Why are loyalty programs important to hotel chains? They promote guest retention and direct bookings. Almost every major hotel chain has a loyalty program, which means it’s difficult for consumers to differentiate one chain’s program from another’s when the action required to receive rewards is pretty much the same across the board. But the industry is ready for a change. Skift recently published their State of Loyalty in Hospitality 2017 report, which examines some of the latest trends and strategies among loyalty programs in the hospitality industry. In this blog post, we’re highlighting a few of the key takeaways from the report and offering some actionable suggestions for hotels to employ in order to increase revenue and improve the guest experience.
As a hotel chain, you might have a love-hate relationship with OTAs. They’re bringing in business, but they’re also cutting into profits. As Skift reported, “OTAs take between 10 and 15 percent of room rates in commission from large branded chains and between 15 and 25 percent for independent properties.” Hotels need to offset rising distribution costs by encouraging more people to book directly with a brand. When a customer has booked through an OTA the goal once they’re on the property is to build a direct relationship so that the customer books direct next time they stay, effectively reducing the cost of customer acquisition.
A few hotels have taken a “if you can’t beat ‘em join ‘em” mentality when it comes to OTAs by allowing guests who book through an OTA to still earn loyalty points. Hotels can give guests who book through Expedia the option to sign-up for their chain’s loyalty program. This has been proven to be a successful tactic to drive more direct bookings. According to Skift, around three quarters of travelers who originally signed up for Red Lion’s Hello Rewards through one of the Expedia sites later returned to book directly via Red Lion. Expedia’s Senior Vice President, Global Partner Group, Melissa Maher explained, “Many partners find value in building loyal relationships with consumers who found them through Expedia. We can be a very fast and efficient new loyal consumer acquisition channel for those chain partners.”
It’s Time for Loyalty.X
Most hotel loyalty programs are based solely on points. But how effective are these programs at actually building loyalty? Point-based programs might have some value for frequent travelers; however, they make it difficult for customers booking less consistently to accrue many benefits. This means that when these travelers are looking to book accomodations, brand affinity is unlikely to factor into the decision-making process. It’s time for hotel brands to consciously-uncouple from point-based loyalty. The pair had a good run, and it doesn’t have to be completely over, but they’ve outgrown each other. Hilton’s SVP and Global Head of Customer Engagement and Loyalty, Mark Weinstein explains the shift well:
In all things, we’re not only looking to reward guests for staying loyal, but to show our loyalty back in the form of tailored offerings — from communications, to what happens on-property… Originally programs focused on building loyalty through rewards designed for high-frequency travelers,” he explains. Rewards were transactional and focused on what you could get for dollars or nights spent. Then things began to shift to more of a “club” mentality — offering more tangible, instant benefits for all travelers. Now, we’re seeing a combination of the best of both worlds, and getting to the core of what our guests want — a program centered on personalized relationships and rooted in customized experiences (Skift).
What Weinstein is describing here is the difference between what we can refer to as Loyalty 1.0 and Loyalty.X — the experience of loyalty. Many hotel loyalty programs are undifferentiated and fail to deliver tangible benefits, which causes members to disengage. If everyone receives the same incentive and gets the same reward, that's not special. That's transactional. It's not about rolling out loyalty programs for keeping score. It's about rolling out customer experiences rooted in data that make customers loyal — and profitable.
The hospitality industry has a unique customer lifecycle. There are crucial phases where the messaging strategy has to adapt, and generic flat messaging misses the mark in terms of upselling other activities or enticing guests to come back. Connecting with relevant messaging right when the guest checks in, is on premise, engages with an onsite venue, or checks out is difficult to execute - especially to upsell other services you offer. For example: the check in experience can be greatly enhanced by providing all available information about a customer immediately upon check in. Discounts or rewards can be presented to entice customers to take advantage of services on property. If a high profile guest who hasn’t visited lately checks in, add value to her stay and offer a unique reward instantly: if she usually visits the bar during her stay, offer her a free entree with a drink purchase.
Hotels can make a positive impact on the guest experience even before check-in by providing your customer service representatives with a holistic view and an opportunity to trigger rewards or discounted services. For example, a guest who visits regularly calls in to schedule a trip. The service rep pulls up her profile, and sees that she typically spends a lot of money with the hotel, so he sends her two free tickets to a concert when she books her stay.
Loyalty has been a constant area of focus for the hospitality industry. In the past, the paradigm was about collecting nights based on stays and tiers, but now it’s about a more hybrid personalized and engaged model. And as SessionM CTO & Co-Founder Scott Weller told HotelBusiness.com, “The future is now about: How do we create customer experiences around loyalty retention and engagement, not only for those who intend to sign up but others who are customers with a specific amount of frequency? How do we apply loyalty to 100% of the customer base who are the frequent buyers and the infrequent buyers?” Executing that hybrid, personalized and engaged model depends on actionable data. By investing in the right technology, hotel brands can expand from typical loyalty program structures to behavior driven and experiential rewards.