5 reasons why customer service is important in hospitality

When it comes to the hospitality industry, good customer service forms the foundation that every successful business is built upon. Whether it's a small boutique hotel, a big international resort or a local restaurant, providing excellent customer service is essential for any business to thrive. But that’s not the end of the story.

Customer service is changing; with new digital services and AI chatbots growing in the hospitality industry, what does customer service mean in the digital age? What is important to customers today, and what happens when they aren’t satisfied with service?

To answer these questions, let's take a look at some recent data and see the five key reasons why it’s essential to provide great customer service online and in-house in 2023.

Why is customer service important for hospitality businesses?

1. Creating memorable experiences for word-of-mouth

When someone asks your customer how their experience was at your hospitality business, the quality of the customer service is going to be one of the first answers that come to mind. This is particularly the case if the customer service was exceptionally good or exceptionally bad; average customer service tends to be more forgettable.

Customer service is so important in the hospitality industry in part because of human psychology. Human interactions and emotional events play a big role in shaping how customers remember their experiences.

Excellent customer service goes beyond a simple transaction; it aims to build a connection and leave a positive lasting impression. By providing personalised, warm and respectful service, hospitality businesses can turn ordinary visits into extraordinary memories. Not only is that great for customers: your business will also benefit from the word-of-mouth (WOM) marketing.

According to marketing research, 78% of people rave about their favourite recent experiences to people they know at least once per week, and 90% of people are more likely to trust a recommended brand even when it’s recommended by a stranger. On the other hand, one bad customer service experience can create a long-lasting negative memory of your brand for a guest or customer. This person will usually go on to share that experience with friends and family. According to data, 26% of people will completely avoid a brand if their friend or family tells a negative story about their experience.

2. Building customer loyalty

In an industry where competition is fierce, customer loyalty can make all the difference. Building strong relationships with guests through exceptional customer service and repeated positive interactions fosters customer loyalty. This in turn brings with it a lot of benefits:

• Having a strong loyal base of regular customers can provide your hospitality business with a backbone to keep it resilient during times of crisis, such as the pandemic
• Loyal customers in travel, hospitality and tourism on average spend 67% more than new customers
• It is cheaper to keep your loyal customers than to spend money on marketing and advertising in order to find new ones. According to data, acquiring a new customer can cost five to seven times more than retaining an old one
• Plus, as mentioned in the first point above: long-term loyal customers who really care about your business also become your brand champions, offering important WOM marketing for free

When guests feel valued and appreciated during customer service interactions, they are far more likely to return and become loyal customers, and in turn to recommend your establishment to others.

3. Gaining a competitive edge

In today's saturated hospitality market, standing out from the crowd is crucial. The data is clear: outstanding customer service can set your business apart and give you a competitive edge.

According to Forbes Magazine, 73% of companies with above-average customer experience perform better financially than their competitors, while 39% of CEOs say customer experience is the most effective method of creating a competitive advantage.

Although these statistics hold true for all industries, good customer service plays an even bigger role in gaining a competitive advantage in an industry that is shaped so much by reviews, WOM, and personal interactions between staff and customers or guests.

When customers in the hospitality industry experience exceptional service, they are simply more likely to choose you over your competitors and to recommend your brand. By consistently going above and beyond in customer service, you can create a distinct identity that attracts new guests and keeps existing ones coming back for more.

4. Boosting online reputation

In the digital age, online reviews, ratings and your brand’s online responses can make or break a hospitality business.

In fact, reviews online today have more influence over customers' hotel booking decisions than star ratings. According to data from TripAdvisor, 81% of people frequently or always read reviews before booking a hotel. In Australia, restaurants, bars and cafes represent 14% of all reviews written online and are the most reviewed businesses out of all industry categories.

On the one hand, this presents a real opportunity for your business to get some free promotions. All you need to do is ask your customers: according to one Australian consumer survey, 56% of the respondents who had left a review online did so simply because the seller had prompted them to.

Happy guests are naturally more inclined to leave positive reviews and recommend your restaurant, cafe, hotel or other hospitality business on review platforms like TripAdvisor, Google Maps or Yelp. Of course, good food and beverage are essential, but customer service is almost always mentioned when customers leave reviews online so it’s crucial to get it right.

On the other hand, poor customer service can lead to emotional customers leaving negative reviews online, damaging your reputation and deterring potential new customers. Prioritising customer service helps maintain a positive online presence and serves as a marketing tool for attracting new guests.

Customer service in the hospitality industry in 2023 doesn’t just mean the interaction that occurs between staff and customers on the ground: it also extends to all your interactions with customers online.

With new branded apps and expanded AI chat services now available, data shows that 81% of hotel guests want greater digital customer service. In one recent survey, 46% of holidaymakers report their recent experience contacting a travel hospitality brand was “just OK,” while an additional 20% say it was “slow and frustrating.”

New digital tools provide an opportunity for hospitality brands to provide faster service online, but must be balanced with consumer demand for personalisation and the desire to speak with a person: 76% of customers in one survey say they expect to talk to someone immediately upon contacting a travel hospitality company.

It’s crucial for every hospitality business in 2023 to engage positively and efficiently with customers online, through email and chat communications and via social media. The digital interactions you have with guests are just as important for your brand as in-house customer service.

5. Maximising revenue

Last but not least, excellent customer service has a direct impact on profits. By providing exceptional customer service you build an environment where guests feel comfortable and valued. Happy guests are more likely to spend more money during their time with you -- be it on room upgrades, additional services, an extra bottle of wine or repeat visits. In fact, data shows that customers who have had a positive customer service experience are likely to spend 140% more than customers who report negative experiences.

Plus, happy customers will leave you good reviews, champion your business, become loyal customers and bring new customers to your door absolutely free of charge. All of this has a cumulative impact on the bottom line of your hospitality business.

Data shows that customer-focused businesses tend to just do better financially than those that aren’t. According to Forbes magazine, brands with superior customer experience bring in 5.7 times more revenue than competitors that lag in customer experience.

For many professionals working in hospitality, providing exceptional service is a great source of personal pride and can be incredibly rewarding. But not only that: exceptional customer service plays a vital role in fostering customer loyalty, enhancing your online reputation and giving your hospitality business a competitive advantage.