Although it took a serious recession and the near-collapse of the world economy, hotel companies are making their loyalty programs more attractive. As a result, loyalty travelers will be the recipients of some of the best incentives we have seen in years. Marriott, Hilton and Starwood have eliminated blackout dates for hotel reward redemption.
This year, Marriott also began allowing all loyalty program members to create their own awards and giving their top-level participants free membership in Clear, a service that helps registered travelers navigate bottlenecks at airport security.
Starwood announced a new twist to its program last month: It is letting members redeem points for airline tickets, on any flight they want whenever they want, as long as seats are available. A $300 plane ticket, for example, can be redeemed for 25,000 points.
These moves contrast starkly with recent initiatives by airlines that reduce the value of membership (e.g., new upgrade fees). As a result, the ‘value gap’ between hotel and airline programs is as wide as it’s ever been and continues to increase.
Measuring Loyalty Program Effectiveness
One measure we use to evaluate the success of a brand’s loyalty program is called ‘loyalty program effectiveness’. This measure identifies the percentage of persons saying that their loyalty program membership was very important in choosing that hotel.
In 2002, 32% of guests said that the loyalty program was a key factor in deciding where to stay. That number has grown steadily to 37% in 2007 but has declined in the first 9 months of 2008. Among the major chains, the most effective programs in the hotel industry are Marriott Rewards, Hilton HHonors and the Starwood Preferred Guest program. Starwood’s Preferred Guest has seen the biggest improvement (+6) in the past three years (2006-2008) compared to earlier years (2002-2005). Approximately one of every three guests at these hotels said their loyalty program membership was very important in hotel selection.
Results based on average performance of all brands within each company. January – September 2008 -Wyndham Worldwide was spun off from Cendant Corporation in July 2006.
Smaller hotel chains are developing successful loyalty programs of their own, and in many cases outperform the major chains in program effectiveness (see list, below). Pan Pacific Privileges ranks near the top in program effectiveness with 71%. This indicates that 71% of Pan Pacific’s loyalty-club members said their membership was very important in selecting a Pan Pacific Hotel. Ohana Hotels, Harrah’s and Mandarin Oriental also maintain highly effective loyalty programs.
Loyalty Program Effectiveness – Selected Brands, 2008
Loyalty Programs in a Recession
US hotel occupancy rates are already expected to drop 3% for 2008. As the financial damage expands to other sectors in the economy, hotels are evaluating ways to reduce costs and protect revenues. Can a loyalty program reduce the impact of the economic downturn? While no loyalty program has been built to handle the looming recession, here are a few guidelines to make it more recession proof:
- Eliminate fees to attract new members
- Offer quicker and possibly immediate benefits to guests
- Differentiate discounts that are available to everyone from loyalty program member benefits
- Make sure members are aware of their benefits and feel they are receiving special treatment compared to non-members (e.g., special line to check in, welcome gift, upgrades)
In a recession, your best customers are even more important. When customers are easily distracted by lower prices or free add-ons at the competitor, emphasize the benefits of staying with your brand. This does not mean offer more discounts, instead, make sure your loyalty program offers sufficient benefits that motivate guests and impact hotel selection.
Jonathan Barsky is a principle with Market Metrix LLC (MarketMetrix.com), a firm that provides multi-channel survey, analysis and service improvement tools and benchmarking data for the hospitality industry. For more information, call (800) 239-7515.
Source: Hospitality Trends