Are hotel loyalty programmes evolving?

In the early 2000’s a study of 364 guests at two big-city hotels by Cornell University’s School of Hotel administration recommended hoteliers to consider redirecting some of their frequent-guest expenditures towards strengthening human resources and improving the guest experience through design and amenities. It also reported a weak connection between satisfaction and loyalty, and surprisingly discovered business travellers to be among the least loyal.

In contradiction, several hoteliers maintained the belief that the corporate traveller was loyal – some for the points and others for the recognition and special benefits a loyalty programme offered. Max Starkov of Hospitality eBusiness  pointed out three specific trends: Business travellers are more loyal to the major brands than leisure travellers; major brands are using their loyalty programmes as a major retention tool to keep business travellers; and major brands are using their loyalty programmes as a key advantage over the online intermediaries – again especially with business travellers.

First introduced by Holiday Inn and Marriott in 1983, hotel-loyalty programs are now a firmly entrenched part of the industry. According to Skift - a New York-based business-intelligence company catering to the travel market - the nine largest hotel-loyalty programs alone boast nearly 350-million members worldwide. Loyalty programmes have now evolved to meeting the needs of experience seeking guests. From where guests could redeem points for free nights, today’s hotel-loyalty programmes are increasingly luring and retaining customers with distinctive experiences. Hotels are now shifting from traditional rewards to value experiences - for example, the Wyndham Hotel Group’s Auctions programme that features over 25 offers such as a food walking tour of New Orleans’ French Quarter for four or tickets for two to see Celine Dion at Caesar’s Palace.

No longer is loyalty the bastion of the business traveller. Hotels now offer a programme that delivers for all travellers - from the rookie in-the-workforce millennial who stays two nights a year, to the seasoned road warrior who spends 200 days of the year in a hotel room. A 2016 survey of U.S. consumers by PwC found that hotel nights are the leading redemption choice for both millennials and older customers, but there were stark differences between the two groups. While 85 per cent of non-millennials said that they prefer to redeem points for hotel nights, this number dropped to 64 per cent among millennials. Meanwhile, 36 per cent of millennials opted for room upgrades compared to 16 per cent of non-millennials.

Now, more than ever, hotels are realising that loyalty serves two key functions:

• Encouraging more direct bookings by offering incentives for customers who book directly through the hotel rather than using an OTA.
• Enabling hotels regain better profit margins by cutting back on commission payments to OTA’s - as more guests book direct.

Furthermore, loyalty programmes restore and drive the level of engagement with customers unlike the anonymity of customers channeled through an OTA.

Shafeek Wahab – Editor, Hospitality Sri Lanka, Consultant, Trainer, Ex-Hotelier

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