Lifetime value (LTV)

Lifetime value (LTV) indicates the total revenue a guest can generate for a hotel over the entire relationship, from the first to the last stay. It includes all bookings as well as ancillary spending, such as restaurant, spa, or extras.

Why is it important to monitor the lifetime value in hotels?

The lifetime value is essential to understand the true long-term value of a guest and to guide marketing, loyalty, and service strategies.

Many properties focus only on acquiring new customers, overlooking the economic potential of existing guests. A satisfied and loyal guest can return multiple times over the years, recommend the hotel to friends and family, and thus increase the overall value of their presence.

 Knowing the LTV allows hotels to:

• Assess how much to invest in loyalty
• Estimate return on marketing investments
• Focus on the most profitable customer segments
• Improve pricing and customer care strategies

How is lifetime value calculated in hotels?

Lifetime value can be calculated in various ways, from simple formulas to more complex models. A basic formula is:

LTV = Average spend per stay × Average number of stays per year × Average relationship duration (in years)

Practical example:

• Average spend per stay: 250€
• Average frequency: 2 stays per year
• Average relationship duration: 5 years 

LTV = 250 × 2 × 5 = 2.500€

In this case, each loyal guest has a potential value of 2.500€. This data helps understand the long-term value of a direct booking versus one intermediated by OTAs, or to justify investments in CRM, email marketing, and loyalty programs.