The Latest in Hotel Loyalty - Prioritizing On-Property Engagement and Personalization
In the aggregate, hotel loyalty programs tend to evolve gradually, but one of the notable trends over the last few years was hospitality brands leveraging their loyalty and rewards programs to engage with guests off-property and to drive revenue when occupancy rates and on-property spending were low. We tracked this trend in our annual analysis of major hotel chain loyalty programs, finding that earn-and-burn offerings increased between 2019 and 2021, particularly for flights, tours and activities, and ground transportation.
According to our most recent State of Loyalty: Hospitality Rewards Report, however, this trend seems to have run its course. Buoyed by strong travel demand in 2022, which continues even amid economic uncertainties, reward options have either plateaued or decreased as the hospitality industry turns its attention back to its core product: room sales and on-property options. What impact has this development had on loyalty programs? Based on our analysis, there are a couple of emerging trends in hospitality that fit neatly within the loyalty structure: the unbundling and upselling of ancillaries and AI-fueled personalization.
What both have in common is the idea that hotel guests should have more control over their experiences.
Staying à la carte: Hotel Ancillaries on the Rise
Though hotels have always provided guests with options when booking (two double beds vs a king, for instance), many aspects of their stay were bundled under one umbrella. Now, hotels are taking a page from the airline playbook by breaking apart bookings and offering perceived upgrades like floor selection, room location, view, and early check-in as ancillary products. Although initially derided, this pricing strategy has paid dividends for airlines. According to the U.S. Bureau of Transportation Services, after airlines converted checked bags into a distinct product in the early aughts, revenues from this category increased seven-fold from 2007 to 2010.
Hoteliers believe that unbundling products and upselling them as ancillaries can do the same for their industry. A study by Skift and Oracle released last year found that 85% of hospitality leaders expect ancillary revenues to make up a larger share of their annual revenue by 2025. While not all guests will care about whether their room is on a high floor or comes with a picturesque view, enough do that it can make a real difference. According to the American Hotel & Lodging Association (AHLA), “over half of consumers from across the world (54%) said they are willing to pay more to choose their view; 38% to choose their room; and 32% to choose their room floor.”
What these numbers signal is a desire amongst hospitality customers to pick and choose (and pay for) the features they most care about.
Integrating Ancillaries into the Rewards Structure
Alongside the unbundling and upselling trend, hotel brands have also boosted the ability of their loyalty members to pay for on-premise items using their points, particularly dining and wellness services. Unlike some reward redemption categories that have stagnated or decreased during the current travel rebound, hotel dining and wellness have seen steady growth in the last 18 months, enabling loyalty members to enhance their stays while increasing spend at the property. Radisson Hotels America, for example, added the ability for loyalty members to redeem points toward on-property wellness services this year, while Melia Hotels introduced the ability to earn points on dining.
Expanding the earning and redemption opportunities available to guests while they’re on property helps increase the utility and perceived value of the loyalty program while keeping the rewards currency within the hotel ecosystem. Ancillary services or experiences can be integrated into the loyalty framework, encompassing everything from exclusive cooking classes with a chef to premium beach access. This integration provides members with incentives to engage with the program throughout their entire stay.
By encouraging repeated engagement with their loyalty program through on-site redemption options, hotel brands can collect valuable data about traveler behaviors and how guests are consuming the available products and services. Incorporating more on-property earn and burn options can help hotel loyalty programs with comparatively narrow rewards portfolios attract members who are looking to maximize value on their trips and compete with the most feature-rich programs like Marriott Bonvoy and Hilton Honors.
The Chat GPT-ification of Travel
Personalization is far from an emerging trend in hospitality. But the meteoric rise of artificial intelligence via Chat GPT signals a new way for consumers to search for travel and develop their itinerary. Since launching in October of last year, big names in travel like Expedia and Kayak are already incorporating it into their booking platforms. While Chat GPT can help deliver the types of personalized experiences hospitality consumers are looking for, without solid data, it risks falling short. Hotels that can connect different data sources, including booking platform data and information in their Customer Relationship Management tools will better be able to create models that predict customer needs.
Loyalty programs are a data goldmine. iSeatz mapped loyalty member data with transaction data on our travel rewards platform and found that members who frequently used the platform to earn and redeem points on rewards like car rental and tours and activities had a 5X higher 10-year average customer value, booked 8X more frequently (with 50% fewer cancellations), and had a 10X higher spend on core products. Hotels can examine patterns among their guests with the highest Customer Lifetime Value and deliver personalized offers to guests with similar attributes automatically using Chat GPT or other AI and machine learning tools.
Though the unbundling and upselling of ancillaries and delivering personalized experiences through AI might not seem connected at the outset, both enable guests to have more control over their stays. Both also require technology investments in loyalty platforms to render them more dynamic so they can better leverage data and deliver rewarding individualized experiences that build true brand loyalty. As the travel surge continues – with no end in sight - expect more hotels to build out these capabilities (and resume expanding their rewards portfolios) to compete more effectively and maximize both revenue and customer lifetime value in the current high-demand environment.
ABOUT THE AUTHOR
Andy Hermo is the Chief Commercial Officer at iSeatz, a loyalty technology company.
As iSeatz’ CCO, Andy leads the development and implementation of the iSeatz commercial strategy to drive enterprise growth, profitability, and improve customer satisfaction. Andy has over 30 years of leadership and commercial strategy experience in the travel and hospitality, consumer packaged goods/retailing and financial services industries. Prior to joining iSeatz, he was VP and General Manager of Enterprise accounts at Sabre Hospitality Solutions and a founding partner with Hudson Crossing, a Travel Industry consultancy. Andy also held commercial leadership positions with other esteemed brands, including Cendant Travel Distribution Services, Dun & Bradstreet, and GE.