With the recent integration of Marriott International’s loyalty programs, hoteliers are feeling urgency to revamp loyalty to provide more value for guests, owners and hoteliers alike.
NASHVILLE, Tennessee—With the 18 August integration of Marriott International’s loyalty platforms, the hotel industry sees a perfect opportunity to re-examine loyalty and what it means to both guests and the bottom line, according to sources.
During a panel titled “Loyalty ROI—fact or fiction” at the recent Hotel Data Conference, Sloan Dean, COO of Remington Hotels, said the branded landscape in the U.S. means loyalty, however it’s viewed, remains essential.
“Seventy five of our hotels are branded. If we did not have loyalty, we’d been paying franchise fees for nothing,” he said, adding that eight of his assets are part of Marriott.
Jamie Russo, VP of loyalty programs and customer engagement at Choice Hotels International, said the question remains whether loyalty is a good proposition for customers.
“That’s the question. Choice seeks to be as friendly to our owners as possible as we are 100% franchise. The more value we provide to our guests, the more we provide to our owners,” he said.
“Guests always have a choice, and our owners have a voice. Our job is to work hard to put as many guests as possible into our hotels via the lowest-cost channels,” Russo added.
Panelists agree loyalty programs in general are shifting away from a focus on points systems and more toward providing guests experiences.
Nicole Lundin, head of loyalty and social engagement at Viceroy Hotel Group, said there is no loyalty points system at her company’s portfolio of 12 hotels. Viceroy partners with the Global Hotel Alliance, a network of independent hotels, for its Discovery loyalty program.
“It’s about memories that last a lifetime,” she said.
But while loyalty programs need to drive experiences, points-based systems remain important for a core group of guests, said Michael Bennett, SVP of global marketing and business development at Cendyn.
“There are lots of people who like their points, and they like the status and recognition, to know you’ll get any problem resolved,” he said.
More data, please
As hotels increasingly look to leverage guest data collected via loyalty programs, that data is often more forthcoming when loyalty is focused on experiences, Choice’s Russo said.
“Points can never catch up with the experience a hotel offers. Expectations have increased. People will give you their data if you provide something back, and (the industry) might be losing that. It is share of wallet versus hearts and minds. … Customers can shift their preferences,” he said.
Meeting those shifting preferences and expectations requires constant evaluation of loyalty programs and what they offer, panelists said.
“Brands do not want to have loyalty and experiences be the same, to be commoditized or become the OTAs of loyalty,” Dean said.
Russo agreed, adding: “If that happens, our value disappears.”
Panelists said some experiences might be as simple as allowing media to be streamed through app, the ability to control lighting via those apps and other tech-driven experiences.
“If you go direct, these are nice points of differentiation, but there will be backlash that will force brands to make some of these (benefits) agnostic,” Remington’s Dean said.
He added it’s increasingly important to provide guests immediate rewards, which he said particularly appeals to some age groups, notably millennials.
“Partnerships with Uber, for instance—a free ride immediately. The highest loyal guests will give you 10 times return, and are by far your most profitable revenue stream, so you have to continue to innovate. Like anything, our old loyalty schemes will die out,” Dean said.
Panelists pointed to loyalty programs outside the industry worth emulating, including Amazon, Apple, Nike, Starbucks and retail beauty firm Sephora.
“That all said, our guests are putting their heads on our pillows, so what better opportunity could you ask for,” Lundin said.
Marriott and OTAs
With the world’s largest hotel company, Marriott, overhauling its loyalty program, panelists said all others must adapt, too.
“(Marriott’s) program is simplifying things and starts reimbursements at 85% occupancy, with a sliding scale threshold, up again at 87%. It smooths redemption. I am hoping other brands follow suit, although I think (Marriott-Starwood) will eventually be a bad thing for owners,” Dean said.
He said he believes Marriott’s changes to loyalty eventually will be egregious in regards to property improvement plans and franchise fees.
“In the long term, Marriott’s loyalty, when it adds 7,000, 8,000, 10,000 hotels, it will lead to higher fees, less flexibility and renovation expectations. So, you might be paying less to (online travel agencies), but we will be paying more to Marriott,” he said.
He added, on a positive note: “The good is that it takes some of the OTA costs out of legacy.”
Russo said hotels need to continue educating guests on the value of loyalty, as well as booking direct.
“Book direct has worked. It has shown guests receive better content by going direct, and it is our fault if OTAs want to sell worse hotel experiences to guests,” he said.
Smaller brands need more non-OTA friends, Lundin said, who added Viceroy benefits greatly from its partnerships within the Global Hotel Alliance.
For example, “our alliance with Corinthia (Hotels) will give us greater exposure,” she said.
New direction for loyalty
Dean said initiatives throughout the industry are moving loyalty in the right direction for guests, hoteliers and owners.
“The upsides are happening right now. Group commissions have come down; the costs of redemptions themselves have been brought down; and (programs are) cheaper for owners in most cases,” he said.
“The questions are: Is it cost-neutral to owners. Is it beneficial? It might be a little bit of a profit hit for owners in the short run,” he said. “It will be a slight hit to (revenue per available room) but makes total sense to the larger companies as you will save in the long term on customer acquisitions costs … and at the moment, OTAs still dwarf brands.”
Panelists said other future moves for loyalty might be via consolidation with non-industry firms, which would also have the benefit of providing more customer-journey data, or via cryptocurrency that can be converted into whatever reward the guest chooses.
“In any one booking, several different entities will say they own that guest, and I think it’s this shared ownership that has driven the evolution of loyalty,” Dean said.
“That is why brands align with like-minded brands,” Russo said.