Calculating tourists' customer equity and maximizing the hotel's ROI

This study is the first attempt to calculate customer equity (CE) and to project the marketing return on investment (ROI) by using risk simulation in the context of tourism and hospitality. Based on the results from focus groups and an online survey of tourists, the study identified the five CE drivers, the CE-based market segments, and demonstrated the calculation of CE related to tourists' CE segments and hotel type. The marketing effort responsiveness for each hotel profile was measured by using the three input variables for calculating customer lifetime value (CLV) and CE. Findings include that the tourists' five CE segments have different financial impact of CE drivers according to the hotel type and high-end hotels have the largest success regarding significant CE drivers in terms of ROI and CE. Theoretical and managerial implications were suggested regarding the application of the CE and its measurement.