(International Journal of Gaming, Hospitality and Tourism, 2022-11-04) Webb, Timothy; Cho, S. Ray; Legg, Mark P.
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 customer’s 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.