positive attitude/preference to a product/service or brand and evidences it by repeated purchases, thereby contributing to improved retention, increased switching cost and benefits to both the parties.

The research on the study of loyalty also included the attitudinal and behavioural loyalty Allaway, Huddleston and Whipple, (2011) which is furthered by O’Malley, (1998) with the inclusion of composite loyalty. Guest (1944) developed the initial concepts relating to attitudinal loyalty and the various ways to measure it. According to Guest (1944), “a personal sense of loyalty, is a feeling or an attitude of devoted attachment and affection. This tends to imply that a person feels obligated to preserve the relationship”. This indicates that consumer even though having negative perceptions about the product/service or the organisation, when supports and is continuously purchasing can be said to be loyal. In other words, a dissatisfied customer, purchasing in a repeated manner and advocating the products can be said to be a loyal consumer. However Palmer, McMahon-Beattie and Beggs, (2000) have contradicted this is in the research, which indicates that a dissatisfied customer many purchasing the product not because of loyalty, but because of other factors such as the price or accessibility.

The subject of behavioural loyalty was introduced by Cunningham (1956) indicating the behaviour of consumer as random and irrational that can be used for analysing the repeat purchase motivations and the behaviour of consumers. The behavioural loyalty concepts have been used in the formulation of modern loyalty schemes by organisations as it indicates the behaviour of consumers in purchasing products and services. It is this data and information about the behaviour of consumers that provides the organisation a significant advantage in terms of improving the relationship by suggesting suitable products/services and developing the relationship. Hence, it may be said that the loyalty schemes, even though rewarding different types of loyalty, is contributing to improving the relationship the organisation has with the consumer. Continuing with the concepts of behavioural loyalty or calculative commitment as defined by Wright and Riebe, (2010) further indicates that many of the loyalty programs are only developing spurious loyalty. The research conducted by Hobbs and Rowley, (2008) have identified that many of the frequent flyer programs are only developing spurious loyalty.

Importance of loyalty in service industry

As organisations are evaluating ways for improving their competitive advantage, increasing customer loyalty, efficiency and quality of service are some of the key drivers and the challenges faced by the marketers. The difference between the services marketing and product marketing have been analysed in several research studies. Inseparably, intangibility, heterogeneity and perishability are some of the characteristics of services offered by organisations. The services are also being branded and the determinants of the loyalty of brand have been studied in various ways. According to Gilbert, Powell-Perry and Widijoso, (1999) the loyalty of customer towards a product or service depends on past experience/satisfaction, the perception of risk, substitute products and services available in the market and the switching cost. In the case of services, an evaluation of the substitute services available in the market is difficult and hence increases the switching cost to the consumer (Hobbs and Rowley, 2008). The inseparably of the services or the consumer’s involvement in service provision which contributes to improved level of relationship, increase the loyalty for service providers. According to research study by Javalgi and Moberg, (1997) consumers have a perceived risk of switching from one service brand to another which contributes to increased loyalty to one service provider. The information about the services provided by different organisations is qualitative in nature and hence the difficult to evaluate, which further contributes to loyalty from the customer.

As indicated previously there are various definitions of loyalty based on attitudinal and behavioural constructs. Furthermore, the behavioural concepts only evaluate the number of purchases or the different brands purchased by the customer within the same product category in order to understand consumer choices. Based on this Capizzi and Ferguson, (2005) have indicated that behavioural loyalty measurement contributes to an organisation’s ability to target and position several brands. However, analysis of behavioural loyalty can only be used by organisations with multiple brands such as a retail organisation as Tesco or Sainsbury, which has several brands from different companies. Many organisations in the service industry such as that of hospitality have only one type of product/service to offer to the consumer and hence cannot measure the behavioural purchasing of individuals. In other words, for a particular hotel such as that of Mercure hotel, if providing a loyalty scheme based only on the brand, cannot evaluate how the consumer behaves in situations where the particular brand is not available. However in the case of the entire organisation, Accor group, which includes several number of brands with varying service provisions, pricing, etc., the behaviour of consumers in purchasing or taking the different services of the brands would be an important factor. The concepts of attitudinal loyalty or its measurement indicates the preferences of consumers towards a particular brand in order to understand loyalty (Johnston and Beaton, 2007). Hence, an organisation would be able to evaluate the attitude of customers towards a particular brand.

Rewarding for loyalty

Rewards and benefits are the incentives to consumers for the repeated purchase and increasing value and frequency. However Mullin, (2010), have indicated the insignificant benefits received by consumers when considering the value of the purchases and the frequencies, as a negative factor in the loyalty schemes. According to Smith and Taylor, (2004), the monetary value, various choices of redeeming the reward options, aspirational value, relevance of the rewards and the convenience as some of the factors, which contribute to improved uptake of the loyalty schemes. Another research study by Capizzi and Ferguson, (2005) indicates that the consumer may be loyal to the benefits scheme proposed by the organisation than to the product/service or the brand. The consumer may evaluate the tangible benefits they receive through rewards and compare it with the other schemes in the market. One of the important developments in the recent years according to Atkins, (2003), is the expectation from the consumer of certain rewards for any kind of shopping of products and services. Since many consumers are expecting certain rewards, the value of these rewards and the relevance has decreased.

The design of rewards can be either direct or indirect. Direct rewards supports the value proposition of a product/service and indirect rewards provide benefits that may not be relevant to the product. The rewards schemes may be immediate or latent. The consumer may get a discount on the purchase, which is an immediate reward, or a discount for future purchases after collecting a certain number of rewards. According to a study by Smith and Taylor, (2004), in the case of service provisions where the interaction and the consumer’s involvement in the service delivery process is high, more direct and immediate rewards are significant motivators in improving loyalty.

Services can be classified and differentiated based on the nature of service provision, relationship, customisation and the methods used. Based on the nature of the services provided, due to the perception of risk the consumers might indicate loyalty to a particular brand or an organisation (Gilbert, Powell-Perry and Widijoso, 1999). In the case of hotels, the customers are getting tangible products, in the form of rooms and the various amenities along with service from the employees. The services provided by the employees are intangible in nature and complex to be evaluated. Moreover, the consumers are involved in the service provision and there is high level of dependence on the organisation that contributes to increase in loyalty.

Importance of relationship

The nature and degree of relationship between the customer and the organisation can also contribute to loyalty (Javalgi and Moberg, 1997). When the service provision and the involvement of the customer with the organisation is more, encouragement is provided to improve the relationship by means of several schemes. This relationship schemes often involve loyalty benefits to the customers. In the case of a hotel, relationship marketing is often pursued and the customers become members of several schemes due to the attraction from the rewards in the benefit programs. Another factor of service provision is the customisation provided to the consumers. Many services can be customised to the specific needs and requirements of the customers. However, many of the customisation is dependent on technology and the facility of customisation is provided to the consumers themselves rather than the organisational involvement in the process. An example is the telecommunication industry, where the customers can change the services or the nature of the services. However, such customisation is done by the consumers themselves and the organisation simply provides the mechanisms of the technology to adopt customised services. In such instances loyalty is no to be expected. Whereas, in the case of hotels, customisation involves the organisation themselves and hence such organisation can expect a higher level of loyalty.

Importance of loyalty programs in the hotel industry

The hotel industry in the United Kingdom is fragmented and dominated by individual, small-scale and medium-sized properties. However, this fragmented structure has changed in the recent years, with the adoption of more franchising which turned the individual operators into branded properties. Many multinational hotel companies established themselves in London as well as other business areas within the United Kingdom. Moreover, an integration of the hotel industry has taken place with number acquisitions of branded and chain hotels by national and international players.

As discussed in the previous sections, the loyalty programs not only reward the customers for repeat purchases, thus benefiting the parties involved, provides information to the organisation in order to develop a sustainable relationship. Information according to Mullin, (2010), is one of the important sources of competitive advantage for modern-day organisations. The necessity for evaluating and understanding the needs and requirements of customers and the ability of the organisation to develop services based on the changing needs is an important factor in sustaining the competitive advantage. The reward programs or the loyalty schemes generate huge amount of customer information, mainly the behavioural actions of the customers regarding their purchases that can be used by organisations to develop new products/services or target/position the products/services (Ha, Janda and Park, 2009).

Information has a significant role in the management of an organisation as it constitutes as an important parameter in the forward planning of companies. Due to the increasing scale of operations, the decision makers of organisations are making their planning remotely from the customer. The small-scale organisations according to Johnston and Beaton, (2007) have an advantage of being closer to their customers, mainly because the decision makers/managers are able to analyse the customer’s needs and requirements based on personal relationship. However, the massive scale of modern-day hospitality/hotels organisations necessitates the need for collection of information and its dissemination to the decision-making executives. Moreover, Palmer, McMahon-Beattie and Beggs, (2000) indicates that the branded and chain hotels with multiple brands in the portfolio such as that of the Accor group of hotel, has to necessarily collect significant amounts of customer data and provide it to the top management in order to understand the consumer behaviour and their changing needs and requirements. Hence, the information collected from the customers with the help of the loyalty/reward program is not only for developing the relationship but also to understand the customer.

Loyalty programs generate huge amount of data about the customer’s purchases and the spending patterns significantly contributes to the knowledge base of an organisation. However, according to Moriarty, Jones, Rowley and Kupiec-Teahan, (2009) many organisations do not concentrate on collecting and even disseminating the collected information so that the decision makers can analyse and develop new services. Less, the collected information is not even used for relationship building process. One of the negative characteristics about the data collected by the hotels about the customers spending patterns is the behavioural revelations rather than attitudes of the customers. Moreover, even though the hotel chains are not branded, most of them offer undifferentiated services across the chain of hotels/brands and hence are only offering a particular/specific service. This can be equated with the case of an organisation selling only one product and providing rewards based on the recurring sales of the product. In such a case, the repeated purchase of customers can only reveal certain kind of behaviour and not attitudes. Moreover, it is extremely difficult to analyse whether the customers switching cost are increased. However in the case of the retail organisation selling several brands in the same product category, will be able to analyse the behaviour as well as the attitude of the customers and from the angle of sales promotions, price changes, quality changes etc.

Even within the single branded retail chain hotel, are able to analyse the customer data based on the promotions, price changes etc. However, rarely ever such kind of analysis and evaluation of customers purchase behaviour/attitude is analysed. Another factor that contributes to the negative attitude of organisations to analysis of information is the improper structures within the companies in disseminating the information. Although some organisations have put in place specific elements of data collection and analysis, often organisations do no use this information in a fruitful and structured manner.

One important characteristics of the loyalty card scheme is the ability of organisation to provide customised products based on relationship that is further based on information about the customer’s preferences. According to McIlroy and Barnett, (2000) customisation and product differentiation is related to customer segmentation. It is because of this customisation that several brands have been developed within the same umbrella brands. The Holiday Inn group of hotels, which is under the Intercontinental group, has several brands and sub-brands within its portfolio in order to cater to the different customer segments and their needs and requirements. Mercure hotel itself has differentiated services such as high-quality rooms and low quality rooms. More hotels are adopting customisation is to suit to specific customer needs which improves the loyalty of customers. Such kind of customisation as indicated in the previous segment can improve sustainable loyalty from the customers (Mullin, 2010).

Summary

From the above analysis of the literature available on the subject of loyalty and the various aspects connected with it has been found that loyalty can be differentiated and structured into different types and formats. The characteristics of spurious, latent and sustainable loyalty have been evaluated in the initial sections. Further, the concepts relating to behavioural and attitudinal loyalty was also analysed in a critical manner. It was found from the literature review that loyalty programs not only reward the customers for repeat purchase behaviour, but also has an important strategic role in collecting the information about the customers. The organisation will be able to develop customised products based on the information collected. However, there were contrary and contradictory opinions and research studies relating to the implementation of loyalty programs, design of reward schemes and the utilisation of information collected from the customer. It has been indicated that the loyalty programs collect information that is an important strategic tool for an organisation to evaluate the behaviour and attitude of customers. However, such kind of information is only relevant from a larger perspective and then a particular organisation is having various brands and sub brands in the same product portfolio. Hence, a retail organisation with several brands in the same product portfolio will be able to utilise the customer information in a much better manner than an organisation selling one particular type of brand. In the case of Accor hotels, there are several brands with differentiated service offerings and the reward scheme is an integrated one. The Accor hotels reward scheme provides points to the customers for staying in the participating hotels/brands such as Sofitel, Pullman, MGallery, Grand Mercure, Novotel, Suite Novotel, Mercure, Adagio, Ibis and Spa.

The literature review evaluated the first to research objectives mainly the concepts and characteristics of customer loyalty and the importance of relationship in developing loyal customers. Further the different types of loyalty schemes and the development of reward schemes of loyalty was analysed in the literature. Further on the three remaining objectives are the advantages and disadvantages for the consumer, the Mercure hotel at London with and for the entire hotel chain from the multi-brand group loyalty scheme. These will be addressed analysed with the help of the data collected from the management of the organisation.

 

 

 

 

Methodology of research

This section provides the method adopted by the researcher in developing the project to the fruitful conclusion. It provides the way in which the primary data is utilised to understand and evaluate the objectives of the research. Research methodology, provides the structure, pattern, methods and the way of developing the research question and the analysis (Bergh and Ketchen, 2009). The various factors involved in the research methodology are the philosophy, approach and the design. These aspects are evaluated in the following sections in order to reach the objectives.

Aims and objectives

The aim of the research is to critically evaluate the concept of customer loyalty and analyse the effectiveness of group loyalty scheme for the entire group and its benefits to Mercure Hotel at London City Bankside. A case study approach will be taken with the Mercure hotel, which is a midscale brand of Accor hotel group.

The objectives of the research are

1. To critically evaluate the concept of customer loyalty in the hotel industry
2. To analyse the reward strategy and different types of consumer loyalty
3. To evaluate the concept of providing a group loyalty schemes for the customers of the entire group of a hotel chain
4. To analyse the benefits of the group loyalty scheme to all the brands in the organisations
5. To analyse the potential benefits of the group loyalty scheme to the midscale hotel brand of Mercure hotels

Out of the above objectives, the literature review evaluated the initial three. The concept of customer loyalty in the hotel industry, the design of reward schemes and the strategy underlying it and the different types of consumer loyalty was evaluated thoroughly in the literature review. Following this, important elements relating to providing loyalty schemes for customers of an entire organisation and its benefits and disadvantages were also analysed. However, a part of the 3^rd and the 4^th and 5^th objectives of evaluating the benefits of the group loyalty scheme to all the brands and the benefits specifically to the particular brand is evaluated in the results analysis section. Significantly, the aspect of providing a group loyalty scheme to the customers of the entire brands in the hotel chain of Accor group is evaluated with the help of the interview conducted with the managers of Mercure hotel. Using this interview, the benefits of the Le Club loyalty scheme to all the brands under the Accor group and particularly to Mercure hotel at London Bridge is evaluated in the following sections.

Research philosophy

Research philosophy is the way in which knowledge is developed from data (Taylor, 2006). As per Kothari, (2008), the philosophy of research can be at a positivist, realism or interpretivism. Positivism considers the reality factors and quantitative variables in the research process (Bryman and Bell, 2007). Positivism is the philosophical position that true knowledge can be generated only with the understanding of the reality separated from the notional concepts of qualitative analysis (Ethridge, 2004). Hence, positivism stresses on quantitative techniques of data analysis and the development of knowledge. The next philosophical position is interpretivism, which considers that qualitative analysis, and the interpretation of the background data along with the quantitative factors needs to be considered in order to understand the research problem (Khan, 2005). The realist principle indicates the mixture of positivism and interpretivism (Saunders, Lewis and Thornhill, 2009).

The present research has initially evaluated the concepts relating to loyalty program. The types of loyalty and the importance of customer loyalty in generating competitive advantage have been stressed in the literature review. It is necessary to evaluate the loyalty of the customers of Accor group and specifically for the Mercure London Bridge hotel in order to understand the benefits from the program. Moreover, the essence of the report is to evaluate whether the Mercure London Bridge hotel is gaining significant advantages from the multi-brand loyalty program. The focus will be to understand the perception of the managers and employees of Mercure hotel at London Bridge in a qualitative as well as quantitative manner. Hence, the philosophical position of realism is adopted as the actual reality facts and the consequential character relating to the data and knowledge is analysed.

Research approach

The two different approaches to a research are deduction and induction (Khanzode, 2004). Deductive approach uses hypothesis, theories, and experimental studies in order to understand the research question. The basic formulation is to understand the theories and hypothesis and the validity and reliability (Kothari, 2008). In the inductive approach, the focus is to analyse the data and develop theories and concepts (Saunders, Lewis and Thornhill, 2009). In the present research, the theories and concepts relating to loyalty, its importance, the reward mechanisms, the importance of relationship etc. have been analysed in detail. The focus will be to understand whether the hotel at London Bridge is able to garner significant advantages from the multi-brand loyalty program. Hence, a deductive approach is utilised where the existing theories related to loyalty are analysed and utilised to understand the benefits generated by Mercure hotel London Bridge.

Research design

Several types of research design are utilised by authors and analysts in the form of exploratory, descriptive and explanatory. In the explanatory research, explanation of the theories and information about the subject is made in order to develop further knowledge. Descriptive research contributes to the knowledgebase from personal experience and a description of the facts and data. Exploratory research analyses the data and information from various studies when such data is insufficient (Saunders, Lewis and Thornhill, 2009). In the present research, an explanatory design is utilised where the data already available in the form of literature and the data collected from the primary methods are used to explain the theories and data.

Data collection

From the perspective of data, there are two types. One is the primary data and other is the secondary data. Primary data is the data and information collected by the researcher and specific to the research problem. Secondary data is the data and information already available in public, but which may not be specific to the present research. In the present research, both primary and secondary data sources are utilised. The method in which the primary data is collected is provided in the below section. Secondary data is collected from various sources, especially from the literature already available about the loyalty program. The Mercure hotel at London Bridge is the organisation understudy and the data relating to this specific hotel is used for analysis.

Primary data collection

When analysing the methods utilised for the collection of data for the present research, the first consideration was the respondents for collection of data. Since the aim of the research was to understand the benefits received for the Mercure hotel at London Bridge from the multi-brand loyalty program, the benefits for entire hotel chain and for customers, it was necessary to understand the perception of the management. From this viewpoint, the respondents of the present research will be the managers and employees working at Mercure London Bridge hotel. However, there a large number of employees and managers in the hotel are directly related and involved with the loyalty program, which comes under the marketing department. Several sampling methodologies were analysed in order to develop a technique where the most acceptable sampling technique, which captured the perceptions of the management in its entirety, can be utilised. The convenience sampling, involved in the nonprobability sampling method where the convenience of the researcher and the respondents is utilised was ultimately taken as the sampling method. The nonprobability sampling essentially has some negative characteristics such as the lack of involvement of the every respondent and their probabilities. However only convenience-sampling method was the best possible alternative in the present research as the accessibility of the respondents and their suitability for data collection was the primary consideration.

In this way, the convenient sampling method was devised and the researcher approached several of the managers connected with the marketing department for the interview. Finally, after discussions, two managers in the marketing department and four junior managers in the same department consented for the interview. In the interview the ethical aspects and the validity and reliability of the interview process and the analysis was fully taken into account. In order to ensure the research proceeds in the best ethical manner, it was each decided that the interview would cover only the aspects, which are not detrimental to the hotel. Hence, no confidential data has been solicited from the employees through the interview. In this manner, the interview has complied with the ethical aspects of the research. In order to ensure the validity and reliability, the data analysis was conducted by using thematic analysis.

Data analysis

Thematic analysis represents the evaluation of the data collected through qualitative research methods by following and developing themes from the data. The interview, which was done in a quantitative manner, collected the respondent’s viewpoints and perceptions. These viewpoints and perceptions were analysed in order to find the general themes recurring from all the employees. The most important themes or the aspects and characteristics related to the research subject who came up during the interview from all the respondents were used for the primary data analysis. Further, the theme which were found as important but which did not occur from the perspective of every other employee in the interview was also utilised. There are several aspects and perspectives provided by the employees, but which the other employees contradicted. These were not utilised in order to ensure the validity and reliability of the research.

 

Results analysis

This section provides the analysis of the interview conducted with the two managers and four junior managers of the hotel. The interview was conducted in a structured manner utilising a questionnaire provided in the appendix. Several aspects relating to the loyalty program of Accor group was evaluated through the interview. One of the important considerations was the evaluation of customer loyalty from the loyalty program offered by the organisation and the advantages to Mercure hotel London Bridge

Role of customer satisfaction in loyalty

One of the initial questions was about the level of customer loyalty achieved by Mercure hotel and the whole of Accor group and how customer satisfaction is affecting loyalty. According to the marketing manager of Mercure hotel, customer satisfaction is based on service performance, which is able to develop a favourable image. All the marketing variables affect the image of the hotel and Mercure hotels concentrates on all the four variables (4Ps) in order to provide adequate service to the customers. As an example the manager listed that, a reduction in price attracts a particular segment of the customers and this is included in the loyalty program. The points collected through the loyalty program offers the customers a discount for the further stays at the hotel and hence attract certain price conscious customers.

According to one of the junior managers, not all aspects of the hotel operation are important for the guest of the hotel. As per two of the junior managers, the service provided by the housekeeping staff is an important factor in determining customer satisfaction and thereby loyalty. Since Mercure hotel targets not only leisure travellers but also business travellers, it is necessary to develop products and services for both the category of customers. For the business traveller’s modern communication technology in the form of Wi-Fi, conference facilities, meeting rooms etc. are to be provided. The leisure travellers are attracted by the location of the hotel (place) as it is near to the London attractions. Hence, it is seen that all the four marketing variables (products, place, price and promotion) are incorporated into the service concept. The final aspect of the marketing variable or the promotion is undertaken through the loyalty program that incorporates the other aspects of the marketing variable. These are the product (with a vast number of hotel properties and different brands catering to different segments of customers), place (hotel is located in different geographic regions, both in the city and in the outskirts), and finally the price (with the hotel properties ranging from lower scale to the upper scale and providing discounts for repeat customers).

The importance of image of the hotel and the entire hotel group was also evaluated from the responses of the interviewees. It was understood that since the Accor group have several brands from the lower scale to the upper scale, it was necessary to provide the unique perception in the minds of the customers utilising the different brands in different locations. Moreover as per the marketing manager, it was of the utmost necessity to maintain consistency in service standards of all the hotels and especially consistency of service of similar brand hotels in different geographic locations. According to the junior manager, customer loyalty is not only nurtured for the entire hotel group but also leveraged for the individual brands and the individual hotel properties. Since most of the hotel properties are managed by the franchisees, individuality is one of the important functions in order to attract and nurture customer loyalty for the brands and for the individual hotel properties.

Individuality of hotel

One of the important and the primary objective of the present research are to understand how the Mercure hotel at London Bridge is able to generate more customer loyalty out of the loyalty program for the entire group of hotels. From the responses received from the interview about customer satisfaction and the image of the hotel, it feels that individuality of the hotel is one of the prime considerations for improving the loyalty for the specific property. Within London, there are three Mercure hotels located at Bloomsbury, Paddington and Kensington apart from the London Bridge and all within a radius of 10 km. There are also the London Watford and Hatfield Mercure hotels within the M25 region. It has been understood that the particular hotel, Mercure London Bridge is competing against not only the other brands but also its own brands in the mid-scale category and in order to command customer loyalty, it would be necessary to develop individuality in the minds of the customer. Hence, with a level of individuality, however in keeping in line with the image of the brand and its essence intact, it would be possible for Mercure London Bridge Hotel to generate more customer loyalty. Nevertheless, the individuality concept may not be adequate to generate customer loyalty for the particular hotel, as almost all the other hotels would be developing the level of services provided by the London Bridge Hotel.

Satisfaction and loyalty

With the above analysis, relating to customer satisfaction and loyalty it was understood that the hotel property is able to develop certain individuality from the other hotels in the same brand; it would be able to command higher level of customer loyalty. However according to one of the interviewees, a minor change in satisfaction can lead to a substantial change in loyalty increment and this is one of the important aspects related to the individuality of the hotel. If the hotel property were able to improve the customer satisfaction even in a minor level, it would be able to improve the loyalty incrementally. This is corroborated by the research conducted by Allaway, Huddleston and Whipple, (2011) who indicates that 63% of the customers who were very satisfied would recommend the hotel to others and would remain loyal to the individual hotel. According to Huang and Huddleston, (2009) it is not enough to have satisfied customers but extremely satisfied customers and this was borne out from the interview. According to one of the junior managers, a small increase in customer satisfaction could boost customer loyalty in an incremental manner, this reduces the spending on advertisements, and other marketing expenses since satisfied customers have their own marketing power in terms of word of mouth marketing. According to the marketing manager, the word of mouth marketing is one of the important sources of competitive advantage, as customers prefer intimate personal information sources rather than external advertisements and forceful agents. Positive word of mouth marketing according to Wright and Riebe, (2010) has seen to increase the reliability and the consumer’s perception of risk.

Multi-brand loyalty program – advantages and disadvantages

The Le Club loyalty program developed by the Accor group of hotels is for a range of hotel properties and different brands. The Accor group of hotels have different categories ranging from the lowest scale, Ibis Hotel to the upper scale in the luxury spectrum. The upper scale of a luxury spectrum in the brand portfolio consists of the Sofitel and the Pullman hotels. It has been suggested by Rowley, (2005) that a single type of loyalty program may not be suitable for all the hotels within the same brand or even for different geographies. According to the researcher, a single type of loyalty program may be suitable for a category of hotels in the same geographic location. In the United Kingdom, the hotel properties are divided into owner operated independent hotels and chain hotels (Ramanathan and Ramanathan, 2011). The loyalty program is based on the collection of points for the stay and the spent. As the customer stays in one hotel brand, he accrues points, which can be utilised for discounts and other benefits in the same brand as well as other brands.

However, as per the response of the marketing manager, a customer chooses one specific brand initiative, which specifically caters to the needs and requirements of the customer. Hence, the customer may choose the Ibis Hotel because of the price consciousness and the availability in different graphic locations. Ibis Hotel has the most number of hotel properties within the Accor group. As per the manager, it was indicated that the loyalty program is beneficial not only to the particular brand but also to the other brands. A customer opting for a stay in a particular brand may switch to the higher or lower category depending upon several aspects and mainly situational characteristics. The customer may not be able to choose his brand because of the geography considerations. Sofitel and Pullman hotels are sparsely located and are not available in many major locations even in European cities. In such an instance, the customer may choose another hotel in the same group and still avail the benefits and discounts from the earlier stay in the upper scale hotels.

Data and information from membership

Similarly, the manager pointed out that a customer who chose to stay in the lower category of hotels such as Ibis or Mercure, may opt for the higher category depending upon situations and geography considerations. Hence, the customer is able to gain benefits across the different hotel properties with the same loyalty program. Apart from the benefits accrued to the customer, the loyalty program has a vast number of members due to the multi-brand concepts. The entire hotel chain is able to gather a large amount of data about the customers and their utilisation of hotel properties, number of stays, the satisfaction levels and the loyalty to certain brands. This information gained from a large number of members from the different brands provides a wealth of information to the hotel, which can be analysed in order to improve the performance, and to upsell the other brands.

Based on the above responses from the marketing manager and one junior manager relating to the concept of the multi-brand loyalty program and its benefits to Mercure hotel, it can be analysed that the specific hotel may not be generating large benefits from the multi-brand loyalty program. It entirely depends upon the customer on the choice of the hotel and may not be within the manageable limits of the brand or even the Independent hotel property. Since the customer may be satisfied with one hotel property in the mid-scale category such as Mercure, he may opt in for a higher category of hotel the next time and thereby a reduction in benefits to the Mercure hotel or the lower category of hotel. On the other hand, it can also be analysed that a customer opting for a midscale category or even the upscale category in the brand portfolio may opt for a lower level due to the satisfaction received from the services of that hotel brand. Hence, it may be said that there is negligible advantage gained by the Mercure hotel due to the multi-brand hotel program.

Negative characteristics of loyalty programme

Even with the negligible advantages gained by the Mercure hotel at London Bridge, the marketing manager indicated certain negative aspects of the multi-brand loyalty program. The hotel not only caters to the guests who are utilising the rooms but also external guests who utilises the restaurant and the bars. The hotel also has meeting rooms and conference facilities, which are utilised by corporate guests. Not all these customers may be using the rooms of the hotel and the loyalty program does not provide points or benefits for the utilisation of restaurant and bars, meeting rooms and conference facilities. In a busy area like London Bridge, the number of customers utilising the restaurant and bar and the conference facilities could be substantial. According to the junior manager, many customers who used the restaurant and bar are not the stay in guest and there are several corporate customers who utilise the conference and meeting facilities who again are not the stay in guests. The multi-brand loyalty program does not provide any points or the other benefits to these customers. It is up to the hotel chain or the Independent hotel to provide discounts based on the customers utilisation of the restaurant and bars, meeting facilities and conference facilities.

Hence, the multi-brand problem is not benefiting the hotel specifically in relation to these non-staying guests. The other factor, which is a major consideration for the entire loyalty program is that, not many of the hotels are situated in busy locations such as London. It is only in the cities and dislocations that many customers come to the restaurant and bars and utilise the conference facilities. In most of the other hotels, which are located in the rural areas, majority of the customers are the stay in guests. Overall, the entire Accor group has a customer base with a vast proportion as stay in guests and the proportion of the restaurant and bar and conference customers are negligible. However, for the Mercure London Bridge hotel, the proportion of stay out or customers using restaurant and bars and conference facilities are more than the contemporary customer portfolio for the entire group. Hence, it has become necessary for the Independent hotel chains to develop a certain other loyalty program independent of the multi-brand loyalty program for the stay in guests. This provides a certain level of independence and individuality to the hotel property as per the junior manager.

Characteristics of Mercure London Bridge hotel

Mercure London Bridge Hotel currently has a customer profile with 60:40 ratios in the proportion of business and leisure customers. The average room stay is just over 1.3 nights and about 20% of the customers are repeat customers. However, as per the marketing manager, the hotel does not have full information about the revenue generated from the repeat customers or the loyal customers. As indicated, 60% of the customers are business customers, who may not opt in for a stay in the hotel and only utilise the restaurant, bar, conference facilities and meeting rooms. Within the business segment, marketing initiatives have been developed in order to generate certain individuality and target the repeat customers. The leisure customer market is even driven by specific events and marketing is conducted in order to enhance the occupancy rate of the hotel. According to the junior marketing manager, follow-up letters are sent to the repeat customers in order to understand the satisfaction levels and feedback of the service provided by the hotel. Nevertheless, no specific information was generated from this follow-up letters, even though the hotel continues to send these letters. It can be analysed that even though the hotel is sending letters to retain customers, there is not particular analysis or evaluation of the data from the feedback and no particular marketing activities are generated based on the feedback collected.

Promotion of the loyalty schemes

The promotion of the Le Club loyalty scheme of the Accor group of hotel was evaluated from the responses of the interviewees. It was understood that commitment is required in order to persuade the customers to take up the loyalty program. Persistent marketing effort is conducted at the group level (Accor group) in order to generate consumer interests in the loyalty program. All the employees of the hotel are provided information about the role of the loyalty schemes and the benefits the consumers can generate from the points they get for using the different services provided by the hotel. In line with the promotional scheme, the customer facing employees are specifically trained to persuade more consumers to become member of the loyalty program. The Mercure hotel management evaluates the number of memberships per guest arrival and the employees are rewarded for their sales of the membership programs.

The loyalty program is considered as an integral part of the operation of the hotel and according to the marketing manager, the entire group also have made several changes in the way it operates. The decision-making process at the top level, development of products and services, recruitment of employees and most importantly the marketing and branding etc. all incorporate several aspects of the loyalty program. Taking an example, the employee-training program now consists of a specific training to understand all the aspects of the loyalty program. Additionally, employees are trained to sell the membership to the customers at every point of contact. The contact with the customers occurs at the stage of enquiry, reservation of the rooms, arrival at the hotel and departure. At each occasion of contact with the customers, the employees are trained to initiate discussions and sales of the membership. When a customer who is already a member of the loyalty program arrives, they are provided special treatment and considerable service enhancement. These customers are made aware of the fact that they are receiving enhanced services due to their membership in the loyalty program. This is also one of the prime considerations of the training programme for the employees.

Design of the rewards/benefits to customers

Rewarding for the loyalty was an important consideration in the literature review. It was understood that there are different types of loyalty and the behavioural loyalty is one of the important characteristics or which could benefit the organisation in the long term (Capizzi and Ferguson, 2005). From the perspective of the different types of loyalty, the reward scheme should first analyse the behaviour of the consumers and then develop the benefits, which, provide maximum value in a tangible manner. According to the marketing manager, the benefits for the customers are based on “reward the behaviour” concept. When analysing the type of benefits the customer can gain for the points they collect, it is seen that the reward scheme is very complex in nature. It is targeted at both behavioural and attitudinal loyalty as against the literature on the subject, which indicates that behavioural loyalty has to be promoted (Wong and Sohal, 2003).

The Accor group sends out regular communication to the members of the program about the opportunities and the special benefits they can gain from some of the schemes they roll out on a timely manner. At the hotel, the customers are provided promotional material customised to each category. Taking an example a customer under the basic membership scheme is provided with the promotional material relating to the needs and requirements of the specific category. The customers at the highest tier category, (Platinum customers) who are the most valuable customers, are provided with promotional materials specifically suiting to the needs and requirements. Hence differentiate reward strategy is promoted.

When analysing the rewards design for the midscale brand of hotel (Mercure hotel), it was found that most of the promotional materials are intended to provide their customers with benefits at the higher class of hotels. In other words, the marketing manager revealed that the basic concept of the loyalty scheme strategy is to promote the customer notion of value towards the upper classes in the brand portfolio of the entire group.

 

Conclusion

The results analysis encountered several considerations relating to customer loyalty and broadly understood the different themes which were recurring and which were considered as important from the subject point of view. The main points considered under the results analysis were about the relevance of customer satisfaction in loyalty, the advantages and disadvantages of the Le Club Loyalty programme, the customer profile of Mercure London Bridge hotel, promotional schemes adopted by the hotel and the design of the rewards/benefits to the customers. When analysing thematically almost all of the factors considered under the literature review were recurring regularly during the interviews conducted with the 2 managers and 4 junior managers/supervisors of the hotel. Based on the results a brief evaluation and understanding of the major research objectives are required. The aims and objectives of the research are as follows

Aims and objectives

The aim of the research is to critically evaluate the concept of customer loyalty and analyse the effectiveness of group loyalty scheme for the entire group and its benefits to Mercure Hotel at London City Bankside. A case study approach will be taken with the Mercure hotel, which is a midscale brand of Accor hotel group.

The objectives of the research are

1. To critically evaluate the concept of customer loyalty in the hotel industry
2. To analyse the reward strategy and different types of consumer loyalty
3. To evaluate the concept of providing a group loyalty schemes for the customers of the entire group of a hotel chain
4. To analyse the benefits of the group loyalty scheme to all the brands in the organisations
5. To analyse the potential benefits of the group loyalty scheme to the midscale hotel brand of Mercure hotels

The initial two objectives, concept of the loyalty, types, reward strategy etc. were evaluated in the literature review. This was further glanced during the results analysis as well. However, it was the last three objectives about the multi-brand group loyalty scheme, its benefits to the customers, the entire group and finally to the Mercure Hotel at London Bridge was analysed in the results analysis. This is further discussed in order to conclude the objectives.

Advantages to the customers

From the interview results, it was found that the customers are able to accrue the points for their stay and spend at the hotel, but only for some of services. The customers who are utilising the rooms are the main targets for the Le Club loyalty programme. These customers are able to redeem their loyalty benefits at more than 2500 participating hotels from the lower end Ibis (budget hotel) to the upper end luxury Sofitel and Pullman hotels. Apart from the direct discounts on the points earned for the stay and spend on the room rates and restaurant bills, the customers are able to exchange these reward points at various points of sale such as at the airports, taxis and related travel services. All the redemptions are targeted at the travelling customer and their needs. The points can be redeemed at several participating restaurants, travel service providers and hence it is oriented towards inducing more spending mainly for the hotel chain.

The customers of one hotel brand are able to utlised the points garnered on the other hotel brands within the portfolio and a range of options is available for the customers. There is the budget hotel chain Ibis that has properties in almost all countries. There are several apartment properties, which is a change from the hotel atmosphere. There are the ultra-luxury Sofitel and Pullman hotels. The customer can indeed move up the hotel chain without the fear of spending too much as the points garnered from the previous stays at the lower category hotels make up for the discounts on the upper category hotels. Unlike other hotel property brands such as Travelodge, which only have one type/category of brand chain the hotels under Accor group are several and the points earned at the budget hotel can be utilised for having a meal at the luxury hotel. Hence, overall it may be said that the customers are benefitting from the multi-brand loyalty programme.

Implications for Accor group

Accor group as discussed in the initial sections and in other parts of the report has a number of hotel properties and the Le Club loyalty programme is designed to reward the loyalty of the entire organisation. In consonance with this strategy of rewarding the customer, the loyalty programme is also inducing the customer to spend more as the rewards collected can be redeemed against the services of the different hotel properties. Since there is collaboration between travel and hospitality organisations, Accor hotel is benefitting significantly. The collaboration between the service-based organisations in the hospitality sector such as the airlines, restaurants, tour operators, taxi services etc. is again beneficial to Accor hotels.

Implications for Mercure London Bridge hotel

From the analysis of the interview with the managers and junior managers of the hotel it has become clear that with the entire organisation the Mercure Hotel is also benefitting from the multi-brand loyalty scheme. However, along with the advantages there are disadvantages as well. It was found from the interview that the reward scheme and the strategy of the entire organisation is to motivate further spending by the customer and to upsell the higher end properties of the group. The higher end properties such as the Sofitel and Pullman provide significant profits than the mid segment and lower end service providers. In this sense, there is a negative implication to the hotel property as the specific hotel is not able to command the loyalty of the customer for a longer period. They are constantly pulled upwards and there will be a general movement of the customers to the upper crust of the hotel chain. However, this in a way is beneficial as the customers at the bottom of the pyramid in the brand structure of Accor group would be moving upwards and there are a considerable number of properties under the lower mid-scale and lowest scale such as the Ibis. Hence, in the end the Mercure brand is at an advantage due to the overall strategy of the group.

Further research

When analysing the benefits to the customers of the hotel, the advantage compared to other hotel loyalty programmes was not analysed. It was felt that such kind of extra analysis would be an added burden on the research. However, on hindsight it is felt that an analysis in a comparative manner about the single brand loyalty programme offered by other hotel properties with that of the multi-brand loyalty programme would be a fruitful exercise, as it would provide some details about the benefits and disadvantages of the multi-brand loyalty programme of Accor hotels. On the same path, there are p0ther hotel chains with different properties offering multi-brand loyalty schemes. One of them is the intercontinental hotel group (IHG) with several brands under its portfolio. A comparison of the multi-brand loyalty schemes of the different hotel chains would provide an effective analysis of the advantages and disadvantages of Accor group loyalty programme.

Apart from this, such type of analysis with a comparison to the external programmes would give added advantages to the top management about the marketing parameters they can use in promoting the loyalty programme. This would also indicate the drawbacks of the present programme and hence would give a guidance and benchmark with the external loyalty programme and hence for the improvement of the present programme.

Recommendations

It was analysed from the result that with the loyalty programme Mercure Hotel is not able to reap significant advantage as a single franchise owned property. However, the advantages gained by the entire group as well as the loyalty of the customer towards the brand are being accrued to this hotel. Nevertheless as mentioned in the initial section and the results analysis, there are 4 different Mercure hotel properties in London and within the 5-kilometre radius. In order to gain advantages with a standalone loyalty strategy it is necessary to generate some form of individuality from the other operating branches of Mercure in London area. It was understood that the business customers was more than the stay in customers and the loyalty card scheme is not able to capture these unorganised customer base. To capture this customer base the following recommendations are generated.

Capturing the restaurant customers

The restaurant customers are not targeted by the Accor hotel group or even the Mercure London bridge hotel, as they do not provide significant revenue since they do not utilise the rooms. However if the eat-in restaurant customers turns out to be recurring and loyal then the hotel can have a regular stream of revenue which may not have cyclical variations such as room occupancy. Hence, the recommendations are that the Le Club loyalty schemes have to be promoted with the eat-in customers. The Le Club loyalty scheme already provides points for the expenditure in restaurant even though the points earned for these are small. However, there are points provided by the group for these customers. Hence the recommendations is that the restaurant customers need to be targeted with the help of direct sales approach from the waiters and customer facing employees in the restaurant to become member in the loyalty programme.

Strategy for management

In order to capture the restaurant/eat-in customers the management must take conscious action to develop targeting strategy. It will not be fruitful to target each walk-in restaurant customer. Any kind of indication of loyalty by either behaviour or attitude has to be rewarded as indicated in literature review. Hence, if the customer exhibits any kind of recurring patter such as a continuous patronage then such customers can be targeted. For this, the management must train the employees to look out for such loyal and continuous patronage customers. The customer-facing employee’s right from the lobby to the restaurant should be provided training to give special service to such repeat customers.

Action programme

1. Training of the customer facing employees to upsell the Le Club Loyalty programme
2. The training programme to include the recognition of the prospective customers to be targeted
3. Training to be provided by the marketing managers in up selling the Le Club loyalty scheme to the customers
4. Training to be provided on targeting and recognising customer’s recurring purchase behaviour.
5. The customer facing employees to be given targets for selling the loyalty scheme
6. The performance of the customer facing employees based on targets and the achievement of number of sales of the loyalty scheme to be monitored

 

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Appendix

Questionnaire for interview

1. What is the role of customer satisfaction in loyalty?
2. What are the advantages of the multi-brand loyalty programme for Mercure Hotels?
3. What are the advantages of the multi-brand loyalty programme for Accor group?
4. What are the advantages of the multi-brand loyalty programme for the customer?
5. What are disadvantages of the multi-brand loyalty programme?
6. What are the promotional measures adopted for the Le Club Loyalty scheme?
7. What are the factors considered for the rewards/benefits for the Le Club loyalty programme?

Transcripts of interview

1. What is the role of customer satisfaction in loyalty?
   1. “Customer satisfaction is based on service performance. The satisfaction of customer improves the image of the hotel. Since the image is composed of different marketing variables, Accor group concentrates on customer satisfaction with the help of the different marketing variables to improve customer satisfaction”.
   2. “The loyalty program improves customer satisfaction as there is a reduction in price. The points collected through the loyalty program can be discounted at the hotel and in other locations related to travel and tourism”
   3. “Customer satisfaction is not dependent on every aspect of the hotel and the front office and customer facing employees are the important constituents and contributors. Housekeeping and front desk are the important areas to concentrate to improve the image”.
   4. “Customer satisfaction can be improved by providing for the customer’s requirement specifically relating to that segment. Business travellers are provided with Wi-Fi, conference facilities meeting rooms etc. Leisure travellers are attracted by the location of the hotel”.
   5. “With the improvement in customer satisfaction, loyalty program and its benefits to the customer and the organisation increases. The Hotel makes sure that only the satisfied customers are approached for the loyalty program. Such customers are able to improve the benefits to the hotel from word of mouth marketing”.
   6. “Accor group have several brands and Mercure is in the mid-segment. The specific hotel property is managed by a franchisee. In order to improve the loyalty for the hotel at London Bridge, individuality of the services is developed by the hotel. This individual service quality and performance are delivered to the customer to improve their satisfaction levels. This improves the customer satisfaction and hence the loyalty”.
   7. “The satisfied customer with one brand in the entire Accor group is an asset to the company as all the brands in the hotel chain can then attract the customers. Although individual hotel properties try to develop individuality, the satisfaction of the customer developed to benefit the entire hotel chain as the loyalty program is for the entire group”.
2. What are the advantages of the multi-brand loyalty programme for Mercure Hotels?
   1. “The multi-brand loyalty program is important as a customer who is satisfied with any of the brand in the hotel chain will be a potential customer for all the brands in the group. Luxury hotel at London Bridge is an important part of the chain due to its geographic location and its relevance to the tourists segment and business segment”.
   2. “Mercure hotel at London Bridge has competition from other hotel properties under the same brand located at Bloomsbury, Paddington and Kensington. The individuality developed by the hotel and provided through service to the customer is indeed the beneficial to Mercure hotel brand and to the specific hotel.”
   3. “The satisfied customer of any hotel brand can increase the loyalty in an incremental manner for Mercure hotel. The incremental loyalty can reduce the expenditure on advertisements and other marketing expenses”.
   4. “Word of mouth marketing from a satisfied customer of any of the brand hotels is important for all the brands in the hotel chain and hence for Mercure hotel as well. Positive word of mouth increases the reliability on the hotel and reduces the consumers risk perception”.
3. What are the advantages of the multi-brand loyalty programme for Accor group?
   1. “A customer who chooses to stay with a lower category of hotel may opt for higher category depending upon situations and geography consideration. Since the customer is benefiting from the group loyalty program they may choose the other brands in the hotel chain and hence the entire Accor group is benefited”.
   2. “Accor group is able to gather large amount of customer data about their utilisation, number of stays, satisfaction, loyalty to different brands etc. This information is utilised in order to develop marketing strategies and to improve the performance”.
   3. “The group wise loyalty program provides the Accor group to tap to different segments of the customers and provide them equal opportunities. This kind of equal opportunities for the different segment of consumers motivates them to move of the hotel chain in terms of the brand value”.
   4. “The specific hotel may not be generating huge benefits from a loyalty programme as compared to the entire hotel group. The entire Hotel group is indeed mostly benefited through the multi-brand loyalty program”.
   5. “The negative of the multi-brand loyalty program is that the customer may choose to walk down the scale or move down the brand which reduces the revenue per customer. However the data collected by Accor group from the loyalty program indicates that the customer is moving up the hotel chain in terms of brand value and hence increases the revenue per customer”.
4. What are the advantages of the multi-brand loyalty programme for the customer?
   1. “The customer is benefited as all the segments are provided with equal kind of benefits based on their utilisation and revenue provided to the hotel. The customers can not only redeem the loyalty points at the group hotels but also airlines, restaurants, travel agencies etc.”
   2. “The customer at Mercure hotel London Bridge is benefited as the hotel provides unique services in order to provide satisfaction and customer loyalty. The Hotel maintains and make sure is that each individual customer even though they are not utilising the full facilities are motivated to come back”.
   3. “The customers coming to Mercure hotel at London Bridge are provided loyalty points and hence benefits for utilising conference rooms, meeting rooms and even restaurants. Hence individuality is making for the Mercure hotel at London Bridge which provides customers with an added advantage from that of other large loyalty programs”.
5. What are disadvantages of the multi-brand loyalty programme?
   1. “One disadvantage of the group wise loyalty program is that the specific hotel brand of a franchisee even though providing extreme levels of customer satisfaction may not be immediately benefited as the customers may move up the hotel chain in terms of brand value”.
   2. “Some of the customers are not able to properly identify the benefits from the multi-brand loyalty program and some of them do not even know the different brands in under the Accor group”.
   3. “Specifically for Mercure hotel at London Bridge, a significant percentage of the customers use restaurants and bars, meeting and conference facilities. There is no GroupWise loyalty scheme for these customers”.
6. What are the promotional measures adopted for the Le Club Loyalty scheme?
   1. “Marketing is conducted in the group level in terms of advertising and promotional strategies. Employees are trained to provide information about the loyalty scheme and benefits to the customers”.
   2. “Customer facing employees are provided training to persuade more consumers to become members of the loyalty programme. The management provides incentives to employees for signing new members up for the loyalty program”.
   3. “Each employee is trained to sell the membership to the customers at every point of contact and the benefits to the customers due to the loyalty program are stressed at every time”.
   4. “Customers are made aware that they receive enhance services due to their membership in the loyalty program and this includes the word of mouth marketing for the loyalty program itself”.
7. What are the factors considered for the rewards/benefits for the Le Club loyalty programme?
   1. “The customers are rewarded for the behaviour or the behaviour of spending more and coming back more to the brand and to the group. Reward scheme is complex providing maximum tangible value for each point gained by the customer”.
   2. “Although behavioural loyalty is promoted, attitudinal loyalty is also a part of the benefits to the customer. Hotels send regular communication to the members about the special benefits which are rolled out on a timely manner apart from the normal benefits such as reduced room rates reduction in the restaurant bills etc.”
   3. “The highest category or the Platinum customers are provided with significantly improved benefits program and each time they come to the hotel they are provided additional benefits over and above the announced loyalty benefits”.