Panelists at the 2017 Hotel Data Conference discussed how loyalty programs have changed and what they mean for guests as well as owners and operators.
NASHVILLE, Tennessee—Hotel brand companies have seen positive results from renewed efforts to increase membership in their loyalty programs as a means to rebalance their relationships with online travel agencies.
But as more and more loyalty members take advantage of discounted rates and other perks, it’s up to owners and operators to keep a handle on the business end of these programs and their effects.
During the “The costs of loyalty and distribution in a discount world” session at the 2017 Hotel Data Conference, panelists spoke about what goes into making these programs successful.
Changes in loyalty
Loyalty programs at hotel brand companies have evolved over the years, becoming richer in terms of rewards and benefits with fewer blackout dates, said Charles Peck, president and COO at Silverwest Hotel Partners. The competition to grab the attention of more members is driving that evolution, he said.
“They are better programs today than … three years ago,” he said.
One difference is that, as technology has advanced, loyalty programs have moved more toward instant gratification for members, Bhavesh Patel, principal of ADM Hotels and chairman of the Asian American Hotel Owners Association, said.
Still, brands need to be circumspect about the role of loyalty, according to Monte Gardiner, managing director of revenue management at Best Western Hotels & Resorts. At most brands, loyalty members account for between 40% and 55% of all guests, he said, so decisions have to be made about how that fits into the grand scheme.
Guests’ first needs are place, product and price, he said; loyalty and booking channel would fall under secondary considerations. But brands have been trying to marry some of the secondary considerations with the fundamental decision-drivers, like the rate discount offered to loyalty members.
“Nothing is more instant than a price presented to a guest at the time of booking,” Gardiner said.
How guests view loyalty
Loyalty points systems have gotten knocked about because they tend to appeal only to a limited segment of diehard travel enthusiasts, Gardiner said. At the most fundamental level, the points are a currency, he said, and currency needs intrinsic utility to have any value.
The weekday guests tend to be the business travelers who are “more or less the point junkies,” Patel said. They save those points to use on vacations with their families, he said. Meanwhile, the weekend leisure guests aren’t as concerned about points, he said.
Peck said he has a cynical take on guests and their loyalty toward a particular brand or property.
People are either a dog or a cat, he said. If a bear were chasing someone, a dog might give its life to protect that person, he said, but a cat would stay up in a tree, waiting for the next owner to come along with a nice looking lap and the ability to provide for its needs.
“I think (there’s) more of us out there that are cats rather than dogs when it comes to hotels,” he said.
That’s why, with Marriott Rewards, Marriott focuses on the rewards and how rich they are and how easy they are to earn quickly, he said. It’s a given the hotel product has to meet a base level of standards, he said, but the rewards can be both hard, such as points, or soft, with recognitions and upgrades.
The business of loyalty
Brand companies mandate a certain amount of new loyalty program signups, Patel said, and properties that don’t meet the threshold get penalized. In some markets, that quota is tough to achieve because the property might have so many guests who are already loyalty members.
For a branded property, booking direct is preferable to booking through an online travel agency because it’s less expensive for loyalty members, Peck said. The choice isn’t as clear when the property is independent, he said, as the OTA commission is roughly comparable to the cost of being part of a brand.
Being part of a brand doesn’t open up a-la-carte pricing, he said, but there are other ways for the brand to contribute, including marketing and technology assistance related to the loyalty program.
“You have to find other ways to get the brands to support you,” he said.