Skift Take

Whatever IHG ultimately does as it proceeds with this loyalty program merger, the No. 1 thing they don't want to do is to anger Kimpton Karma elites. We also wonder: Will new IHG CEO Keith Barr start letting IHG's most elite loyalty members get access to his phone number too?

It’s been 1,008 days since InterContinental Hotels Group (IHG) acquired Kimpton Hotels & Restaurants, the company that jumpstarted the boutique hotels movement in the U.S., for a cool $430 million.

And in those thousand or so days, there hasn’t been much news to report on the two entities’ respective loyalty programs, both of which have continued to operate separately — until now.

Friday morning, IHG announced that by early 2018, Kimpton Karma Rewards will become a part of IHG Rewards Club, forming a combined loyalty program with a single points-based reward system.

When the combination of the two programs is completed next year, all Kimpton Karma Rewards members will be automatically enrolled into IHG Rewards Club, which is considered to be the world’s largest hotel loyalty program by membership numbers with more than 100 million members total. IHG wouldn’t divulge exactly how many members are in the Kimpton Karma Rewards program, or what kind of overlap there is in membership between the two programs.

Kimpton Karma members will then have access to IHG’s total portfolio of more than 5,200 hotels in nearly 100 countries worldwide. IHG Rewards Club members will also now be able to earn and redeem points at Kimpton’s more than 60 hotels in North America and Europe. IHG Rewards Club current status will be recognized and members will receive all applicable in-hotel benefits beginning in early 2018.

“IHG Rewards Club members who stay at Kimpton hotels will receive 10 points for every qualified dollar spent on room revenue,” Susanna Freer Epstein, SVP of global loyalty marketing for IHG, said. “Elite members will receive bonus points on top of that. Any valid Karma Free Night Rewards will be converted to IHG Rewards Club Reward Nights and will remain valid in members’ new IHG Rewards Club account, with existing expiration dates.”

IHG also noted that Karma member tier levels will “map” to IHG Rewards Club membership levels, and any activity accrued toward an earned night will be converted into IHG Rewards Club points. “Active Karma members will slot into IHG Rewards Club tiers (Club, Gold, Platinum, and Spire Elite),” Freer Epstein said.

In a statement, IHG said: “Kimpton Karma members will enjoy the ability to accelerate higher tier status and earn more benefits with incentives and promotions that are personalized for them. Members can also earn points through IHG partners for everyday activities like renting a car, ordering flowers, shopping, dining and more.” Kimpton’s loyalty program does not have its own branded credit card program like IHG Rewards Club does.

Kimpton Karma members will be automatically enrolled in IHG® Rewards Club in early 2018, unlocking benefits to earn and redeem at nearly 5,300 hotels around the world, including the new InterContinental Los Angeles Downtown, the Kimpton De Witt in Amsterdam, and Hualuxe Zhangjiakou in China, pictured here. Source: IHG

Why This Makes a Lot of Sense

Today’s hospitality mergers and acquisitions are often powered by two driving forces — scale and loyalty. That was certainly true in the case of Marriott’s $13.3 billion purchase of Starwood Hotels & Resorts in 2016, and that also rings true in IHG’s case with Kimpton.

It would have been a huge lost opportunity if IHG had failed to bring Kimpton’s loyalty members into its portfolio. While the acquisition has added some scale to IHG, the loyalty aspect is even more compelling. Even though IHG has the largest number of loyalty members to date, without including Kimpton’s Karma members, bringing those consumers into the IHG family is crucial to keeping the entire IHG brand ecosystem in healthy condition. Loyalty drives direct bookings and, more importantly, it helps hotel companies know more about their guests so they can continually improve on their guest experiences.

When Skift spoke to Kimpton CEO Mike DeFrino earlier this year, he said the two loyalty programs would be combined by 2018.

“What we hope to do, and what we’re planning on doing, is maintaining the ethos of that loyalty program, that Kimpton Karma program, and marrying it with the currency of IHG’s reward program, so our goal is to have the best of both worlds and be able to provide that individual treatment and sort of specialization, which I think people expect in boutique hotels, perhaps a lot more than they do from the big brands,” he said. “So, together with Kimpton Karma and IHG currency, we’ll have a tremendous reach.”

He also said IHG’s global scale would help Kimpton grow even more, especially after the two loyalty programs become one.

“The thing is, since Kimpton has never been outside the United States, people don’t really know Kimpton in China or know Kimpton even in Europe very well, and we think that this will give us some street cred outside of North America,” DeFrino said. “And so, when people are booking from Shanghai and they see that it’s an affiliate, that Kimpton is affiliated with IHG, they’re going to feel good about booking that. We also think that those travelers, especially inbound travel from China, is going to be more and more interested in staying at lifestyle boutique hotels or whatever we’re calling them today. So, we think we’re in the right place with sitting on a strong credible loyalty program and currency and with the Kimpton point of view and style and design and restaurants and bars, we think that sort of is the one-two punch we need.”

That strategy is already playing out. On Wednesday, Kimpton announced it plans to open three properties in Southeast Asia and Greater China. As Kimpton becomes an even bigger and more global brand, it makes perfect sense to house it under the IHG loyalty umbrella.

Why IHG Needs to Tread Carefully Here

Combining Kimpton Karma and IHG Rewards Club into a single program is easier said than done, however, and IHG will have to be very careful not to upset die-hard Kimpton Karma rewards members, especially those with elite-tier status, also known as Kimpton Karma InnerCircle. (Likewise, Marriott is also contending with this as it works to integrate its three loyalty programs into one, without upsetting Starwood Preferred Guest members.)

IHG said that Karma InnerCircle will continue to exist at Kimpton hotels and that it “will be grandfathered” into the newly combined program in 2018.

“[Kimpton Karma] members who earned InnerCircle by the end of 2017 will maintain their InnerCircle status, within Spire Elite,” Freer Epstein explained. “That means for Kimpton’s most loyal members, they will continue to enjoy InnerCircle perks when staying at Kimpton hotels. Things like the highly personalized welcome amenities, the new hotel reward night at Kimpton hotels and chef tastings at Kimpton restaurants will continue to be a part of the Kimpton experience. Moving into 2019, to qualify for InnerCircle in 2019, members will need to earn Spire Elite and receive an invitation into InnerCircle.”

A hallmark of the Kimpton Karma program was the deeply personal way members interacted with it. Kimpton Karma members have to call a Karma Rewards Advisor to redeem a reward night and those who qualify for InnerCircle status even receive a phone number they can use to call Kimpton CEO Mike DeFrino directly. There’s also a Raid the Bar feature which lets Karma members receive a $10 credit ($15 credit in New York City) to spend at the restaurant bar or in-room minibar during eligible stays.

Freer Epstein noted: “We’ve also preserved Kimpton Karma’s most-loved perks, like Raid the Bar (for Gold, Platinum and Spire Elite) and the $30 spa credit. We think Karma Rewards members are going to be really happy to know their most beloved perks and the highly personalized Kimpton experience will remain, while at the same time, will gain access to a whole new world of benefits that IHG Rewards Club introduces.”

While Kimpton Karma members will no doubt benefit from access to more hotels in more places when the programs merge, there’s still a chance they could lose that personalized loyalty experience in the process, especially when they stay in non-Kimpton branded IHG properties.

On the flip side, however, it appears Kimpton Karma members will benefit from no more blackout dates and the ability to redeem points online instead of having to call, as noted by Kathleen Reidenbach, Kimpton’s chief commercial officer, in a press statement.

Reidenbach added: “With the increased portfolio of hotels – 80 times more hotels than what we’ve been able to offer – our members can now travel all around the world earning and redeeming points, including new international Kimpton destinations. What’s equally exciting is that members will continue to enjoy the highly personalized experience that Kimpton delivers, while gaining access to the rich benefits of IHG Rewards Club. It’s really a win-win.”

The Future of IHG Rewards Club

When asked if IHG is planning to unveil more changes to its loyalty in the coming year, in the same vein as its peers Hyatt and Hilton have done in the past year with a larger focus on experiences, flexibility in points usage/sharing, and alternative sources for redemption (like Hilton’s Amazon tie-in), Freer Epstein said:

“Clearly, this is an important milestone as we’re offering more brands in new destinations to our combined membership moving ahead. IHG Rewards Club offers countless great opportunities to earn points and redeem rewards — from Reward Nights at IHG hotels worldwide to music downloads, electronics, gift cards and more, via its online global redemption catalogue. And we are always looking at ways to enhance IHG Rewards Club.”

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Tags: ihg, kimpton, loyalty

Photo credit: Nearly three years later, IHG is finally merging Kimpton's loyalty program into its own. Pictured here is the new Kimpton Hotel Born Denver. Kimpton Hotels & Restaurants

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