Increasing brand loyalty in the hospitality industry Mustafa Tepeci School of Hotel, Restaurant, and Recreation Management, Pennsylvania State University, Pennsylvania, USA Introduction Many hospitality firms are having difficulty increasing their market share because of rising international competition, slower growth rates, decreased population growth, and oversupplied and mature markets. Over the last two years, national hotel occupancy in the USA declined modestly, to 64.5 percent in 1997. A record 1,480 new hotels opened, and new records are expected to be set in the coming years (Ford, 1998, p. 59). As a result, an increasing number of hotel firms are pursuing fewer new customers. Under these circumstances, a large share of any firm's resources must be devoted to present custo- mers. Firms may increase sales and their market shares by decreasing prices, expand- ing their distribution channels, launching promotional campaigns, and retaining their current customers (Cravens, 1994). However, customer loyalty would be a more profitable approach because as a mature industry, the hospitality business must pursue market- share gains, rather than market-growth gains (Jarvis and Mayo, 1986). When customers are lost, new ones must be attracted. However, replacement comes at a high cost. Capturing new customers is expensive because of advertising, promotion and sales costs, and start-up operating expenses (Reichheld, 1996). Reichheld, in his book, The Loyalty Effect, argues that in businesses like auto and life insurance and credit card firms, attracting new customers often costs approximately five times what it costs to retain current customers. If compa- nies knew how much it really costs to replace customers, they would make more invest- ments to retain them. For example, credit card companies spend an average of $51 to recruit a customer and set up the new account (Reichheld, 1996). It costs less to serve loyal customers because familiarity with the company's products and services makes customers less dependent on its em- ployees for help and information. A satisfied, loyal customer can contribute a great deal to the bottom line of any company. Therefore, the purpose of this article is to emphasize the importance of brand loyalty and to determine factors that contribute to brand loyalty. This paper then provides strategies for hospitality managers for improving brand loyal custo- mers. What is a brand and why is it important? A brand is the product or service of a particular supplier, which is differentiated by its name and presentation, such as Marriott or Hilton for a hotel company. Many hotel and restaurant chains seek to create and fulfill the expectations of specific groups of customers. They want to leave their mark on a given field (e.g. Ritz Carlton for an upscale hotel) and set their imprints on a product or service (e.g. Disney's creative theme park concept). Brands introduce sta- bility into businesses, help guard against competitive imitation, and allow consumers to shop with confidence in an increasingly complex world (Aaker, 1991). Once customers have made a decision about a brand and its associations, they are often loyal to that brand, continue to buy it in the future, recommend it to friends, and choose the product over others, even those with better features or lower prices (Assael, 1991). Brands are natural barriers to new competi- tors because branding reduces consumer risks associated with the purchase of pro- ducts or services. Thus, they support pre- mium prices and sustain increasing revenue because of the consumer tendency towards long-term brand loyalty (Ehrenberg et al., 1990). Brand loyalty Brand loyalty has been described as a behavioral response and as a function of [ 223 ] International Journal of Contemporary Hospitality Management 11/5 [1999] 223±229 # MCB University Press [ISSN 0959-6119] Keywords Brand extension, Brand loyalty, Hospitality Abstract Hospitality companies can increase their market share and growth rates by increasing their brand loyal customers. This is a more profitable approach than other marketing activities, such as price cuts or promotional pro- grams. As a mature industry, the hospitality business must pursue market-share gains, rather than market-growth gains. Acquiring new customers is expensive because of advertising, promotion, and start-up operating expenses. Besides, it is cheaper to serve current customers. This paper brings together the factors that contribute to brand loyalty in marketing literature and provides strategies to hospitality managers for increasing brand loyal customers. The author thanks Dr Sara C. Parks and Dr Angela L. Farrar of the Pennsylvania State University for their constructive suggestions on earlier versions of this article.