We're calling 2017 as the year when loyalty becomes an even bigger focus for hotels, if it isn't already. Why? Because there's no better time than now to try to capture a consumer's loyalty, or to engage with them, even if the landscape is becoming a lot more competitive, and consumers, overall, aren't quite as "loyal" as they used to be.
For hotel companies, loyalty isn’t just about repeat business or just about getting more direct bookings. It’s a unifying strategy that, for many, is absolutely crucial to the short- and long-term success of their businesses.
This year, in particular, we’re seeing an intense focus on loyalty from the hospitality space. Now that Marriott is 30 brands strong, and in the process of integrating Starwood Preferred Guest (SPG), Ritz-Carlton Rewards, and Marriott Rewards all together, there’s no better time than now, both for Marriott and its peers to focus on revamping their programs, and making them even more appealing to consumers.
Hilton just announced four new features to its Hilton Honors program. Hyatt is launching the new World of Hyatt program next month. Shortly after Marriott completed its acquisition of Starwood, Wyndham Rewards made an unsuccessful play for SPG members, following a year during which the program garnered plenty of praise for its more straightforward approach to the loyalty space.
And as travel loyalty programs continue to evolve, the competition for consumers’ pocketbooks (both in spend and credit cards), smartphone space (for those apps of course), and genuine brand loyalty (does it still exist?) is becoming more challenging day by day.
At the Americas Lodging Investment Summit in Los Angeles in late January, we asked hotel CEOs and executives for their thoughts on loyalty, and here’s what they had to say.
Hilton: We Want to Make a Loyalty Program for Everyone
Prior to Hilton announcing new updates to the Hilton Honors program, Skift spoke to Christopher Nassetta, President and CEO, Hilton, who gave a broader interpretation of what he hopes the program will eventually become.
“We want to continue to drive more direct relationships with our customer,” Nassetta said. “We want to do that for the simple reason that we want to make sure that our customers get the best value and get the best experience. Our belief is if we’re fully engaged with them through our loyalty program, that it allows us to do that, give them the best value and give them the best experience.”
He also elaborated on the ways in which he says Hilton has made its loyalty program valuable and useful for guests.
“We’ve done that in ways that you’ve seen in Hilton Honors by creating a much more flexible program of how people use their points of adding things like free Wi-Fi. [We’re] giving them the opportunities on the digital side with digital check-in, room selection, and now digital key that’s being deployed at scale around the world. And importantly, we’re giving them the best value. If you’re a member of our club, you’re going to ultimately always get the best price because we want to make sure that we have a special relationship with you.”
He added, “What you’re going to continue to see in the future over years is we’re going to continue to curate Honors to make sure it’s a club that everybody wants to be part of. Being an Honors member, you get different treatment. You are unique in the sense that we can deliver you the best value and the best experience. The things you’re going to read about in the next couple of weeks are taking next steps on that journey to creating more engagement with our customers to driving even better experiences, even better value, even greater flexibility in how the program works so that it resonates with customers. The more that we have direct relationships with our customers, I think the better of we are and the better off they are.”
Taking a more inclusive approach to loyalty, Nassetta noted, is something Hilton is intent on cultivating going forward, too.
“What we found years ago is that not everybody travels all the time,” he explained. “Of course, if you’re a really frequent traveler, we want to make sure that we treat you exceptionally well. But we also want to treat infrequent travelers well. We also want to have a direct relationship, to the extent we can, with them. We want Honors, and you’ll see this in the flexibility that you’ll see with some of the changes we’re going to make, we want Honors to appeal to all travelers, both frequent and infrequent travelers. We want to be able to have a direct and unique relationship no matter how many nights a year you stay with us.”
Best Western: Loyalty Needs to Be More Instantly Gratifying and Smarter About Marketing and Customization
“There’s no question that a loyalty program is the most effective tool we have to defend ourselves against OTAs [online travel agencies] and the one problem we haven’t been able to solve, as an industry, is that the distribution costs keep rising, and there’s no end in sight,” David Kong, CEO, Best Western said. “I think next year we’ll see an even higher distribution cost for our hotels, so we have to offset that by producing more business through the brand channels, and the loyalty program is a good reason for people to book with a brand directly because, if they don’t, they won’t be able to earn points.”
“But aside from that, making sure the program is meaningful and official, and emphasizing that membership has its rewards, [is important],” he added. “Member rates, certainly, are a huge component of that. Making rewards much easier to redeem, like instant rewards, I think, is important. There’s so much instant gratification that people are looking for, so being able to earn something instantly, or being able to redeem something instantly is crucial.”
But even the best loyalty programs aren’t valuable unless hotels know how to use the customer data gleaned from them, Kong noted.
“The beauty of the loyalty program is it allows you to collect a lot of data about the guest. We need to do a much more effective job in utilizing that data, becoming much more intelligent about what we do and how we market. So for basic things, like if someone is two stays away from earning an elite status, that there’s a trigger-based marketing message that goes out to remind a person he or she is only two stays away, and we can make it easy. [We can tell that person,] ‘You just have to stay one more time.’ I think the guests want to know that we are using the information that we’ve collected in a beneficial manner to them, and we’re being much more relevant in how we communicate with them.”
He continued, “For any marketer to be successful, you’ve got to find the right channel to reach that customer — the channel that that customer wants to use — and you’ve got to really be developing your content, and only relevant [content]. But you have to think about it being timely … and also personalized so it’s appropriate for that person. And lastly, you’ve got to make your messaging short and snazzy, so it gets people’s attention and it cuts through the clutter.”
Kong mentioned Facebook as a primary channel through which hotels can make marketing more relevant, timely, and personalized.
PwC: There’s No Better Time Than Now for Hotels to Rethink Loyalty
“I think there’s a recognition that the lodging sector has to be a little more creative, commercially,” Scott D. Berman, Principal and U.S. Industry Leader of PwC, said. “You’re seeing that through different partnerships. It used to be: redeem your points for a room or an airline seat. Now, retail is playing such a big role. That’s a story in and of itself: how the retail sector and the lodging sector are in parallel, right? I think there is envy from both for different reasons.”
“When we look at how our clients are positioning themselves, and setting up their digital strategy, they’re not looking at their peers, they’re looking at retail. That creates a different sort of loyalty. It’s connecting the dots among these different partners.”
He added. “As consultants, what we see is how important loyalty is to overall brand value. When I first got in the industry 30 years ago, it was about reservation systems. Those are still relevant, but they’re one piece of the overall brand infrastructure. I would expect a lot of interesting and different programming. It is a lot about consumers. Our own firm is a huge demand driver of corporate travel. The average age in our firm is 27. Our young people who travel, [for them] it’s all about accumulating points. They become loyal. It drives our behavior in terms of procuring room nights. It’s very interesting to look at the demographics.”
So what do those road warriors want? According to Berman, there has to be more of a personalized touch.
“There’s been a lot of consolidation in the industry, obviously Marriott-Starwood being the largest. I think if you talk to Arne Sorenson, the CEO of Marriott, he would tell you he got more queries about the loyalty program and what was going to happen to the SPG most loyal members. They were screaming. It’s about the upgrade. It’s about the attention, the personal touch. That’s a big piece of this. If we’re moving to this digital platform and everything’s going to be mobile, the industry is going to face a challenge of losing this personalization. I think that’s a huge challenge for the industry, it’s this synchronization of mobile and personal. The industry’s done a good job for the last decade, in terms of understanding their best customers’ needs and wants — the simple stuff. But where do we go from there?”
Choice Hotels: Loyalty, Instant Gratification, and Direct Booking Go Hand in Hand
In the past year, Choice Hotels made significant changes to its loyalty program, offering more instant rewards and preventing points from expiring. Making those changes to the loyalty program, Pat Pacious, COO, Choice Hotels, said, has had a big impact on the program, and Choice Privileges now has 30 million members.
“We really enhanced that program a year ago, and it’s been award-winning since then,” Pacious said. “We’ve been ranked No. 1 in USA Today. We went from [being] ranked 10th to No. 2 in U.S. News & World Report. It’s all about giving customers two things: one, an instant reward, and two, their points not expiring. Just making that simple for the guest to experience and to understand our program has been a really powerful engine for us and that when you’re an Ascend Collection [an independent hotel property owner] or you’re a Cambria [branded property owner], having that strong loyalty program is very important to bringing in business.”
“We did something that I would call contrarian a year ago,” Pacious said. “We launched our new program. Because loyalty programs have been getting less rich for the consumer. We kind of went in the opposite direction. The second thing we did with our program was, because Millennials are so focused on instant gratification, it was all about, ‘when they check in the first time, I want to reward them.'”
“That’s true not just for Millennials, but everybody else wants something for their stay. Those are probably the two major things that we looked at, that other loyalty programs were not doing. The importance of that for us is, particularly about book direct. Book direct is all about joining the loyalty program, so we wanted to make sure that that was a rich experience for the consumer, and so making the loyalty program stronger really fed into that strategy that we have about bringing consumers into our proprietary channels and being able to get that sort of member only rate.”
When asked about the hotel industry’s overall push for more direct bookings, Pacious said, “I think every company is sort of in a different phase of rolling it out and of educating the consumer on that front, but I think it’s starting to penetrate the consumer’s mind that you can get these rates if you belong to the loyalty programs. I think that ’17 is going to be the year where I think it really starts to click with the consumer. That option is there. That’s kind of our experience as well. We have a book direct program today, but it’s going to expand in ’17. Really, at the end of the first quarter of this year, we’ll be applying it to more rate plans. I think that’s going to create a lot more optionality for our consumers and again, it’ll get it out there more in the consumer mindset, that you can always get the lowest price by going to a proprietary channel.”
AccorHotels: We Don’t Want to Forget About Our Loyal Fairmont Customers
Like Marriott, AccorHotels is contending with the integration of two separate loyalty programs: that of Le Club AccorHotels and that of the three programs for the Fairmont, Raffles, and Swissotel brands that Accor inherited as part of its FRHI acquisition last year.
“For some of the brands, [loyalty] is a bit of misnomer unto itself because they’re not loyalty programs,” Kevin Frid, COO, North & Central America, AccorHotels, said. “They’re reward programs. And there is a difference. In the Fairmont world, and with the FRHI brands, we had a loyalty program. Loyalty in a sense of, ‘I look to gain your loyalty, because of the experience we deliver that’s personalized, customized, we know you before you walk in the door.’ So, our challenge is to take the best of that world and combine it with a reward program. We take the best of that world and put them together to create a true loyalty program that people are rewarded for that loyalty. So, where do they go for us? Specifically, we’re continuing to build a very powerful reward program by being able to incorporate and integrate the element of customization, prioritization, like we have at FRHI.”
He added, “They’re completely separate programs, but we’re now recognizing each other’s top guests from a loyalty standpoint. But, it will be 2018 before we fully integrate them and they will become one.”
And as AccorHotels works on integrating all the programs, Frid says the company is being very mindful to make sure the combined loyalty program remains personalized and valuable for guests. He said, “We have to make sure our loyal Fairmont customer is excited about this so they continue to enjoy the elements they enjoy of personalization. But, they have a point reward program that goes along with it that was not there before. So, there shouldn’t be anything there to upset them. If we just flipped over and just started giving out points and tossed away all the personalization, that would be where they would be upset.”
InterContinental Hotels Group: Loyalty Is Something Hotels Need to Earn
For Elie Maalouf, CEO, The Americas, InterContinental Hotels Group (IHG), loyalty will continue to evolve just as it has since its earliest beginnings. In fact, one of the first hotel loyalty programs began with Holiday Inn, one of IHG’s primary brands. To date, the IHG Rewards Club has more than 99 million members.
“We’re always building our loyalty program,” said Maalouf. “We’re always adding features. It’s not [about] rethinking our loyalty plan, but it’s continuing to make it stronger because our guests demand new experiences. IHG Rewards Club is a brand. It happens not to be a ‘stay’ brand, but it’s a hotel brand. It’s a hotel experience brand.”
“Last year,” he noted, “we added Your Rate, which is a special member rate. In the context of all the features that we keep adding for our guests in our loyalty plan, it’s just another feature. It’s not revolutionizing our rewards club plan, but it’s making it stronger for our loyalty guests, who are loyal to us, by definition.”
“If you’re going to stay with us so many times, if you’re going to show loyalty to our brands, if you’re going to give us your input and your feedback, and take pictures and put them on Instagram, and help build the social community and collaborative commentary around our brands that we want, we want to show that we recognize that. We want to give you recognition, attention, and also features and promotions that meet your needs.
It’s a comprehensive strategy to continue to make loyalty something that we are earning as a hotel brand, companies and hotel owners, because we have to work hard for it, but also recognizing our guests for it.”
Langham Hospitality Group: Loyalty in the Luxury Space Is More About Recognition Than Points
Echoing the statements of Four Seasons Hotels & Resorts President and CEO J. Allen Smith, Robert Warman, President and CEO, Langham Hospitality Group, said that, in the luxury segment at least, consumers aren’t as preoccupied with points as they are with making sure they receive the recognition and personalized service that they’ve come to expect in a luxury experience.
“Right now, I see most of our guests looking for recognition,” Warman explained. “I don’t see the bulk, particularly in the luxury segment, of our guests running around looking for [a traditional loyalty program.] Loyalty is an interesting thing. They’re basically just giveaways, and that’s been going on for years. Banks used to give toasters away when you deposited $500 into a checking account. Was that a loyalty program, or is it just a rebate? Points are rebates in some sense, and we found that most of our customers and guests aren’t necessarily looking for a rebate. They’re looking for us to recognize them, to understand their unique desires, and make sure that we treat them special, but treat them in the manner that they want. To let them know what’s important to them.”
He continued, “We’re not embarking on a massive global program to reduce rates because you’re a member and give you X number of points or a rebate back. We don’t necessarily see that in a luxury market today as a necessity.”
But if that’s the case, how can luxury hoteliers gather customer data to be able to better personalize the experience for their guests?
Warman said, “Obviously, we do ask people if they want to communicate with us. We have a program that you can sign up that allows us to communicate on a more personal basis because you’ve said you’d like that.”
Giving hotel employees the right tools and training to know how to respond to guests is also crucial, Warman said. “We also train every colleague to be able to identify and recognize unique things that people are staying at hotels for. You’d be amazed. What customers say to you allows an employee to understand, and then we empower the employees to be able to adjust the service level and product offering to meet that individual customer’s needs. It’s kind of tailored on the move. It’s kind of on the run, where we’re shifting and allowing every colleague to be able to look at you and say, ‘Oh OK, I understand. You’re here for something unique. Let me make sure I help you capture that uniqueness,’ or, ‘OK, you need something today that may be not in its offering,’ but we empower them to be able to make those changes to do that. We think a big [part of the] culture of Langham is the empowerment of every colleague to create a stay. Sometimes, empowerment, too often, is focused on problem resolution and I think a culture of empowerment could in many cases eliminate the need for problem resolution because if you give somebody the upfront ability to identify what special needs each customer may need, to do that.”
“Then the last piece is, we consistently ask our customers to rate us and do surveys. From that, that also allows us to garner additional information of what people would like, or things they disliked. Things they like, things they’d like to see in the future. I think there are multiple ways to be able to capture that data without just having somebody signed up in a program.”
He added, “To my knowledge, most of the loyalty programs were not necessarily designed for the market segments that Langham is in, in the luxury market. Most of them were designed for a segment below that. I don’t know if there’s ever been a communication to that customer that says, ‘Is this what you want? Is this important?’ I think, as I explained, I think Langham realizes or believes that isn’t necessarily the direction for that new luxury customer. That recognition is a much stronger desire. Coming and staying in an environment where employees, colleagues are empowered to be able to adjust and make your stay for you. That is a much more of a desirable piece, for me, than collecting or getting points, you know?”
Warman also looked at airline loyalty programs as an example of how brand haven’t been successful, necessarily, in capturing all of a guest’s loyalty.
“It’s always interesting because, obviously, we travel a lot and airlines have given points for years,” he explained. “We all garner our airline points, and so the question always is, for example, let’s say you live close to Newark and United is the primary carrier out of Newark and so you’re a United customer. But then you moved homes to Queens and you live next to LaGuardia, and Delta is the main carrier there. Did you stay loyal to United? Did you continue to drive across town to Newark, or do you now become loyal to Delta because they’re closer to you?”
“Again, I don’t know,” he said. “When it says ‘loyalty,’ are they capturing that customer’s full stay? Generally, loyalty is more about capturing all of your business, and I don’t know if that’s accomplishing that feat there. And that also goes for consolidation of more brands. How do I keep that same customer because we know they’re moving to different places? We know no one brand has all of those customers.”
Trump Hotels: Loyalty Needs to Be Tailored Differently for Luxury and Lifestyle Hotels
Likewise, the executives at Trump Hotels feel that there’s a difference in how you define loyalty programs for the luxury and lifestyle segments. That’s why they are planning to have two separate, but somewhat linked, loyalty programs — one for Trump Hotels and one for their new lifestyle brand, Scion Hotels. The executive team said the new program for Scion Hotels was still being worked on and no established timeline of program name have been set.
“I have a very strong belief that, that kind of lifestyle user, they don’t want another 500 frequent flyer miles,” Eric Danziger, CEO, Trump Hotels, said, referring to guests who might stay at Scion. “They want something that’s instant gratification, that has to do with their stay today. That’s what matters to them. We found that out in many things we did in another company. Jeff’s [Jeff Wagoner, EVP of Hotel Operations for Trump Hotels] re-working his [loyalty program for Trump Hotels] too, as everyone is, but [for Scion] it’s really all about being more experiential, than points based, because they have points.”
Danziger continued, “Loyalty programs are such a misnomer, because if you have most travelers, you open their wallet, [and] they have every company’s card. So, isn’t the point of loyalty to say that you don’t have every company’s card, because you are going out of your way to stay at the company? That’s loyalty. And that doesn’t happen in this industry with the way in which these things are created. So, to reward somebody with something more that they get the same thing at this one, or they get more miles at this one or whatever, is not what I believe they want.”
Like Warman and the other CEOs, Danziger sees a greater desire for instant rewards and recognition among guests today. “They’re free to do what they want. My strong belief is, if you’re in a lifestyle hotel — well, let’s just say that we had a bowling alley or a bar, and it was hot place because it was the local place — if I’m staying at that hotel, if I’m that kind of user, you’re going to really recognize me. If you say, ‘By you being here, we’re going to give you our loyalty right now, so you go to the head of the line, or you get the preferred dinner reservation, or whatever,’ that’s loyalty. It’s experiential, it’s right now. To me, that matters more than all this other stuff. So, that’s what we’re definitely working on over there [with Scion].”
“Perhaps a luxury customer wants something a little different,” he added. “That’s not a very price-conscious customer. So we have to create the programs that are meaningful to them and not just be like everybody else.”
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Photo credit: A rendering of guest room at a future Cambria hotels & suites property in Chicago. Hotel loyalty programs are becoming an increasingly vital part of hotel companies' strategies. Choice Hotels International / Choice Hotels International