The theory-practice research gains from big data: evidence from hospitality loyalty programs
International Journal of Contemporary Hospitality Management
ISSN: 0959-6119
Article publication date: 1 May 2023
Issue publication date: 8 November 2023
Abstract
Purpose
The hospitality industry values segmentation and loyalty programs (LPs), but there is limited research on new methods for segmenting loyalty program members, so managers often rely on conventional techniques. This study aims to use big data-driven segmentation methods to cluster customers and provide a new solution for customer segmentation in hotel LPs.
Design/methodology/approach
Using the k-means algorithm, this study examined 498,655 profiles of guests enrolled in a multinational hotel chain’s loyalty program. The objective was to cluster guests according to their consumption behavior and monetary value and compare data-driven segments based on brand preferences, demographic data and monetary value with loyalty program tiers.
Findings
This study shows that current tier-based LPs lack features to improve customer segmentation, and some high-tier members generate less revenue than low-tier members. Therefore, more attention should be given to truly valuable customers.
Practical implications
Hotels can segment LP members to develop targeted campaigns and uncover new insights. This will help to transform LPs to make them more valuable and profitable and use differentiated rewards and strategies.
Originality/value
As not all guests or hotel brands benefit equally from LPs, additional segmentation is required to suit varying guest behaviors. Hotel managers can use data mining techniques to develop more efficient and valuable LPs with personalized strategies and rewards.
Keywords
Acknowledgements
This work was supported by national funds through FCT (Fundação para a Ciência e a Tecnologia), under the project – UIDB/04152/2020 - Centro de Investigação em Gestão de Informação (MagIC)/NOVA IMS, research grants UIDB/04521/2020 of the Advance/CSG, ISEG – Lisbon School of Economics and Management; and UIDB/00685/2020 of the Centre of Applied Economics Studies of the Atlantic, School of Business and Economics of the University of the Azores. Editage proofread this work.
Declaration of interest: The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
Citation
Rita, P., Borges-Tiago, M.T. and Caetano, J. (2023), "The theory-practice research gains from big data: evidence from hospitality loyalty programs", International Journal of Contemporary Hospitality Management, Vol. 35 No. 12, pp. 4486-4501. https://doi.org/10.1108/IJCHM-05-2022-0646
Publisher
:Emerald Publishing Limited
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