Loyalty programs are on track to become the next big battleground for travel brands, and it’s not hard to figure out why. As hotels and online travel agents fight for bookings, rates can only drop so far before money starts flying out the window. What can brands do to up the ante without sacrificing profits? Provide other incentives through loyalty.
There are now over 3 billion loyalty programs in the United States alone. Now consider the entire population of the United States, approximately 325 million. That is a vast gap that clearly demonstrates the competitive battleground that loyalty programs have entered.
From a travel perspective, loyalty program membership grew 13.1% from 2014 to 2015. However, a high number of program members are considered inactive. For example, only 25% of La Quinta’s 11 million loyalty members were considered “active” in 2015, and Wyndham only saw 22% of its member base as active during the same year.
Millennials, in particular, have been a tough segment to persuade with 39% not seeing the value in signing up for a loyalty program. The most important factors for this particular segment include value and ease of use.
Business travelers, inarguably the most vital demographic for loyalty programs, also have several pain points in this area. 76% of business travelers would extend their business trips for leisure if they were offered discounted rates while 81% cited a high level of service as an important deciding factor when it comes to sticking with a brand loyalty program.
Enticing guests to sign up for a loyalty program is only half the battle; getting them to stay active, redeem points, and use perks is a challenge that many brands are struggling with. A primary issue related to engagement is simply the fact that most guests are members of multiple rewards program and cited “fatigue” as a primary issue when deciding which program was the best. Additionally, hotels often automatically enroll guests into loyalty programs during a stay without clearly communicating the value and benefits associated with the program, leading to a huge disconnect when emails about the program are sent.
Are any hotels doing it right? Hilton was the first major brand to completely revamp their loyalty program (HHonors) and rolled the promotion into their direct booking campaign. The new program heavily pushes earning and redeeming points and best rates for booking direct. Additionally, loyalty members can enjoy digital check-in, complimentary internet access, late check-out and express check-out for all members, with other perks added as a guest earns a higher status.
Marriott also changed their loyalty program after the acquisition of Starwood Hotels, which made Marriott the largest hotel group in the world. Since the merger, the two branded loyalty programs have been linked, allowing guests at any of the 30 total brands to use either program seamlessly. Meanwhile, a complete overhaul of the loyalty program is under way and is expected to launch sometime in the beginning of 2018, though specific details on what the new program might entail have not been released.
What does the future hold for loyalty programs across the board? Member-exclusive benefits and rates will continue to be a primary focus, especially considering the success that Hilton has experienced with making members a priority. Providing exclusive amenities on-property is something that OTAs simply cannot offer, giving hotels a leg up on the competition. Member-exclusive benefits could be complimentary access to high-speed internet, a discount at the on-property restaurant or spa, or even a surprise at check-in. Additionally, more loyalty programs are listening to consumers when it comes to simplifying their programs, making it easier to understand exactly how perks are earned and how to use them. Also, hotels are beginning to offer more, smaller perks along the way versus making travelers accrue tremendous amounts of points to cash in on one big prize. Rewarding guests with small surprises at shorter intervals can help with engagement and long-term retention.
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