hotel companies have sought to make “Loyalty, Loyalty, Loyalty” as
important as “Location, Location, Location” since they introduced
frequent stay programs decades ago, how realistic is that goal at a
time when consumers are focused on “Low Price, Low Price, Low Price?”
In fact, senior executives in charge of loyalty programs at major
brands are in consensus that the programs have become even more
meaningful as travelers seek to spend as little as possible on
accommodations—and look to points as “currency” to be used not
only for rooms and air travel, but also for merchandise.
Don Berg, vice president of loyalty programs for IHG, says that,
“Trends that we have been seeing since the economic downturn began have
only accelerated, including increased enrollment. Last year, we had the
largest ever year on year increase in enrollment—35 percent.”
Members, Berg says, are looking to use their points as currency to
purchase everyday items as well as free stays. “We had a 26 percent
increase in redemptions for gift cards in 2009,” he says. “A lot of
that came in the last two months of the year.”
Jeff Diskin, senior vice president of brand management for Hilton
Worldwide, says, “The programs are more important now than ever, both
for members and for hotel companies. Enrollment is up and percentage of
business from members is also up; in addition, over the last 18 months,
redemption for free nights is up as well.”
Of course, loyalty programs have long had their skeptics, and among
them is popular industry speaker Lalia Rach, a dean at the NYU tourism
and hospitality school. “These programs,” she contends, “create a
loyalty to freebies rather than to a brand. When you get a free sample
at a supermarket do you buy the product?”
Still, Rach says, “There is a place for loyalty programs but hotel
companies need to find ways to identify individuals who are truly loyal
customers and separate them so we can give them perks.
Hotel companies have to know how the programs fit into their brand strategies and I have not seen that.”
In fact, says Berg, he and his team “talk about those issues all the
time.” He adds, “Our research does show that a large percentage of our
customers are loyal to the program itself, but we also learned that
members will try our other brands and, since they are people who stay
with us in 15 or 20 cities, we will be able to generate true brand
Berg says that 65 percent of customers use two or more brands,
“especially helpful for smaller brands like Staybridge Suites and
With consumers more used to choice than ever, loyalty programs are
making flexibility a cornerstone of their programs. A few examples
Leisure Or Not?
- A number of
programs now allow a combination of cash and points to redeem rewards.
Berg says that fully one in five redemptions for room nights involves
cash and points.
- IHG members can “redeem at any hotel brand.” Using a special American
- Express card, they can convert their points to cash on that card and use those credits at non-IHG locations.
- While air miles
have become a less appealing reward, loyalty programs now offer
airlines by the hundreds rather than the traditional limited
partnerships For example, Starwood Preferred Guest (SPG) offers members
redemption on more than 350 airlines with no blackout dates.
- Starwood allows use of points for suite upgrades; and hotel amenities such as meals, Internet service, and even spa treatments.
- Marriott claims
to be the first company to allow elite members to “roll over” points
into the following year. For example, it takes 50 nights to make Gold
status; if a member stays 60 nights in one year, the extra 10 would go
into the account for a 10-night “jump” on elite status for the
With leisure the most resilient market in this recession, some loyalty
programs are focusing on even infrequent leisure travelers. “Redemption
for vacations and getaways have become far more important,” Diskin says.
As a result, Hilton has intensified promotions to that segment. For
instance, the company ran a promotion where guests who booked all of
their 2010 weekend getaways by January 31 of this year would get up to
a 33 percent discount on all rates, as well as complimentary
IHG takes a somewhat different approach to leisure. “Our focus is on
business travelers because those members also take vacations and we
want them to stay with us on those trips as well,” Berg says. “But the
infrequent leisure traveler is not a core segment for our program.”
With their huge bases of loyalty club members, hotels are looking to
social media avenues as a way to heighten the relationship with their
members, with some moving very aggressively.
“We have an extremely vocal group of loyalists,” Diskin says, “and we
see these developments as a positive thing because social media
represent a subset of our membership base. It amounts to a large panel
of consumers and it’s up to us to decide how we can take advantage of
According to Starwood executives, SPG “sees social media as a key
platform for further engaging an influential and rapidly growing
segment of its members.” Not only are SPG members highly active social
media participants, but “these particular members book and stay more
frequently. In fact, SPG members engaged in social networks are nearly
20 percent more likely to book a Starwood hotel than other SPG members.”
And the programs are moving quickly on mobile apps as well. Hilton’s
iPhone and iTouch applications, launched in November, offer a “Request
Upon Arrival” service that enables a traveler to place an order for
room service and have a meal in the room on arrival; the new app also
offers “e-check-in,” a feature that provides remote check-in up to 48
hours in advance.
As for Starwood’s iPhone app, it allows members to easily access travel
information on the road. Members can jump onto their SPG account to
view their Starpoints balance, find details about their upcoming hotel
stays and get directions to their
Growth Lies Abroad
As is the case with development, growth of the loyalty programs is
strongest outside of North America. For instance, China has become the
richest source of new members for SPG—jumping 50 percent in 2009 over
the previous year; and SPG members now make up roughly half the
occupancy of Starwood hotels in China. Growth in guests who stay 10
times or more a year, according to Starwood, “is unprecedented.”
Members in markets such as China, Berg says, are also “unusually active participants in the programs.”
Loyalty Is Local
With all the road warrior chatter over programs: whose points are most
valuable; whose promotions are most creative; who has the best credit
card and airline partnerships; the fact is that much of a program’s
success comes down to the front desk.
As Berg points out, “We have always had a set of Priority Club
standards and we are now enforcing them more strictly. That includes
mandating inventory for free nights, and requiring greetings based on
the level of membership (a “good to have your business” at all levels,
perhaps an upgrade at a higher level.)
“Research has shown a direct correlation between a member being greeted
properly at their level of membership and a hotel’s RevPAR,” he
As a result, IHG is engaged in a significant training program to insure that standards are maintained.
“We cannot succeed in executing our loyalty program,” Berg says, “without the partnership of our ownership community.”
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