The grey market is growing rapidly. There are currently about 15 million people over the age of 50 in the UK, and according to Age Concern, this is set to increase to one-third of the population by 2020. Many have retired with comfortable pensions and no mortgage, meaning this age group also holds 80% of the nation's personal wealth, and 40% of the nation's disposable income - spending £205b each year, according to advertising agency Millennium Direct.

Despite the fact that the term "grey pound" has been around since the 1970s, marketers in all sectors are only just beginning to realise the true potential of this market, and how to target it effectively.

So how are hoteliers faring in this battle for the grey pound? Seeing as this customer base is just itching to spend its huge disposable income on leisure, the industry should be cashing in. However, it seems real progress has been made only over the last couple of years. One of the main problems has been that the hotel industry, like many other sectors, has been basing marketing activities on outdated and stereotypical views. Indeed, the unflattering term "grey" that's still used to describe this market speaks volumes. The fact is that over-50s don't want to be seen as the grey-haired old dears that marketers have historically depicted.

Pamela Carvell, chairman of the Hotel Marketing Association, says: "There are a lot of people who are retired, financially happy, but not that old. Over-50s can be very active - in fact they hold the largest number of gym memberships. People like to keep fit and enjoy their retirement. They definitely don't want to be the typical elderly couple with grey hair walking along a beach. The key is trying to talk to this market without being patronising. And this is something that some hotels still have to wake up to."

One of the most experienced organisations at arranging leisure breaks for the over-50s is services group Saga. Mark Taylor, marketing director at Swallow Hotels, says he has taken heed of its experiences. "They found out that you can't lump all over-50s together. You need to think of three separate age groups - 50-59, 60-65 and over-65s. People in their fifties are not interested in going on a cruise with older
people," he says.

Some characteristics tend to span all mature customers, however. Although many are quite affluent, these customers also know how they want to spend their money and have a higher regard for service levels than other age groups. "Demands can be high," says Carvell. "Customers have been around longer and are looking to get better value in terms of extra recognition and better service. When we retire we lose the status of our job title, so personal recognition can be important. This is a very discerning customer base which appreciates style and the smaller touches."

Derek Picot, general manager at five-star Knightsbridge hotel Jumeirah Carlton Tower, agrees that mature guests appreciate higher levels of service. "Special service touches that build the guest experience include closing curtains at sunset or turning down and cleaning the room after the guest has left for dinner," he says.

The good news is that if you get service right, you could win long-term custom. Research by website travelsupermarket.com has found that the grey market has greater brand loyalty. The website's channels manager, Alexis Garrick, says: "The over-50s market doesn't shop around as much as other groups might. Once they like and value a brand, this market can be extremely loyal and can generate a great deal of repeat business."

Weekend offers

As many people in this market are retired, they have time on their hands. This flexibility poses some great opportunities for hotels to fill their books during lean periods. Carvell says: "Every hotel has a major occupancy problem on Sundays, so with older customers often taking four or five short breaks a year there are real opportunities to shift weekend offers to Saturday and Sunday rather than Friday and Saturday. Retired people often have complete flexibility over the check-in and check-out times."

Midweek leisure breaks can also appeal. However, Taylor says customers won't accept paying full price for a midweek stay. "Although the over-50s have a lot of money to spend, they're still very price-conscious and want a good deal. For midweek breaks you still have to offer a much lower rate," he says.

As with any age group, people have different budgets, so hotels need to provide a good spread of deals. Swallow Hotels, which offers leisure break rates from £35-£110 per person for an overnight bed and breakfast stay, is looking at introducing a standard senior discount on all leisure break rates. "Train companies have an over-55 rate and this is something we're researching with a view to offering a similar discount scheme," says Taylor.

Hilton already offers discounts through a deal it provides via Saga. Tony Orme, director of leisure marketing at Hilton International, says this market is an increasingly important segment for the hotel chain. "A few years ago Hilton recognised there was a greater demand for leisure provision for the over-50s market. For the last three years we've had an exclusive partnership with Saga whereby Hilton is the preferred leisure hotel brand in the UK and Europe. The ongoing partnership allows Saga customers access to preferred rates at Hilton hotels through Saga brochures, while Hilton provides a best-rate guarantee," he says.

Prices for the discount scheme start at £51 per person for two nights at hotels including Hilton Dundee, Hilton Coventry and Hilton Southampton, and peak at £142 at its London five-star hotels Hilton on Park Lane and the Waldorf Hilton.

There's a willingness among the most affluent people in this market to spend a little more on luxury. Debrah Dhugga is managing director of Seaham Hall, an exclusive hotel with three helipads and a world-renowned spa. Prices range from £315 to £635 a night including breakfast and dinner, based on a weekend stay for two. Dhugga says about half the customers are over 50. "The mature traveller is now looking for luxury activities. We work closely with the golf course so men tend to play golf, while women enjoy the spa. We also have a renowned chef, Stephen Smith, so we tend to attract a lot of mature food gurus too and provide gourmet food and wine evenings," she says.

Seaham Hall is also profiting from the rising demand for day packages. "A growing number of mature customers are booking spa days. Having some treatments followed by lunch at the hotel is increasingly popular, as they have the free time to enjoy it," says Dhugga. For guests on a lower budget, activities can still be an important draw. Carvell says guided walks, painting, flower arranging and pottery are all popular among this age group.

Taylor says providing more traditional activities such as card games and bowls can also help attract older guests. "However, one of the best ways to get this age group interested is to provide musical entertainment in the form of a singer or pianist. The key is to offer a good price and easy entertainment where activities and music are provided on site," he says.

When considering which publications to advertise in, hoteliers should remember that many people in this age group might still be reading the newspapers and magazines that they were reading 10 years ago. "Just because you're over 50 it doesn't mean you stop reading the Sunday Times," says Taylor. "But to target the over-65s it can pay to advertise through specialist groups such as Saga Magazine."

Personal touch

Dhugga says that Seaham Hall advertises packages aimed at the over-50s through aspirational magazines such as Vogue, Homes & Gardens and Country Life. She says this age group also responds particularly well to web-based marketing. "We send out personal e-mails to customers. More mature people tend to spend a lot of time on the internet looking for packages. We also find sending postcards detailing new packages and offers to be effective. A personal touch is important."

Retired customers often have more time to read post, and Karen Gee, sales and marketing director at holiday provider WA Shearings, says direct mailings can be effective. "Direct mail and brochure request adverts both work really well. This market is also extremely responsive to mailed questionnaires, so we get a great response rate - they have the time and are willing to offer their comments," she says.

Using specialist magazines to advertise activity breaks can also reap rewards. Andrew Cook, operations manager at Forest Pines Golf & Country Club in Broughton, Lincolnshire, says: "We've carried out a strategic golf marketing campaign throughout national golf journals promoting residential golf breaks. Following this campaign we've seen an increase in the golf-playing grey pound."

Carvell says hotels could be missing out on some serious revenue if they fail to raise their game. "There are huge opportunities that hotels cannot afford to ignore," she adds.

Marketing tips

Pamela Carvell, chairman of the Hotel Marketing Association, shares her top marketing tips for targeting the more mature market.

• Choose photography in marketing material carefully. Don't use grey-haired elderly couples - use mature people with highlighted hair having a good time.
• Consider yield management. Provide Sunday night and midweek deals to fill up times when you're short of business. An activity night on a Sunday is often really popular.
• Advertise in the right publications. Many people over 50 wouldn't dream of picking up a Saga-type magazine - they're still reading national newspapers and aspirational magazines such as Vogue and Harpers & Queen.
• Focus on service and recognition. Customers need to be treated like important, independent business travellers. Treat them as you would the managing director of a company - as they probably were. Retired customers need to feel important. If you give them this recognition it will drive brand loyalty.
• Offer activities. Retired customers often take up hobbies they never had time for before. Go for educational and creative activities such as painting and guided walks.
• Use mailshots. Research shows there's a better response rate to them from older people. They're much more likely to read post and enjoy more wordy literature about leisure-break deals and activities.
• Harness the grey surfers. Many older people enjoy using the internet, so consider marketing via e-mails.

The Over-50s

• There are 15 million people over the age of 50 in the UK.
• This number is set to rise to 20.1 million - which will be one-third of the population -
  by 2020.
• The over-50s hold 80% of the nation's personal wealth.
• The over-50s have about 40% of the nation's disposable income.
• The over-50s spend £205b each year.

Source: Age Concern and Millennium Direct