Yes, despite cynicism about brand loyalty these days, hotels are investing heavily in these programs but with a reinvented approach that reflects two powerful trends:
• Emotional attachment: Rather than simply offering points for stays and goodies, hotel operators are seeking to establish personal connections with guests.
• Direct bookings: Members are being incentivized to book directly through brand websites and call centers with discounted rates and other benefits; and non-members are being urged to join to enjoy those same benefits.
For travel managers, the growth of loyalty programs could aggravate issues around sticking to the travel program as more travelers seek to maximize points rather than follow policy. On the other hand, hotel brands are sweetening perks to managers and their companies.
And despite any cynicism, loyalty remains crucial to driving bookings. “Loyalty contributes 40 to 60 percent of hotel business and that is growing at quite a healthy pace; that is especially true at the upper end,” says Cindy Estis Green, CEO of Kalibri Labs, which researches hotel distribution systems. “And the book-direct initiatives are driving growth in loyalty numbers.”
Those book-direct efforts, like Hilton’s “Stop Clicking Around” campaign, are showing significant results. Hilton CEO Christopher Nassetta said recently that nine million members were added to the Hilton Honors program in 2016. Loyalty members also drove 56 percent of the company’s system-wide occupancy. Other chains, including Marriott, report similar increases in membership.
Of course, the headlining loyalty news in 2016 was Marriott’s acquisition of Starwood and the wariness of Starwood Preferred Guest members fearful of losing benefits. Marriott has taken steps to assuage SPG members and recently named David Flueck, a 13-year Starwood veteran to serve as the combined company’s senior vice president of loyalty, overseeing all three loyalty programs – Marriott Rewards, SPG and The Ritz-Carlton Rewards – with a mandate to integrate them. (For now the programs remain separate but may be linked and status in one can be extended to the others.)
On March 1, Hyatt took its own leap into loyalty’s future with the launch of World of Hyatt (replacing the venerable Hyatt Gold Passport) and the touchy-feely advertising campaign tagline “For a World of Understanding.” Shot on location in Thailand, Morocco and Spain, the campaign shows a series of travel vignettes over the Burt Bacharach classic, “What the World Needs Now Is Love.”
That’s a long way from the old ‘Earn points – get a week in Hawaii.’
“A brand’s loyalty program should evolve as the needs and desires of members are always changing,” explains Liz Crisafi, head of portfolio marketing, loyalty and partnerships, The Americas, for IHG, operator of InterContinental, Holiday Inns and others brands. “With IHG Rewards Club, our vision for loyalty is to create truly connected relationships over transactions and personal experiences over points alone.”
As Dr. Lalia Rach said at a recent gathering of chief marketing officers organized by the Hospitality Sales & Marketing Association International, “It’s not about the customer being loyal to the brand; it’s about the brand being loyal to the customer.”
Rach, who is founder of Rach Enterprises and an astute observer of the industry, says that brands must “reframe” their approach to loyalty to reflect changes in demographics and traveler behavior. “What changes is how we show appreciation as businesses. A loyalty program should be simple, easy to learn and allow people to earn and burn on their terms.
The hotel experience should be personalized and look at customers in terms of lifetime value, Rach adds. “It goes back to the Cheers TV show idea,” she says. “When Norm walks into the bar, everybody says ‘Hi Norm.‘ When you walk into a hotel you want to feel that you are valued. That comes down to how well-trained people are. It doesn’t mean people don’t want upgrades, but they do want to be recognized after the slog that travel often is.”
Rach advises hoteliers to look to a particular mega-retailer as a role model. “Amazon has trained guests in how a company should deal with people,” she says. “If there’s anybody you should follow in developing loyalty, it’s Amazon.”
Travel Managers Loyal To Loyalty
In the most recent GBTA survey (2015), two thirds of corporate travel managers agreed that loyalty programs play at least a “slightly important” role in their negotiations with hotels and one in five says they play a “very important” or “extremely important” role. According to the study, 78 percent of managers are allowed to use individual loyalty accounts when traveling for business. Managers almost universally say travelers can keep the points or rewards through business travel for their own personal use.
The study also found high interest in leveraging hotel loyalty programs both through corporate incentives and individual programs that encourage booking through authorized channels. A large majority (77 percent) of travel managers are “somewhat interested” or “very interested” in a corporate loyalty program that rewards companies through various discounts and perks. And 72 percent are also “somewhat interested” or “very interested” in allowing travelers to belong to individual loyalty programs to accrue points more quickly if they book through a channel agreed upon by both the travel manager and the hotel.
Aaron Glick, vice president of the recently rebranded Hilton Honors, says the company has added elements that provide managers and travel managers with more flexibility, as well as more valuable and useful ways to use their points. Glick cites Points Pooling, which allows up to 11 Hilton Honors members to combine points toward a stay. Program changes also include a new slider tool which lets members choose a combination of points and money. And later this summer, members will be able to use points to purchase items when shopping on Amazon.com.
“Business travelers who book through their corporate booking tools (including GDS or travel agent) are eligible for benefits, stay credit, points and our stay bonus promotions,” says Glick, “so long as their Hilton Honors number is included in the reservation or provided upon check-in. The only time that stays aren’t counted towards stay credit or points is if the room is on a master bill – meaning, if the room block is booked and paid for on one bill, an ineligible rate was booked or if it was booked through a third-party like an online travel agency.”
At Creative Lodging Solutions, a travel management company that specializes in lodging, Mike Tetterton, chief executive officer, says, “If travelers have provided us with their loyalty program membership numbers, we give those to the participating hotels when we book their reservations. Our clients receive all the loyalty points directly. They may also provide their number to the hotel at check-in. We can also facilitate points for meeting rooms and any banquet rooms. Because of the volume of our buying power, most hotel brands work with us and give our travelers points even though our reservations are at a deeply discounted rate.”
But Tetterton also says managers have to walk a line when dealing with loyalty. “Of course, travelers want to maximize their points but it’s the job of the travel manager to make sure that their people belong to multiple programs so that the emphasis is on picking the hotel that’s right for that trip. We’ve had people stay in a hotel costing $35 more than its nearest competitor, each of the same quality and parking availabilty, just to earn the loyalty points,” says Tetterton. “Our travel managers come to us and say, ‘We don’t want you to be point-driven; we want a TMC that’s brand-neutral and working only for the company.’”
William Sarcona, assistant general manager of KIE/Kintetsu International, a TMC, agrees. “Smart business travelers are looking toward hotel loyalty programs to maximize their travel perks. In addition, our clients will typically be members of two or three major hotel loyalty programs. It is this variety that allows them to search many different hotel options, to secure the best pricing and meet the travel budget set by their company.”
To travel managers, Marriott and Starwood loyalty program benefits “have basically remained the same,” according to Brian King, global officer, digital, distribution, revenue management and global sales for Marriott. “The big difference now is accounts linking. Members can earn in both programs as they have in the past, but they can also transfer points between their Marriott Rewards and SPG accounts and have their status matched. This is a significant benefit for travelers in managed travel programs. Many of our customers in managed travel helped us communicate this message to their teams when we launched our linking strategy and we appreciate them getting the word out so quickly. We strongly believe in managed corporate travel programs and the duty of care they provide to a company’s traveling workforce.”
And hotel companies are also providing direct benefits to travel managers. IHG’s Crisafi says, “In April 2015, we introduced IHG Business Rewards, which rewards individuals that book on behalf of others. Members earn IHG Rewards Club points when booking their business accommodations, business meetings, and corporate events.”
Crisafi explains, “Because Business Rewards is part of the IHG Rewards Club program, buyers who book direct (either via IHG.com or through their GDS/managed travel portal) still have the benefit of getting the member direct booking benefits. This includes access to Your Rate (the direct-booking rate) and our in-hotel member benefits along with our welcome amenities.”
Additionally, she says, when booking travel through IHG Business Rewards, travel managers have access to services that make corporate travel more efficient and secure.
The Loyalty Outlook
Hotel programs are placing an increased emphasis on special experiences – an outgrowth of hoteliers aiming to win over leisure travelers. For example, World of Hyatt’s new loyalty tier names – Discoverist, Explorist, Globalist – “reflect the aspirations of members as they travel and expand their world,” according to a company announcement.
“We listened and reimagined our loyalty program to emphasize more meaningful rewards and benefits at every level,” says Jeff Zidell, senior vice president, loyalty, Hyatt. “More than just great locations, luxurious rooms and amenities, World of Hyatt is about connecting you to the people, places and experiences at the heart of your world.”
Sarcona says, “The ability to use points to book culinary tours, sporting events and concerts, among other options is increasing.”
The key, Glick says, is flexibility. “Whether you need to be able to use only a select amount of points combined with cash, or your clients want to spend their points on experiences, it’s important to work with a program that offers a deeper level of control.”
Leveraging loyalty gives programs the power to balance expense reduction with traveler experience, Crisafi maintains. “The bottom line is that travel managers need to move away from a model focused almost exclusively on reducing costs and toward one that seeks to maximize returns by best serving their travelers’ needs,” she says. “A traveler’s experience extends well after purchase, and if the focus is purely on cost, rather than return, it will only be a short-lived gain. Balanced business models that give the opportunity to improve a traveler’s productivity, health and well-being, their safety and overall employee engagement are why a travel manager must also look at the hotel brand experience and exclusive benefits that a hotel loyalty program offers.”
Hotels have bet the farm on their book-direct efforts, strategically aiming to take market share back from competitive online travel agencies. They have been successful although some say the cost may be too high in terms of discounted rates and expenses in marketing.
But questions remain: Will travelers really want to make an emotional connection with hotel brands or will they still just want their points and awards? Will the brands continue to spend what it takes to combat OTA’s? How will travel managers navigate this new world of loyalty?
Stay tuned.
