The pandemic has proven the resilience of loyalty programs. But it has also suggested the need for travel brands to supplement their loyalty programs with subscription-based products that address complementary needs.
The pandemic forced travel brands to get smarter by using their loyalty programs to engage with consumers even when those customers aren’t traveling. That new skillset will have a lasting impact even after the pandemic eventually fades.
Being savvier at engaging customers at all times was one of the four takeaways from Skift Live’s Loyalty and Subscription Summit, which took place as a virtual event on April 21. Other takeaways included revamping loyalty programs to cope with the loss of traditional corporate travel, experimenting with subscription models, and adapting to “responsible tourism.”
Serving Your Customers
Marriott International is one brand that has leveraged non-travel spending through its loyalty program. Earlier this month, Marriott made it possible for members of its Bonvoy loyalty program to earn points toward free nights at the company’s hotels and home rentals when ordering food delivery on Uber Eats or requesting selected Uber rides.
“This Uber effort is just the first stop on other ways that you’ll be able to earn more points,” said Peggy Fang Roe, global officer, customer experience, loyalty, and new ventures at Marriott International. “You’ll see us capture more share of leisure spending. We’ve been working on yachts for Ritz Carlton, for example.”
Coping With Changes in Business Travel
Marriott has also historically weighted its loyalty program promotions to business travelers but, in the near-term, it will be leaning into promotions for leisure travelers. In February it updated its mobile app to feature more “things to do,” such as tours and experiences, at destinations, powered in part by tech vendor PlacePass. For more context, see our story: Marriott Leans Into Superapps to Build Up Loyalty.
Hyatt is another hotel brand coping with a shift in its guest base this year. So Hyatt is moving from tempting traditional corporate road warriors with distant rewards, such as higher-tier status, toward wooing remote workers, who are doing team meetings or so-called bleisure travel, with more immediate benefits. For example, the brand plans to add meet-and-greets for remote workers at more than 100 properties worldwide.
“The insight for us is to reward members for ‘workcations’ with qualifying nights for future travel,” says Amy Weinberg, senior vice president of global brands, loyalty, and insights at Hyatt.
In a similar vein, American Airlines has been adjusting its frequent flier program to respond to the current reduction in corporate travelers.
“We’ve done things like reducing thresholds that help people earn or extend status, especially for new program members,” said Rick Elieson, vice president of loyalty at American.
“We’ve also changed kind of the orientation of some of our programs,” Elieson said. “If it used to be that if you’re buying the least expensive fares, that you wouldn’t get all the benefits afforded to you by your status with the airline. We’ve flipped that to be very customer-centric.”
Loyalty program executives are wise to study the potential of catering to digital nomads, which may remain a fixture for at least some period while the pandemic wanes.
Digital nomads traveling in the U.S. on a subscription basis is at minimum a $1 billion total addressable market, according to a presentation by Skift Research Senior Analyst Seth Borko.
Borko estimated the $1 billion figure by assuming only one in 20 adults between ages 22 and 24 whose jobs may be eligible for digital-based remote work actually do it for at least six months a year. Borko assumed they would reinvest rent savings, via subletting, in travel, with a typical spend of $4,000 per year.
A Trend in Testing Subscriptions
While brands get better at customer “engagement,” they continue to face “churn,” or the loss of acquired customers, as their Achilles’ heel.
Some travel brands, such as Tripadvisor, are testing subscription products as a counterweight in their portfolio of offerings. One reason to experiment with subscription-based products and services is to overcome the headwind of customer re-acquisition with traditional products.
While subscription programs themselves can face problems of churn, the positive impact of recurring revenue can outweigh the drag of churn, Borko noted.
In a traditional sales process, the product needs to be resold regularly. But the subscription model takes advantage of the power of compound interest. “So even with actually a pretty high churn rate, a subscription model will compound your annual sales to a much higher number, much faster,” Borko said.
Tripadvisor is testing a subscription program, Tripadvisor Plus, as Skift was first to report. The company has plans to unveil the product, which lets consumers access discounted prices for lodging and travel experiences in exchange for an annual fee to all U.S. users by June.
“We’re asking for hotels that participate to have a minimum of 15 percent discount plus perks,” said Brad Soroca, Tripadvisor’s vice president of marketing and business development and general manager of direct to consumer.
The subscription model means that Tripadvisor can collect information about travelers that it will pass along to hotels, and that information sharing is much better than what online travel agencies typically provide. Tripadvisor also lets hotels have control over how much inventory they offer at any time in a way that’s better than the typical minimum inventory demands that online travel agency giants often insist upon.
Other players are also experimenting with the subscription model. A key issue is developing direct connectivity with suppliers to have better assurance that promised perks would actually be delivered to travelers, said Michael Ros, founder and CEO of travel startup Bidroom.
Responsible tourism Trend
“A lot of customers sitting home for quite some time and they have had time to think about the purpose behind travel,” said Audrey Hendley, president of American Express Travel. “They’ve had time to think about am I booking sustainable travel, the importance of inclusion and diversity in how I make my travel choice.”
Hendley said that American Express has been looking at ways of highlighting travel choices so that customers can more easily find experiences that reflect what they want, such as calling out travel experiences that are more environmentally friendly and highlight locally-owned businesses that are more tightly tied to a destination’s culture than global brands.
An American Express Travel survey found that 69 percent of respondents agreed that they want to choose an airline or hotel partner that values diversity and inclusion and that its employees reflect a diverse customer base.
“That’s a staggering number,” Hendley said.
A similarly high number of surveyed travelers want to priorities travel experiences that are relatively low-impact on the climate.
Photo credit: A traveler in Denmark. Loyalty programs at travel brands becoming savvier at engaging customers even when they aren't traveling was a takeaway from a Skift Summit. Mantas Hesthaven / Unsplash