Insight: Priceline leverages AI to build loyalty
Seeking Alpha provides a look inside the plans of Booking.com, a division of Priceline, to combat hotel loyalty programmes not by competing with a loyalty programme of their own, but by leveraging Artificial Intelligence (AI) to provide a more personalised booking experience to its customers. The technology is sophisticated - but is Priceline still missing a trick?
The move by Priceline is the latest salvo in the shooting war between hotel brands and their online travel agency (OTA) partners/rivals. With major hotel chains combating OTA bookings and their stiff commissions by offering deep discounts to loyalty programme members, Priceline and its rivals will need to answer with customer-friendly initiatives of their own.
With Priceline Group CFO Daniel Finnegan on record as a hardliner against loyalty programmes, as we reported in April, its Booking.com unit has been answering the challenge by investing heavily in personalisation and the mobile user experience.
As Seeking Alpha reports, Booking.com will leverage AI within its mobile app to deliver QR codes to travelers in a particular location that allow them to instantly book reservations at local attractions and venues without going online or standing in line at a ticket window. The money quote:
"The AI tool makes suggestions based on personal experience. This tool was built by analysing millions of data points about local attractions in the cities and how personal likes and dislikes affect the buying decision for these venues. As more customers use this feature, it will become better at predicting the ideal attractions for an individual and provide more timely and relevant information to the users."
It's the kind of value-added frictionless customer experience that has become an essential distinguishing feature for today's successful consumer brands. Still, by focusing solely on the user experience, Priceline may still allow a significant opening for hotel brands to counter-programme.
That's because there are natural limits to how well personalisation and customer experience (CX) can deliver increased retention and yield from best customers. Unless Priceline segments its customers behind the scenes and delivers its most valuable and in-demand experiences to its best customers, the company is spreading its AI investment inefficiently across its customer base, from its most valuable customers to its least valuable price-focused cherry-pickers. No matter how smart the AI becomes, or how adept it becomes at sending Booking.com customers the perfect offer when they arrive at their destination, those offers will quickly become an entitlement that may no longer result in any significant shift in customer share.
The hotels, meanwhile, can counter Priceline's AI-based offers with offers that appeal to both the rational and emotional side of the brain. They can craft bonus point offers to high-potential customers to pick up an incremental booking or two from Priceline, and they can entice high spenders with, say, priority redemptions at high-demand properties. It's the flexibility of the loyalty programme as a relationship tool, as well as the hotels' ability to target offers to best customers, that will continue to give the hotels an edge in the battle for customer loyalty.
Still, there's no doubt that Priceline's investment in AI will deliver a great experience for their customers. The battle for hotel loyalty continues apace.