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Earlier this week we released our new Skift Trends Report: The Reinvention of Airline and Hotel Loyalty Programs, focusing on strategies for how marketers can capitalize on new innovations in tech and shifts in traveler behavior to build more genuine customer loyalty and larger profits in the future?
Below is a short extract from it. For more buy the report.
Travel loyalty programs. A simple idea to create product differentiation following airline industry deregulation in the late 1970s has morphed into a global marketing juggernaut adopted by virtually every corner of the travel industry, from airlines to hotels to rental car companies and beyond. The amount of money at stake is immense: COLLOQUY, a marketing and consulting research firm, recently found consumers had amassed more than $48 Billion dollars worth of rewards.
Yet despite this wild success, there is a growing sense among both travelers and marketers that the programs are flawed. A system that was designed to create stronger bonds between travel customers and travel businesses has turned into something else entirely — a massive revenue stream.
The program revenue generated via alliances with credit card issuers and consumer businesses that profit off loyalty programs are making travel businesses rich, but the original goal — forming an emotional bond with the customer — has been lost, with potential long term consequences. In fact, the changes are already happening: a recent survey of traveler perception of loyalty programs by Deloitte found that just 14 percent of respondents always fly the same airline, while just eight percent always stay at the same brand of hotel.
According to travel industry analyst Henry Harteveldt, the entire concept of loyalty marketing needs a complete overhaul. “If I were running loyalty at a travel company, I’d probably want to see how quickly can I end my current program, and how do I ‘green field’ something new that reflects the new competitive dynamic of my industry and what are my real objectives. These loyalty programs have stopped being about customer loyalty and they’ve turned into cash cows for their sponsors.”
As hotel and airline loyalty programs be- come less important in purchase decisions, they’re simultaneously being disrupted by several changes to the industry landscape:
- Continued industry changes in how rewards programs are structured and how the rewards are earned and redeemed
- Increased transparency of program value due to technological innovation, decreasing brand competitive advantage
- Shifting preferences among travelers’ for finding, booking and taking advantage of rewards while traveling
- New and more types of traveler data that help travel businesses better respond to and personalize the travel experience before, during and after it happens.