Hotel loyalty programs becoming a core focus of 2017

March 7, 2017

Moving into 2017, loyalty is becoming a core focus in the hospitality sector. An uncertain economic outlook and intense industry competition has led numerous hotels to evolve their loyalty programs to offer greater flexibility and personalization.

The very definition of the word is also dividing opinion. While some hotels are focusing on instant rewards and discounts as an incentive, others believe that guest “loyalty” should instead be built upon offering exemplary service and recognition.

Despite conflicting ideas, one thing’s for sure: in the coming year, loyalty in the hotel industry looks set for major change.

Can current loyalty rate strategies last long-term?

The current discount-driven loyalty model was first launched to help hotels, particularly large brand hotels, combat the dominance of OTA direct bookings. But it turns out that these programs often end up benefiting the brand at the expense of the hotel owner.

While the hotel brand gets a boost in loyalty club membership and booking percentages, many hotel owners end up footing the bill and in some cases could receive a lower net revenue per booking than they would have gained through a booking via an OTA.

Many hoteliers also argue that offering reduced rates for joining loyalty programs can mean discounts are given to those who would probably have paid full price anyway. Some feel the idea of incentivizing loyalty in this way is also fundamentally flawed as guests aren’t really wedded to the brand at all—only to the discount they receive.

On top of all this, the financial burden hotels face when joining brand schemes has also skyrocketed. A recent study found that in the past five years, the cost to participate in brand loyalty schemes has risen 77%.

In the midst of all this discussion, it seems that price-driven programs might be destined to fizzle out as the big chains consider new ways to build consumer loyalty.

How the big chains are rethinking loyalty

In an attempt to deliver long-term sustainability, many of the world’s major hotel brands are rethinking how loyalty is recognized and rewarded.

After its high-profile “stop clicking around” campaign that offered guests exclusive room rates for booking direct, Hilton has recently announced updates to its loyalty program aimed at broadening overall appeal.

On top of receiving members-only rates for direct bookings, Hilton Honors will include four new features. These include the ability for members to “pool” points for future travel, buy products on Amazon.com, and book a hotel stay at Hilton by combining membership points and money.

Meanwhile, Choice Hotels has started offering customers more instant rewards and stopped points from expiring. Simple but incredibly effective, these two changes have seen membership numbers surge in the past year to 30 million members. Choice Privileges has also shot up from 10th to No. 2 in U.S. News & World Report.

Marriott is also making instant rewards a priority. In a recent interview, Marriott’s senior vice president of digital, George Corbin, said the brand was “shifting from a delayed gratification to a series of instant gratifications.” Instead of accruing points for future stays, guests will be rewarded as soon as they check in and throughout their stay, with emphasis on a more personalized approach.

Marriott is also looking at using “machine learning” and “plenty of number crunching” to provide a range of benefits to loyalty members. This data-driven approach could see rewards become far more tailored to suit unique guest preferences, tracking changing tastes and desires through the years.

Of course, loyalty programs aren’t just the preserve of big brands. To compete, independent hotels are finding ways to create their own loyalty programs that incentivize repeat bookings and lead to long-term revenue growth.

How independent hotels can play the loyalty game

Bringing in a loyalty program can be extremely profitable. In a study by Cornell, guests who joined an independent hotel loyalty program stayed almost 50% more nights than guests who didn’t join the same program. The total annual revenue per enrolled guest was also boosted by nearly 50%.

While far from easy, there are clearly huge benefits to creating a loyalty program. For any independent hotel attempting to do so, here are some of the key factors to consider.

Choosing the right partner

One of the biggest considerations when creating a loyalty program is deciding who to partner with.

Many hotels join third-party reward programs, such as Voila Hotel Rewards and Stash Hotel Rewards. The benefit of this approach is that it enables an independent to reach a wider audience and compete with brands that already have established programs.

But to provide a more unique range of offerings, some hotels choose to start their own program and end up partnering with a CRM provider. CRM software effectively provides all the tools needed to help drive loyalty, offering everything from analytics and guest profile management to automated pre-stay and post-stay emails.

After finding the most suitable partner, it’s time to address exactly what type of rewards to offer.

Personalized rewards

According to research, 77% of travelers want greater input in shaping their own reward program. So take the time to survey guests to check the kind of rewards they’d most appreciate. Not only will this help tailor appropriate offers, it’ll increase the chance that guests join the program based on them having been consulted in the first place.

Arguably, independents may also find more success using instant rewards instead of points-based schemes. Given that many independents don’t have multiple properties, guests can find it hard to build up and redeem points. Instead, instant rewards tailored to match the preferences of the target audience can serve as a far greater incentive.

Hotels should also regularly remind loyalty members about existing points, and suggest ways to redeem them. According to PwC, 60% of leisure travelers hadn’t redeemed their points in the past year. For maximum effect, consider sending personalized emails that focus on how points can be redeemed and align these with guest preferences.

Finally, it’s important to get creative with offers to ensure they truly stand out. Along with room upgrades, Kimpton Hotels’ Karma Rewards program allows members to earn credits for things like birthday offers, VIP restaurant reservations and in-room spa treatments. Guests can even spend credits on getting direct access to Kimpton’s CEO.

By offering a varied, fun and inventive range of rewards, the appeal of joining a loyalty program becomes greatly increased.

Loyalty program integration into the website

Travelers today expect to be able to manage their loyalty memberships online, so it can be a major turnoff if a hotel doesn’t integrate their loyalty program into their own website. To boost member participation, independent hotels should work with their CRS or booking engine company to build out an integration to their CRM or loyalty program software. This would allow members to log in to their accounts on the hotel site and see rewards or special rates available to them without having to use a special offer code.

The changing face of hotel loyalty

As loyalty becomes a huge focus for the industry, hotels are challenging traditional ideas and trying new strategies to attract both short and long-term business.

While there will always be a subsection of travelers looking to maximize points and value from loyalty programs, there is also a desire for programs to be more about personal recognition and personalization.

Arguably, long-term customer relationships are strongest when they’re based upon solid foundations. So while incentives and rewards certainly have their place, encouraging guests to return time and again also depends heavily on how welcome, recognized, and valued they’re made to feel.

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