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Loyalty Programs Are Evolving Beyond Points and Direct-Booking Discounts

by Ed Watkins, Contributing Editor |

Your grandfather’s hotel loyalty program is dead — or will be soon. Those points-based, redeem-for-a-free-room schemes are quickly being replaced with programs that offer guests a wider range of services, amenities and, yes, discounted room rates. Revenue managers need to calibrate their rate and channel management strategies to reflect an increasing volume of business from loyalty club members.

New data from the landmark “Demystifying the Digital Marketplace” study by Kalibri Labs shows a sharp rise in the percentage of hotel rooms booked by loyalty club members. Loyalty bookings are particularly high in the upper-midscale to upper-upscale chain segments, with each of those chain scales seeing loyalty club bookings above 50%. The leader is the upscale segment, which garners 60.3% of actualized roomnights from loyalty club members.

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We recently chatted by phone with the study’s author and Kalibri Labs CEO and Co-Founder Cindy Estis Green to discuss the current state and future of hotel loyalty:

Is the increase in loyalty bookings purely the result of chain marketing programs?

It relates to the book direct programs that are going on. That was a big push by the brand companies, and it got a lot of visibility because so many of them were doing it at the same time.

How can brand companies maintain the momentum they’ve achieved in direct booking?

What they did in the beginning was discounting, which got consumers’ attention. Discounting can’t be the only thing, and they can’t depend on it indefinitely. They need to provide other services that are equally valuable to the consumer and provide convenience and a better, more seamless experience.

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What are some examples?

A lot of them are already starting to offer mobile check-in and keyless entry and choose-your-own-room options. That kind of functionality, if it is available to loyalty members, will be very compelling and give consumers more reasons to book directly.

The percentages of direct bookings are highest in the upper-midscale through the upper-upscale segments. Is this a result of high business traveler volume in these segments?

These aren’t just frequent travelers. The idea of the loyalty programs we think of from 10 years ago, when it was all points-based and all “road warrior” frequent travelers, is evolving into much more affinity kind of programs. They’re not just going to be points-based; they’re going to have a lot of other benefits guests can get if they’re in the circle. Sometimes, if you don’t have the opportunity to stay five times or 10 times in a year, it might not be as interesting for you to be a loyalty member, because you’ll think you’ll never get enough points to get a free room.

The big brand companies have a leg up in this with the resources they command. What can smaller chains and independents do to compete in the loyalty game?

They also can provide services that are compelling to consumers. Some of them may use third-party tools if they can’t build their own, but they can do it. There are plenty of third parties that have keyless entry and mobile check-in services.

What is the future of hotel loyalty programs?

It’s going to be much more in the digital experience. If you travel on United or American airlines the mobile app is where you go to find out whether you got your upgrade, or change your seat or check-in. Hotels are going to make their loyalty programs built more around convenience services, so it basically alters the pattern of your stay and the interaction with the hotel so that it takes you from pre stay, during stay and post stay.

Where can this lead?

Hotels will start adding other experiential things, such as what restaurants are in the area or what attractions or shows or concerts are going on. They’re going to build it so it is a seamless experience for the traveler. Everyone is trying to do that, but the brands need to hurry up and do it, because they can control more of what happens within the walls of a hotel than a third party can. The consumers would feel they have an end-to-end way to be connected to that brand.

What’s next to be released as part of the study?

We have part three coming out in a month or two. It’s about how hotels can harness some of this data, the kinds of analysis they can do. We have more hands-on, case study kind of work for hotels to figure out how they can use net revenue metrics to make a difference and to improve the decisions they make, to improve their net revenue outcomes and provide their optimal business mix. We will show them models of how to use that.

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Ed Watkins, Contributing Editor

Ed Watkins, Contributing Editor

Contributing editor at Duetto
Ed has been covering the hotel industry for more than 40 years. He was editor-in-chief of Lodging Hospitality from 1980 to 2012. He then joined Hotel News Now as an Editor at Large, until his retirement at the end of 2014. Ed still contributes to several publications and is a member of the advisory boards for the hotels schools at Michigan State and Penn State.
Ed Watkins, Contributing Editor

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Ed Watkins, Contributing Editor

Ed has been covering the hotel industry for more than 40 years. He was editor-in-chief of Lodging Hospitality from 1980 to 2012. He then joined Hotel News Now as an Editor at Large, until his retirement at the end of 2014. Ed still contributes to several publications and is a member of the advisory boards for the hotels schools at Michigan State and Penn State.