GLOBAL UPDATE : SALES AND MARKETING
ACCESS
Leading kills
WILLIAM JAMES ANDERSON 1004575
MEMBER SINCE 97 EXP 09 / 12
transaction fees
A new membership model focuses on creating guest loyalty to drive revenue . By Jeff Weinstein , editor in chief
The Leading Hotels of the World ( LHW ), New York City , has made a radical decision to change its business model and make itself an even more compelling option for selfsufficient luxury hotels looking for a partner to bolster their revenue stream .
LHW is piloting a transformational program that removes all transaction fees ( currently accounting for about 45 % of membership cost ) and instead requires hotels to sign up and maintain three members per room per year to LHW ’ s Leaders Club . As long as the club members renew , they are considered members for that year . Hotel owners will still pay annual membership dues but don ’ t pay for the Leaders Club participation .
The acquisition of club members is expected to drive more revenue to all LHW hotels and foster a more multilateral collaborative relationship between member hotels . The theory is that by increasing Leaders Club membership from 100,000 today to some 400,000 within five years , it will deliver more customers to the hotels and organically grow the power of the network . “ Instead of asking members to contribute money toward covering costs , we are asking members to contribute customers so all members will benefit ,” says Ted Teng , LHW ’ s president and CEO .
The pilot started at the beginning of the year with some 40 of the 430 LHW member hotels , and the concept will be rolled out to the entire membership in 2013 .
Return to roots LHW reported hotel sales of US $ 614 million in 2011 , an increase of 13 % over 2010 . So why such a radical move to change its model ? Teng says it goes back to the roots of the company — independents banding together to support each other .
“ By shifting money coming from Leaders Club members , we generate 200,000 frequent travelers in the luxury independent world who will bring more business to our hotels ,” Teng says . “ For our hoteliers , if they treat these members well , it is more likely that guests will renew their memberships as opposed to having to find new ones . Hoteliers need to make a commitment about this concept to each other . That is the emotional bond I want to see members have with each other , as opposed to a casual transactional relationship .”
Teng also likes to question whether the chain brand model brings incremental value to a hotel . “ I look at a well located and conceived hotel , properly scaled with engaged ownership and management , and it will produce 80 % of its own results without any help ,” Teng theorizes . “ We are there to ‘ top up ,’ and for that we charge about 1 % of total revenue . We want to reach a point that for every dollar we are paid , we generate US $ 20 in revenue . Right now we are just under an 11:1 ratio . With this model we shoot straight to 20:1 .”
Teng believes even luxury customers want price-value , and with club membership including a free night for every five nights paid , free Wi-Fi , free continental breakfast and upgrades when available , they will see it pays for itself quickly . “ Our average reservation is US $ 1,200 , so US $ 150 ( to join the club ) is not a lot of money ,” he adds .
The big concern among members with the new model comes from those that do not transact a lot of room nights through LHW and therefore won ’ t save much money , yet will have to do the same amount of work finding and maintaining club members . “ If this is not a viable model for them and they decided to leave that is okay , as they are not engaged with us anyway ,” Teng says , adding that the new model should be so compelling that lost members will be easily replaced .
18 HOTELS April 2012 www . hotelsmag . com