There was a time, and not too long ago, when one major brand could legitimately “own” the customer relationship because of its size or reach, but not anymore. With so many options to choose from, consumers will quickly abandon your airline, hotel or co-brand credit card for a low-cost carrier, a spare bedroom on Airbnb, or a mobile wallet loaded with points and rewards to spend. And those changes are also changing the way travel and loyalty go together.
Guest Post by Daniel Farrar
Today, it’s no longer “travel on my airline, stay in my hotel, or buy my product” but “buy and be loyal to my brand.” And while there can be healthy competition between loyalty programs, that doesn’t mean travel brands can’t still work together to maximize their “piece” of the customer’s loyalty and the valuable data that comes with it. The travel industry can become a much more collaborative environment for loyalty with fewer programs working at cross-purposes and each brand maximizing its “piece” of the customer’s loyalty.
Loyalty will increasingly be a “meeting point” where brands can work together on travel technology, expand cross-selling and up-selling opportunities and solve once and for all the fragmentation across travel sectors.
After all, aren’t travel brands serving the same customers simply at different points on their journey?
The Present and Future of Travel Loyalty
One way to understand how travel loyalty (and really, all loyalty) has changed is by looking at changes in demographics. Gen X was all about price – what mattered in those early days of the Internet wasn’t user experience but low prices. This is shifting with Millennials as they are willing to pay more in exchange for better experiences, like taking Uber for $12 instead of a bus for $2.
This “experiential travel” mentality goes beyond the flight or guest stay. Millennials have high appetites for great user experience (UX) and it sways whether they engage with a travel brand or not. They don’t care about what’s going on behind the scenes in the travel industry. Really, what they care about is which brands are doing business or immediately available on their mobile devices. And no supplier, distributor or platform is too big to fail if it doesn’t adapt to the customers ever changing and demanding UX appetites. At the very least, brands risk losing their “piece” of the customer’s loyalty unless they change their approach to travel technology, starting with basic expectations like support for mobile wallets.
Payments and Loyalty Programs in Travel
From a systems perspective, payments are not a huge problem for travel loyalty as brands can easily add new payment methods using gateways. The real challenge will be integrating key marketing channels, such as loyalty programs, into payments and ecommerce. Many consumers get confused on how they can use their loyalty points. They need the ability to use points as a true currency, seamlessly and without convoluted earning and redemption structures along with the complex lack of inter-operability between brands and loyalty programs. It’s a highly unfriendly environment at times.
This will likely require high-level partnerships with “anchor tenant” commerce companies such as Amazon and Google, to agree on how consumers can use different loyalty currencies on their platforms. Of course, every brand will have a different valuation and conversion rate for their brand currency, but the important thing is that it be useable within travel, for every transaction and interaction, and ultimately more broadly for merchandising. This is how travel providers can really optimize their current ancillary revenue strategies, by integrating their loyalty currencies into payments and mobile wallets.
Travel providers are becoming more educated about existing possibilities for loyalty that don’t require major systems changes. For example, they can build brand-matched loyalty hubs hosted by third-party vendors, so when a customer logs in to the brand’s website, they are routed through a gateway to their preferred distribution channel, such as Amazon or Expedia, while carrying their loyalty program information with them.
The booking may go to Amazon or Expedia, but the supplier will be able to add ancillary merchandise to the transaction and tie loyalty currency to payments. This can create significant ancillary revenue opportunities, such as outfitting a family of four for a ski trip after they’ve made their booking.
Using Loyalty Data as Metadata
Travel suppliers have also gotten very good at ecommerce, but the problem lies in the number of distribution channels they own and their ability to carry metadata across channels. Compared to OTAs, who buy inventory to control content and margins across many channels, suppliers are only able to capture data through their ecommerce site, restricting the amount of customer information they have access to. What suppliers need is metadata that can carry across all channels.
This is one area where loyalty program data is invaluable. For example, if a hotel knows how someone likes to redeem their loyalty points or rewards, that data can be used for more targeted ancillary offers. Airlines are in a privileged position, because they are “first in line” when a customer sets out to book a trip. If airlines can use loyalty program data to better personalize and package fares, they can gain significant market share as travel distributors - and differentiate their brand in an industry notorious for loyalty churn.
The Limitless Possibilities for Travel Loyalty
If you’ll excuse a bit of imagination, let’s visualize loyalty evolving into the channel for a travel supplier’s absolute best offers, something set apart from ordinary, everyday offers. In this scenario, loyalty programs might be more focused on working together to maximize overall engagement and spend on the day of travel, rather than trying to turn every customer into a die-hard loyalty program member. This could also help solve the “commoditization” of travel loyalty programs, not by one-upping each other but by building a better loyalty infrastructure with flexibility and cooperation between programs.
If customers are tempted to switch loyalty programs, then why not build this into the system, so loyalty is not limited to just “brand loyalty?” There could also be a “loyalty of spend” if loyalty points could be used as real or true digital currency
In the meantime, for a proven example of what travel loyalty might become, just look at OpenTable, the restaurant-reservation service that makes dining one, seamless experience including reservations and payment. This could easily become an “open wallet” concept where a member profile ID connects data across travel brands and loyalty programs, similar to how users can log in to sites with their Facebook account. Instead, they would log in with a travel ID.
The possibilities are endless, of course, but they must be understood in the context of ongoing changes across the entire travel technology and distribution landscape. We should expect as the industry technologies evolve coupled with strategic consolidation actions to see more cross-over economics being explored and realized, as the two spheres of business and leisure travel supply align for margin capture. Revenue and data will be tied together in travel, and loyalty data certainly holds a privileged position in the travel technology ecosystem.
I’m excited – and prepared – for the limitless possibilities for travel loyalty and what we can help travel brands achieve through more strategic use of loyalty data and ecommerce technology.
Daniel Farrar is CEO of Switchfly.