The last twelve months have been full of change for all sectors of the hotel industry. Acquisitions and mergers are a growing topic of conversation in the industry as many expect them to pave the way for hotel marketing in the coming years. One major impact being considered is the changes to be made in regards to customer loyalty programs. With a new direction and promise for personalization, independent hotels and small brands must customize their rewards programs to compete with the big players.
Loyalty programs made their debut in 1981 when American Airlines paved the way with a frequent flyer program known as AAdvantage . The goal was simple- to reward frequent American Airline travelers and create a database of its best customers. AAdvantage expanded its reach through partnering with Hertz and Hyatt, allowing customers to further accumulate points through rental car mileage and hotel stays. Later that year, Delta and United released their own versions of this program featuring new rewards such as a 500,000 mile enrollment bonus and no mileage expiration. Although frequent flyers were the main focus of the campaign, most hotel companies were reaping the benefits from airline packages. In 1983, Holiday Inn was the first to launch its own guest reward program, sparking competition across the big brand hotel scene.
Today there are over 70 FFP worldwide serving 100 million members. For the last 30 years, hospitality professionals have marketed to their customers based on the fact that “Mileage is a basic consumer expectation, alongside convenient schedules, competitive pricing, safety and customer service”(frequentflyer.com). The basis of most loyalty programs is rewarding repeat customers with point-based discounts, with no real customer information taken into account. As a result, loyalty is a very loose concept in the minds of most travelers. “Even high frequency travelers only spend 58% of their spend on their preferred brand, and 65% report staying with 2 or more brands in the past 6 months” (deloitte.com). With a new generation of travelers craving novelty, this cookie-cutter approach to loyalty programs will no longer be an enticing deal.
In addition, recent mergers have made the loyalty environment even more challenging for small chains and independent hotels. Now giving loyal customers access to an even bigger pool of options, it has made joining a loyalty programs even more enticing.
There are a few alternatives that hotels can do to keep up with the competition. Many small hotel brands have started joining together to create more appealing loyalty programs for a younger mix of travelers. An alternate to these points based programs is based on customer data and personalization. Small chains and independent hotels can begin to analyze who their customers are, their preferences, and how they like to be communicated with. One way to entice more loyalty program sign ups, is by offering an upgrade or amenities add on from the very first visit. By engaging customers from their very first stay, guests are likely to associate the brand with the great value they received when booking their next stay.
These types of programs can be maximized by personalizing which loyalty programs features appear to which guest. For example, site visitors can be targeted with personalized campaigns based on information like their location, their referring source, or even the keyword they searched. Engaging a visitor who is interested in the local nightlife with a complimentary beverage or bar visit will (almost always) be more meaningful than the family tour package.
Hoteliers believe that “travelers are burnt out on points and that what they really want from a loyalty program is access to special perks and experiences they wouldn’t be able to get on their own” (nytimes.com). Big name hotels are catching onto this trend. Hiltons latest campaign reflects the new direction of loyalty programs, with their tagline “Turn points into experiences worth sharing.” The strategy for small hotel companies now is to give travelers the personalized rewards and offers they are looking for right away.
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