Hotel loyalty schemes missing out on co-branded cards

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By: Wise Marketer Staff |

Posted on September 2, 2004

Hotel loyalty schemes missing out on co-branded cards

Approximately 10% of hotel frequent guest programme members who do not currently possess a co-branded credit card have expressed strong interest in obtaining a hotel-branded card within six months, according to Phoenix Marketing International's recently released 'Hotel Scores' study.

The study also found that while 10% of all hotel frequent guest programme members claim to have a co-branded credit card, 80% of those possessing such a card are 'elite level' members in at least one hotel frequent guest programme. The Hotel Scores study surveyed nearly 4,000 members of hotel frequent guest programmes, probing their awareness, membership, usage and perception of more than a dozen hotel frequent guest programmes.

Balanced view According to Greg Diaz, vice president of the Travel Research Group at Phoenix Marketing, the study focuses not just on upscale hotel programmes but also on those offered within the moderate and economy lodging segments. In addition, by focusing on airline and road travellers as well, the study gained a more complete picture of the perceptions and value of hotel frequent guest programmes.

The study highlights the fact that credit card issuers and hotel frequent guest programmes are not always efficiently targeting potential credit card subscribers in their direct marketing programmes. Diaz believes that they must re-evaluate their list selection criteria for direct mail acquisition programmes; the acquisition of new members by direct mail can be expensive if it is not targeted at an audience that is likely to respond positively to the offer.

Improving response The key to improving co-branded card acquisition rates, according to Diaz, is to understand the perceived value of the hotel loyalty programme in conjunction with the target audience for the co-branded credit card. The study showed that hotel frequent guest programmes engender a level of loyalty to hotels, with 40% of members claiming that programmes influence their choice of hotel most or all of the time.

As a consumer's travel frequency and involvement in a programme increases, the loyalty commitment to the programme also increases. In an effort to build on and enhance these loyalty phenomena, the credit card issuers and hotel frequent guest programmes could target these loyal guests, as well as those on the cusp.

Loyal interest The research also showed a greater interest in acquiring a co-branded credit card among those who are heavily committed to a particular programme (i.e. elite members) than among the general programme membership or non-members.

However, Diaz cautions, this discovery does not necessarily mean that credit card issuers and hotel frequent guest programmes should blindly campaign to their heavy users and elite members. While it might seem to be a good idea, Diaz explained that they would probably need to include a variable in the list selection and modelling process that includes their propensity to either purchase or take advantage of the offer within a reasonable timeframe. By doing so, a credit card issuer or a hotel frequent guest programme might significantly improve the response rates and the ROI on its marketing efforts.

According to Diaz, Phoenix Marketing has worked with several large credit card issuers in the USA and, in those instances where they have used the company's own List Optimisation modelling service, card issuers often experienced a lift rate of two to three times higher than their standard list selection approach.

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