On a recent episode of the Skift podcast, we discussed hotel loyalty: who’s doing it right, who’s still trying, and how it’s continuing to evolve. Marriott is merging its program with Starwood’s SPG. Hyatt’s new program just launched. And Hilton recently announced a slate of new features.
And all of these changes are taking place as online travel agencies continue to lure many travelers driven by price rather than points, and up-and-coming accommodations providers like Airbnb win fans without even offering a loyalty program.
Our guest was Gary Leff, founder of the View from the Wing blog and an expert on points programs. He joined podcast host Hannah Sampson and Skift hospitality editor Deanna Ting.
We also heard from some interviews that Ting did at the Americas Lodging Investment Summit in L.A. with Scott Berman, U.S. hospitality and leisure practice leader at PwC; Best Western Hotels & Resorts president and CEO David Kong; and Langham Hospitality Group CEO Robert Warman.
Here are five takeaways from the conversation:
Major acquisitions are changing hotel loyalty in a big way.
Recent consolidations of hospitality brands — the biggest example being Marriott-Starwood — leads to loyalty programs being pushed together, and that can get messy. Consumers loyal to each individual brand don’t want their points to be disrupted or reduced in value, and they don’t want any interruptions in their customer service.
“IHG swallowing Kimpton and we’re going to see changes to their program. Fairmont and Accor. Obviously the big behemoth being Marriott and Starwood,” said Leff. “Initially I think there was a tremendous amount of skepticism among Starwood’s members as to what that’s going to look like. And there’s still certainly a wait-and-see situation, although Marriott’s gone to great lengths to try to reassure those members.”
“Hotels are really starting to figure out that loyalty programs aren’t just a mechanism of communicating to consumers,” said Leff. “They’re a way of allowing them to expand their footprint across brands because consumers are going to respond to the incredible stickiness that allows them to have more brands.”
Retail rewards don’t work for all travelers.
Travel companies are getting more creative with their loyalty benefits. Instead of only redeeming points for a hotel room or an airline seat, consumers can now often redeem for tangible retail products like a Starbucks gift card.
“That’s the story in and of itself is how the retail sector and the lodging sector are parallel,” said Berman. “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. And so that creates a different sort of loyalty.”
On the other hand, Leff questions whether retail and lodging really make good bedfellows.
“On the retail, I think we shouldn’t overemphasize that. There are some opportunities for synergies, but we started to see a decade ago, mostly on the airline side, the airlines had a problem,” said Leff. “You’ve got all these points and a limited supply of seats and people are having frustrations — what are other things that they could do with their points? And retail never really ever took off on that side, at least in terms of percentage of redemption. Why? Because getting a toaster or washing machine for your points isn’t nearly as aspirational as the trip to Hawaii. So it just doesn’t drive long-term behavior in the same way.”
Younger generations view loyalty differently than older generations.
Older consumers may be accustomed to decades-long brand loyalty, but younger travelers of Gen Y or Z are often more elusive and willing to break their purchasing patterns. Sometimes younger people prove more adept at gaming the loyalty system to rack up more points. On top of that, millennials by and large want to exchange those points for experiential rewards, like a free trip to Hawaii, rather than retail rewards.
“Millennials are less trusting of institutions,” said Leff. “In the loyalty context, the programs are telling folks if you take action of a specific kind now, give us your business now and there’s going to be rewards in the future; it’s an inter-temporal play. What happens when you don’t trust that?”
“No loyalty program should ever use the word ‘enhancement’ again. Because millennials in particular don’t trust it,” Leff added.
“For young people who travel, it’s all about accumulating points. And they become loyal,” said Berman.
Luxury hotels lean more on recognition than rebates.
Immediate rewards may not serve as big a role in the luxury space as customer recognition and delivering that unique, personalized, high-end experience. This crowd is definitely not in it for the free toaster.
“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,” said Warman. “We’re not embarking on a massive global program to reduce rates because you’re a member or give you X number of points or a rebate back. We don’t necessarily see that, in the luxury market today, as a necessity.”
“Certain upscale [brands], they’re very well attuned to getting the recognition component right,” said Leff.
No matter how comprehensive the loyalty program, no single company can be all things to all travelers.
Every hotel company has a profile, no matter how many properties or brands they have across the globe. Experiences will inevitably vary from company to company, as will the type of guest they attract, from family leisure travelers to single road warriors.
“Arne Sorenson of Marriott says that he wants Marriott to become the only program you’ll ever need. Now, I’m not sure. I think that’s a little bit of an overstatement,” said Leff. “You can go just about anywhere and stick with them, so Marriott grew their international presence, their higher-end presence. Starwood is getting a footprint in smaller cities. And so geographically, that’s more true. But I think that it really comes to the individual consumer and tastes. And one company isn’t going to appeal to literally everyone and every profile.”
Companies in the sharing economy will have an even tougher time administering their loyalty programs consistently to a large audience, since each property is overseen by its individual owner.
“The owner of an AirBnB is going to have to stock the fridge with your favorite juice or soda before they leave because you’re an AirBnB VIP.” said Leff. “How do you drive that consistent experience? How do you fund that experience?”