Customer Lifetime Value: A Data Science Approach for Hospitality Applications

Authors

Keywords:

hospitality, casinos, customer lifetime value, Markov-chains, customer relationship marketing

Abstract

Segmentation of databases based on Customer Lifetime Value (CLV) is the cornerstone of Customer Relationship Management (CRM).  To implement CRM strategies, the hospitality industry relies heavily on loyalty programs to track customer behavior.  Despite the prevalence of loyalty programs, little attention has been given to CLV model formulation in hospitality.  This paper reviews the extant literature discussing CLV modeling and formulates a model with hospitality-specific considerations.  Based on the literature, a phased approach is proposed using cluster and Markov chain analyses, while incorporating a new metric based on a customers’ expected trip cycle to identify lost customers in the non-contractual setting.  The model is empirically tested on casino loyalty data to demonstrate the viability and robustness of the approach for hospitality sectors.

Author Biographies

  • Timothy Webb, Department of Hospitality and Sport Business Management, University of Delaware

    Dr. Timothy Webb is an Assistant Professor of Hospitality Business Management at the Alfred Lerner College of Business and Economics at the University of Delaware.  His research is focused in the areas of hospitality revenue management and analytics.  He has several years of industry experience as an analytical consultant, data scientist and business intelligence analyst for internationally recognized hospitality companies.  He is also the chair of ICHRIE’s Revenue Management Special Interest Group (SIG).

  • Ray Cho, School of Social Work, Rutgers University

    Ray Cho is a Postdoctoral Research Associate in the School of Social Work at Rutgers University. He received his PhD from University of Nevada Las Vegas (UNLV) and has worked as a research assistant at the International Gaming Institute. He also has several years of industry experience as a corporate manager in the gaming industry. He earned his BA from the University of Wisconsin Madison and a Dual MBA/MS in Hospitality from UNLV.

  • Mark P. Legg, Penn State Berks

    Dr. Mark Legg works in the School of Hospitality Administration (SHA) at Boston University as an Assistant Professor. Mark has over a decade of experience in analytical and leadership roles within the hospitality industry including developing industry leading analytical departments for international hospitality firms. He has also developed numerous analytic solutions for the industry ranging from pricing optimization and throughput analyses at destination venues such as Kennedy Space Center and Rockefeller Skating Rink to labor efficiency studies of lodging/retail areas in National Parks. His research interests are leveraging applications of quantitative methods to improve efficiencies within the hospitality industry.

Customer Lifetime Value - Cover

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Published

2022-11-04

Issue

Vol. 2 No. 1 (2022)

Section

Academic Study

License

Copyright (c) 2022 Timothy Webb, Ray Cho, Mark Legg

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.