How is loyalty evolving?

16 Aug, 2018

Achieving customer loyalty is the Holy Grail of hoteliers.

Repeat customers are particularly valuable, as they generally cost less in terms of marketing and distribution, since they are more likely to book direct, thus avoiding OTA fees and the need for expensive Google ads.

They also have greater lifetime value, providing recurring revenue to a hotel chain –perhaps for years or even decades.

Luxury hotel brands focus on delivering a more personalised guest experience

Thus, hotel groups large and small have created frequent guest programmes, such as Marriott Rewards or Hilton Honors, which attempt to entice customers to book as frequently as possible with the chain.

Such programs may include 1’000 or more 'partners' i.e. airlines, car rental companies, retailers, financial institutions and even, in some cases, charities, which provide customers with a wide variety of ways to 'earn' and 'burn' points in the chain's loyalty scheme.

In fact, these programs are really about offering bribes to customers and have nothing to do with loyalty in the conventional sense of the word.

A valuable customer segment

The reality is that the big chains are chasing a relatively small group of frequent business travelers who are on the road staying in hotels more than 50 nights a year.

Typically such guests will be members of several different major chain loyalty programmes and will actually select their hotels according to normal locational criteria, e.g. near to the head office or the conference venue.

In many cases, bookings for business travelers are actually done by the host organisation at the destination. 

citizenM Amsterdam Hotel - “become a citizen” loyalty program

Nevertheless, these are the truly valuable customers for a hotel or a chain, not casual, infrequent leisure travelers.

Business travelers are also more likely to make use of a hotel's ancillary services, such as F & B, and guest laundry.

The big chains' loyalty or rewards programmes have been geared mainly to frequent business travellers, who are the customer segment that can actually build up enough points to receive a meaningful reward.

Hence it is this guest segment that really values accumulating points towards future rewards.

Programmes are evolving

However, there is an increasing recognition that frequent guest programs should offer more instantaneous rewards if the chains wish to use them as tool to pull in new customers –particularly millennials who are thought to place a lower value on loyalty schemes.

Rapid rewards

Instead of just dishing out more points, some of the more innovative hotel groups are emphasizing 'instant gratification'.

For instance, Amsterdam-based CitizenM gives all guests who sign up to “become a citizen” a 10% discount on the room price and a free welcome drink. 

citizenM London Shoreditch Hotel - “become a citizen” loyalty program

Meanwhile, members of Karma Rewards, the loyalty scheme of IHG's boutique brand, Kimpton, are eligible for a US$10 bar credit, free nights, or credit for the group's spas.

Another example is the Global Hotel Alliance’s (GHA) DISCOVERY scheme which is an umbrella program for 35 medium-size, brands, like Kempinski, Leela, and Corinthia, with a total of 550 hotels in 76 countries.

GHA offers program members 'Local Experiences' intended to help guests to connect with the local culture and local traditions, such as tickets to a Harry Potter studio tour in London.

This approach to loyalty attempts to build a more emotional connection with the brand and can be particularly effective for a hotel group with multiple distinct properties.

Recognition instead of rewards

Luxury hotel brands have basically eschewed conventional loyalty schemes that offer points or rewards preferring. Instead the focus is on delivering a more personalised guest experience

For instance, the hotel staff may study customer profiles, in an attempt to adapt service to individual tastes and requirements.

Some of the benefits offered to loyal customers in luxury hotels include: free breakfast which could add up to €80-€100 for two; WiFi charges which can range from €13 to €30 per day; late check-out which could otherwise cost as much as 50% of the room rate; or early check-in  (i.e. guests arriving early, before check-in time, may need to pay for the night before if they wish to be assured that their rooms will be ready).  

Frequent guests can also aspire to VIP status or free airport transfers, for example.

citizenM New York Times Square Hotel - “become a citizen” loyalty program

Booking direct not always best

Some of the programs also protect customers from 'getting walked' when the hotel is overbooked, and give them wait-listed priority to check-in, even though they may never have stayed in the hotel previously.

In fact, many of the hotel groups that offer such onsite benefits don't operate formal frequent guest schemes themselves. Rather these programs are offered to guests booked by their top-producing travel agents.

Thus, in order to enjoy the benefits, guests need to book via an agency that offers the program.

For example, Ovation Vacations, generates over US$250 million in sales to luxury hotels and suppliers and lists over 1’250 hotels which can be booked via the agency.

Travelers are advised to ask their agents to which programs they are affiliated. Alternatively, they can Google the name of the program and “travel agent” and participating agencies should pop up.

Otherwise, the hotel groups don’t publish lists of agents which participate in their programs. In fact, this reality belies the widely trumpeted message that "booking direct is best".

This article first appeared on the SSTH blog.  
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