Hotel loyalty heads for greater innovation

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By: Wise Marketer Staff |

Posted on September 14, 2009

Hotel rewards programmes are in the mature phase of their lifecycle and hoteliers are increasingly challenged to differentiate their programmes from those of competitors, according to a new research report from Razor's Edge Business Intelligence.

The Multinational Hotel Rewards Programmes 2009 report suggests that now is the time for hotels' frequent guest loyalty programmes to be upgraded and developed in new and increasingly creative directions.

The survey examined the loyalty schemes operated by the world's twelve largest hotel groups, including high profile programmes such as Choice Hotels' Choice Privileges, Hilton HHonors, Hyatt Gold Passport, InterContinental's Priority Club Rewards, Marriott Rewards, and Wyndham Rewards.

According to Bruce Conradie, managing director for Razor's Edge, "Given their size and complexity, this is probably the most homogeneous set of loyalty programmes examined in any of our studies so far. Although we didn't formally measure similarity, it is clear that the surveyed programmes are highly similar."

But this should come as no surprise even to observers outside the industry, because all of these programmes are relatively mature. The oldest profiled programmes, Priority Club Rewards and Marriott Rewards, are both 26 years old, followed Hyatt Gold Passport (23), and Best Western Rewards (21). Five of the 12 profiled programmes are older than 15 years.

In fact, some of the similarities among hotel reward programmes are extensive. For example, these programmes typically:

  • limit the lifetime of membership without account activity;
  • offer value-added services (such as late check-out);
  • are tiered;
  • offer bonus points and additional value-added services to elite tier members;
  • vary the points earning rate among hotel brands;
  • allow points to be earned on multiple rooms per stay;
  • have multiple earning and redemption partners;
  • allow points to be exchanged for those of a variety of frequent flyer miles.

The survey noted, however, that the more mature programmes have been adding new benefits, features, and partners for many years, with some reaching the point of being just as complex as a typical frequent flyer programme. "When it gets to that point, programme operators need to tread carefully, and not make their programmes unbearably complex," warned Conradie. "Complexity saps the consumer's time and energy, undermining the value of the programme."

Ironically, Conradie points out, greater complexity makes it even harder to make the programme stand out in the consumer's mind: The more complex the rules, benefits, and redemptions become, the harder it is for consumers to compare competing offerings. It is certainly true that the average consumer will not try to work out their return on spending (the monetary value of earning points), or even try to factor in the worth of value-added services such as early check-ins or access to an executive lounge.

The plethora of promotions seen during the current recession may be seen as an effort to differentiate by providing hard benefits (i.e. those having a clear monetary value). But while this kind of promotional activity is here for the foreseeable future, we can expect a return to other forms differentiation when the recession is over.

One aspect of this approach is experiencial rewards. Hotel accommodation is essentially an experience-based product, and these rewards fit well with hotel rewards programmes. As a result, all of the programmes surveyed allow members to redeem points for holiday packages, cruises, theatre tickets, entrance to theme parks, spa treatments, and other similar rewards. One such reward that is expected to gain popularity is the 'one-offs' category (e.g. an opportunity to meet a celebrity). Interestingly, these opportunities are often offered to members by way of a points-based auction.

Razor's Edge expects hotel rewards programmes to move on from simply adding more partners and more benefits toward developing in whole new directions. This development is likely to take place, among other areas, in the further enhancement of the experiencial rewards theme, such as the creation of sub-clubs that appeal to special interest groups (e.g. sportsmen, sports fans, or bikers) or the addressing of environmental concerns.

Small hoteliers, especially those without multi-brand rewards programmes, are likely to try to enhance the overall guest experience through superior personalised service. Meanwhile, large hotel groups are likely to become even more sophisticated in using customer relationship management (CRM) technology to provide personalised services to their higher-value customers.

The full report, which outlines the loyalty operations of the world's 120 largest hotel groups and provides detailed profiles of the 12 main rewards programmes, is available for purchase directly from Razor's Edge (click here) for US$2,200.

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