Is the NPS® the Key to Hospitality Success?

commercial strategy fernando vives hospitality management Mar 03, 2024


Don´t you think that it would be great to know The Secret to Guest Retention?

In the hospitality industry, customer satisfaction and loyalty are key drivers of success. But how do you measure and improve them?

One of the most popular and effective methods is the Net Promoter Score (NPS), a simple metric that gauges how likely your guests are to recommend your business to others.

NPS is not only a measure of satisfaction, but also of loyalty. It reflects how your guests feel about your brand, your service, and your value proposition. It also gives you an insight into how you can improve your guest experience and increase your repeat and referral business.

Let´s explore the concept of NPS and its value for the hospitality industry, and why it matters more now than ever.

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What is the NPS

The Net Promoter Score (NPS) was introduced in 2003 by Fred Reichheld, a partner at Bain & Company, as a method to gauge customer loyalty. It's based on the premise that customers can be divided into three categories: Promoters, Passives, and Detractors. By asking one simple question:

"How likely is it that you would recommend our company/product/service to a friend or colleague?"—businesses can identify which category their customers fall into. Scores range from -100 to 100, and a higher score indicates better customer loyalty and satisfaction.

The Value of NPS in Hospitality

For years, we've delved into measuring quality in hospitality from multiple angles. Back in 2009, I introduced the Quality Penetration Index (QPI), a benchmark that allowed comparison with other indices like RGI, ARI, and MPI against our quality standards. Collaborating closely with our provider, ReviewPro, and RJ, they evolved this concept into what's known today as the Competitive Quality Index. While industries outside hospitality have long embraced the Net Promoter Score (NPS), its adoption within our sector has been gradual.

Is NPS now gaining the momentum it deserves in hospitality?

NPS is a simple but powerful way of measuring guest satisfaction and loyalty. It is based on a single question: "How likely are you to recommend us to a friend or colleague?" The respondents are asked to rate their likelihood on a scale of 0 to 10, where 0 is extremely unlikely and 10 is extremely likely.

Based on their ratings, the respondents are classified into three categories: Detractors, Passives, and Promoters. Detractors are those who rate 0 to 6, Passives are those who rate 7 or 8, and Promoters are those who rate 9 or 10. The NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters.

For example, if you surveyed 100 customers, 40% were detractors and 50% were promoters, your NPS would be 10 (50% - 40% = 10). The score can range from -100 to 100. The closer to 100, the better.

NPS is a simple and direct way of gauging guest satisfaction and loyalty, as it captures the essence of how your guests feel about your business. It also allows you to collect valuable feedback from your guests, as you can follow up with them and ask them why they gave the rating they did. This can help you identify the strengths and weaknesses of your service, and the areas where you can improve.

NPS is also a valuable indicator of your business performance and growth potential. Research has shown that NPS is correlated with customer retention, revenue, and profitability. A higher NPS means that you have more loyal and satisfied guests, who are more likely to return, spend more, and refer others to your business. A lower NPS means that you have more dissatisfied and disloyal guests, who are more likely to switch to your competitors, spend less, and discourage others from choosing your business.

Why NPS Matters More Now Than Ever

For a benchmark comparison of NPS across various industries, you would typically look at large data sets that categorize average NPS scores by sector. These benchmarks can vary significantly between industries due to different customer expectations and experiences.

Generally, a score above 0 is considered good, above 50 is excellent, and above 70 is world-class.

NPS is not a new concept, but it is more relevant and important now than ever before.

In today's competitive landscape, filled with a multitude of brands and new offerings in nearly every market, measuring both quality and loyalty is crucial. NPS provides insight into guest loyalty and the likelihood of recommendations to others, which, when combined with quality metrics, can offer a comprehensive view of a hotel's performance and areas for improvement. As the industry evolves, such tools are invaluable for maintaining an edge and ensuring guest satisfaction and retention.

How to Transform Feedback into Excellence

Harnessing guest feedback is pivotal for hospitality enhancement. By incorporating the NPS question into guest surveys, we can categorically address different guest groups. Negative feedback from detractors can trigger immediate service recovery, ensuring follow-ups that might transform their experience.

Engaging passives is equally crucial; they hold the promise of becoming promoters with the right incentive.

Meanwhile, champions of our service—the promoters—should be nurtured through loyalty programs, turning their satisfaction into a lasting relationship.

Setting clear goals and enabling our teams to actively use NPS feedback can significantly elevate guest satisfaction and loyalty

Conclusions and final thoughts 

In the dynamic world of hospitality, the Net Promoter Score (NPS) stands as a beacon of customer satisfaction and loyalty. It's a compass that guides us towards service excellence by translating guest feedback into actionable insights.

We've touched on the power of NPS to categorize guests, the importance of service recovery for detractors, the potential of passives, and the value of engaging with promoters. These strategies can propel any hospitality business forward.

Your insights and experiences are invaluable to this ongoing discussion. Share your thoughts below, join our vibrant community conversation, and let's collectively elevate guest loyalty and satisfaction.  

NPS® Trademarks and Licensing | Bain & Company

 Until next time, keep exploring the endless possibilities of hospitality.

The views and opinions expressed in this newsletter are solely those of Fernando Vives and do not necessarily reflect those of any company or organization I work for or I am affiliated with, nor those of their partners or suppliers. The data sources used are mostly public, ChatGPT may have been used for research assistance, copywriting or editing. If you find any discrepancies or errors in the data or insights shared, please reach out to me via LinkedIn for necessary adjustments. Thank you for following and being a part of this community.

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