When it comes to brand loyalty programs, more transparency is needed, according to hotel owners, who are frustrated by their inability to analyze the data from those programs.
ABU DHABI, United Arab Emirates—Owners are increasingly querying the worth, cost and effectiveness of loyalty programs, according to sources.
On a panel at the Gulf & Indian Ocean Hotel Investors’ Summit, two owners and one brand executive debated the merits of loyalty programs in today’s competitive market and plateauing financial cycle, especially in the Middle East.
Loyalty still has a part to play, owners said, but they want hotel chains to work with them more in respect to clarity, transparency and value.
Zoltan Kali, chief asset management officer at owner Omran Hospitality, said audits are needed to make sure loyalty programs do not contain hidden revenue centers for operators.
“Why cannot owners get access to (audits)?” Kali said, who added an in-depth analysis would allow owners to ascertain whether loyalty programs really are increasing guest stays and spend.
“Hotel operators seem to be focused on making loyalty for them a revenue provider,” he said. “I do not mind if this is incremental demand, but it is not always. Owners have to come together. At the moment, we tend to fight only the little battles. What is needed is a concerted effort to looking into these loyalty numbers to find an equable solution.
“Are they making us act more loyal? Most of us have, what, five, six, 10 loyalty cards? That is the heart of the debate. Owners rarely look at programs in detail, and schemes tend to be quite complicated. Owners do not understand them. … Brands say there are benefits, but these are temporary, as they will eventually be given to all, just as Wi-Fi was.”
Ultimately, concern comes down to the economics of assets and portfolios, owners said.
Kali said his calculations suggest an established asset with between 150 and 200 keys would require 3,000 or 4,000 incremental roomnights per year to make a loyalty program worthwhile.
“That’s a lot of roomnights,” he said. “When you start putting some clarity into it, they do not bring us money.”
Yannis Anagnostakis, CEO of RAK Hospitality, a hotel owner and management firm established by the emirate of Ras Al Khaimah, said it is possible to force full audits out of hotel companies. But, he hinted, that should not be as difficult as it is.
He also questioned why owners start paying for loyalty right from the very beginning.
“Why would not international brands be willing at least to pay for the initial loyalty acquisition?” Anagnostakis said, adding that hotels could offer discounts, rather than charge owners.
Owners, in general, are losing when it comes to loyalty, Kali said. Loyalty has to be seen to work, he said. Otherwise, the cost of customer acquisition repeatedly dents owners’ bottom lines.
“For us, we’ve seen loyalty work only on one property. The rest have not reached critical mass,” Kali said. He added that brands should do a lot more to mine customer data.
RAK Hospitality’s Anagnostakis said another problem is that loyalty often is earned in one market and dumped elsewhere.
“Often it is earned in urban markets and burned in resort markets,” he said.
Aligi Gardenghi, VP of marketing, Europe, Middle East and Africa, and commercial director, Middle East and Africa, at Hilton—the sole chain representative on the panel—asked the owners if outstanding customer service is enough to ensure loyalty.
“The benefits within loyalty are part of the customer experience and an amplifier of that experience. Customer service per se does not detract from loyalty,” he said.
Gardenghi added that brands are at fault for not always making sure their teams explain the loyalty story to guests.
As far as transparency with owners, he said, “We used to run (loyalty) as a separate entity years ago, but now it is on a separate balance sheet. We do share data, but probably we would not share a full audit.”
It’s important, Gardenghi said, to incentivize loyalty collectively—for the whole team—not individually.
To that extent, value is being driven to owners via predictive modeling of guests, he said.
“This cannot be just on a geographical basis; otherwise it is just spam. Data can help flash sale efforts, for example, so we can see the spend of customers who receive them, versus those who have not. Science is embedded into our commercial teams,” Gardenghi added.
Kali said hoteliers need to analyze loyalty schemes from other industries.
“They often do a far better job than do hotel companies. Retailers are one step ahead, even though I realize it is a very expensive exercise for them,” he said.
The owners said arguments over value, worth and cost will continue without full transparency.
“Forty-nine percent of preferred guests book via an (online travel agency),” Omran Hospitality’s Kali claimed.
Gardenghi said his number suggested 95% of Hilton’s Hilton Honors guests booked direct.
“It’s important we all play together,” he added.