Starwood will wisely continue to pour money into Starwood Preferred Guests and its most loyal members because they are driving profits. Too bad online travel agencies don't actually operate hotels -- they'd then have better luck at discovering the loyalty gene.
Ever wonder why Starwood places such importance on its Starwood Preferred Guest program?
The company says that the top 2% of its guests at its various brands, including St. Regis, The Luxury Collection, Sheraton, W, Westin and about a half-dozen others, account for 30% of profits.
They pay higher rates, on average, than standard members of the loyalty program and non-members.
It’s no surprise then that the hotel chain launched a three-year pilot Ambassador program in February for its most loyal guests.
Stay a mere 100 nights at Starwood hotels, and you get your own, ongoing personal representative, dubbed an ambassador.
The ambassador not only takes care of routine matters, but might help you shop for an engagement ring, respond to a family members after an accident, or help a friend of yours get back into an apartment if locked out, says CEO Frits van Paasschen.
Van Paasschen, speaking during the company’s second quarter earnings announcement July 26, says SPG is the “cornerstone of global growth” and among the chain’s best marketing investments.
“SPG members spend more, give us business in tough times, and they’re our best brand advocates,” van Paasschen says.
What loyalty is worth
During the second quarter, which ended June 30, nights stayed by SPG members rose 12% and Platinum members’ nights climbed 17%.
And, lots of this growth in the hotel loyalty program is taking place outside the U.S., in Asia, and other regions, the company says.
In fact, members of SPG who aren’t from the U.S. accounted for 44% of active member days during the quarter, according to Starwood.
Starwood is bullish about its loyalty program, expansion in Asia, and also the tech changes taking place throughout the world, which it believes it will be able to leverage to its own advantage.
“Travelers will expect personalized attention, knowing what they want and when they want it,” van Paasschen says. “Seamless global service with a local and human touch and a quick resolution to any problem. Meeting these expectations will be hard enough for global hotel brands with the scale to invest.”
“Those investments are simply out of reach for anyone without a global platform,” he adds. “In fact, meeting travelers’ expectations can create a virtuous cycle where strong brands with scale get even stronger and larger.”
The big will get even bigger, if this scenario plays out, and Starwood’s most loyal guests will continue to get royal treatment.
The challenge for Starwood will be to nurture the loyalty of the non-elite members of SPG, as well.
Online travel agencies, which deal with brand non-loyal guests to a large degree, can only look from afar at programs such as SPG — with envy.