Booking.com Sees Loyalty Programs as a Burden, Not an Opportunity

Loyalty programs among online travel agencies seemed to be a trend with the launch of Orbitz Rewards in 2013 and then Expedia revamped its program a year later but hotel-site Booking.com wants no part of them.

Priceline Group CFO Daniel Finnegan, speaking at a Bank of America Merrill Lynch retail tech conference in mid-March, said there is a downside to loyalty programs and its Booking.com unit would rather create a great user experience for site visitors and app users instead of paying them to be loyal.

“I feel our performance has been strong without being beholden to loyalty programs,” Finnegan said.

Noting that many hotels have loyalty program and rival Expedia does too, Finnegan said it can be costly to compensate customers through loyalty programs when perhaps they were going to become repeat customers and be loyal anyway.

You have to pay these customers even when they were going to book direct anyway, he said.

If Booking.com provides a great user experience — with comprehensive content in 42 languages and no consumer booking fees — then it would be questionable how many incremental visits a loyalty program would generate, Finnegan said.

Loyalty programs can also be frustrating to customers when their points expire, Finnegan added.

Not A Purist, Though

The Priceline Group, which includes brands such as Booking.com, Agoda, Priceline.com, Kayak, RentalCars.com and OpenTable, isn’t a purist about abstaining from loyalty brands. Booking.com, which is by far the biggest money-maker in the Group, doesn’t have a rewards program but Agoda and OpenTable do, for example.

Finnegan sees the trends working in favor of Booking.com’s lack of a loyalty program. Direct bookings, which might come organically, are growing faster for Booking.com than visitors who arrive from paid channels, he said.

Once Booking.com entices customers to use its apps, then the company doesn’t necessarily have to reacquire these users again through advertising, the lure of a loyalty program or other incentives. The Priceline Group says one third of its bookings come from mobile, including the mobile Web, and that should reach 50 percent of all bookings over the next year or two, Finnegan said.

Expedia’s All-In

There is a different take on the subject over at Expedia, which counts some 40 million loyalty program members among Expedia, Hotels.com and the Orbitz Worldwide loyalty programs.

“I would say our appetite here is unlimited and the way to explain that is that the variable economics behind these loyalty programs are all working,” Expedia CEO Dara Khosrowshahi said during its fourth quarter of 2015 earnings call in February. “In other words, we look at the points costs, we look at the ultimate redemption value of those points, the percentage of people who are using points — customers who are using the points, and when they use them. And then we look at the behavior of the consumers and like-for-like consumers who are in the program versus the behavior of consumers who are not in the program and how that behavior changes in terms of repeat characteristics and in terms of channel mix.”

Khosrowshahi said that if the dynamics and the benefits of these loyalty programs remain favorable then Expedia will look to expand them “as aggressively as we can on a global basis.”

For Expedia, its loyalty program is especially strong in Asia Pacific, “where loyalty has really taken off,” Khosrowshahi said.

That may be one reason that the Priceline Group doesn’t have a one-size-fits all policy toward loyalty programs as Singapore-based Agoda chooses to feature a loyalty program while Booking.com wants no part of it.