Skift Take

Loyalty programs helped brands engage with customers during pandemic lockdowns. But now they need to evolve, and travel companies need to not only decipher what today’s traveler wants, but also how to factor in sustainability in a meaningful way.

Hotels, airlines and now destinations are embracing loyalty and reward programs in 2022, ready to capitalize on global pent-up demand. But consumers have different needs than before the pandemic. The most notable change is they’re going to want more freedom and flexibility when choosing rewards after being deprived of having the luxury of making choices for the best part of two years. But most notably, they’re also emerging as more aware of the impact their travel has on the planet.

Skift’s Travel Loyalty Summit, which took place as a virtual event on Thursday, saw a number of travel industry innovators share how they perceived the future of loyalty in a post-Covid world.

Sustainability Is a Work in Progress

Greener travel habits were slowly taking hold before coronavirus arrived. But brands today should really be considering how to “bake” sustainability into their programs, argued Wouter Geerts, Skift’s senior research analyst, in the summit’s kick-off presentation.

Was Delta Air Lines looking to incentivize sustainable travel? “We’re in the process of understanding what would make a meaningful impact,” said Prashant Sharma, vice president of loyalty who added Delta was the first airline to hire a chief sustainability officer. “We’re looking at how we can have the biggest impact.”

Besides air travel, he said passengers can donate air miles to organizations furthering sustainability. It was also proud of its partnership with American Express, which used recycled ocean plastic for it cards. “It demonstrates we’re making a difference, but there’s so much more to do,” Sharma told Skift Editor-at-Large Brian Sumers during the “Evolution of Airline Loyalty and Innovating to Engage Customers” session.

Meanwhile, Mark Nasr, senior vice president of products, marketing and e-commerce at Air Canada, said the airline was donating 100 million Aeroplan points to bring Ukrainians to Canada. “We’re working with Miles for Migrants, and the goal is to bring 10,000 Ukrainians to Canada,” he said.

It’s perhaps destinations that stand to be more the most authentic though when it comes to blending sustainability with loyalty. “Organic loyalty” is probably overlooked by a lot of tourism boards and marketing organizations, but several destinations are now dipping their feet in the water with more structured rewards programs, including the Maldives, Visit Mexico and more recently Grenada, which last month launched a program called 473 Connect for the island’s 360,000-strong diaspora.

“They’re the unsung heroes who promote our island tirelessly,” said Petra Roach, CEO of Grenada Tourism Authority. “Why not create a tangible program, then they become an extended salesforce. We’re training this grouping of people, in the same way we’d train a travel agent or advisor.”

There would be promotional evenings, fam trips, discounts card at bars and restaurants. Even a petrol station had signed up, she told Skift’s global tourism reporter Lily Girma during the “New Paths to Building Tourism Loyalty” panel.

And by using the 473 area code, it was “pulling at those heartstrings, that nostalgia” and driving new energy and business into the country, she added.

Other countries can easily follow suit. “You don’t always need a program, it can be expensive,” said Ramya Murali, principal at Deloitte Consulting. “Think about layers and complexities. You can start using emotional connections to a brand, without going through steps to build a program.”

The consultant said 473 Connect worked because it was focused on a specific customer segment. “You don’t need all the trappings of program to drive a program,” she added, but warned that destinations needed to think about constantly evolving it, because “staying still means becoming stale.”

Destinations are also well placed to leverage travelers’ desire to be greener citizens through regenerative tourism experiences. Roach noted that there was already a broad-based “voluntourism” program, which allows people to get up close to the community, with activities including planting mango trees or beach clean-ups, which cost nothing. “They will repeat and they will return. It’s a natural extension, it’s not contrived,” she said.

Murali concluded that the pandemic had moved the needle a lot when it came to our awareness of planet, and that it forced big brands to become relevant. “The key to introducing sustainability is ensuring it connects to the brand. It can fail if it’s seen as something they have to do,” she warned.

Hotels Now See More Relevance, and Opportunity, in Loyalty

Hospitality is another sector that’s well placed to leverage loyalty in the coming years.

Winning a bigger share of direct bookings has long been a goal of hotel companies, to ease their dependence on online travel agencies. Now IHG is using a revamped loyalty program in tandem with a new booking app to address this. The advantages will go beyond free nights and upgrades, according to its senior vice president, global loyalty and partnerships.

“We’re proud of what we’ve brought to market. But delivering loyalty at scale to 6,000 hotels is complex,” Heather Balsley told Skift senior hospitality editor Sean O’Neill.

Following research, IHG found that, yes, guests did want to earn points for free nights. But it went beyond the core expectations around benefits, such as free breakfasts or free upgrades, she added.

Its 100 million-enrolled loyalty members are also nine more times likely to book directly.

IHG launched a new app on April 19, offering faster booking, enhanced customer account management and a mobile wallet. It also acts as a way raise awareness of the different brands, and inspire the types of experiences the younger traveler wants.

There will also be “dynamic reward night pricing” for IHG guests, which was a deliberate strategy to enhance value. Hotels can align reward night pricing with average daily rates.

“Guests tell you they want more — but our hotels can’t give everything to everyone. So we give them more choices — that was at the heart of putting members in control, treating them as individuals,” she said during the “How Are Hotels Revamping Their Programs to Stay Competitive?” interview.

“Diamond and Platinum members also get exclusive access to reward night discounts,” she added. “It launched last week, think of it as flash sales.”

The new app also better helps users understand where they are on the journey towards the next milestone, while there’s targeted messaging to make it easier to engage with people pre-arrival, meaning less of a burden on hotels.

The extra choices also help prevent hotels suffering higher operational costs. Balsley said the new loyalty program was cost neutral or cost-saving for more than 95 percent of its hotels. “It creates the capacity to drive loyalty, and drive profitability for third-party owners. It’s about driving the most profitable guests to our hotels,” she said.

In terms of sustainability, IHG’s Balsley said guests could opt out of housekeeping, or donate points through the website. “There are a number of different ways our corporate social responsibility flows through the loyalty program,” she said.

And as Skift Research shows short-term rentals took six percent of market share from hotels during pandemic, one question to ask is: what would an Airbnb loyalty program look like, if it produces one. It could be a big innovator, and help the brand develop its business travel division, Greets reckons.

Customers Want More Choices, Fewer Restrictions

Another broader theme from the summit was that brands need to offer more choices to their more loyal customers, many of whom are new after the lockdown.

Delta Air Lines, for example, saw a record number of people sign up to its Skymiles scheme in the first quarter, and a higher proportion of younger people.

“We feel great that these are customers that cut across various demographics,” said Sharma. “It’s strong across hubs, but also a large number join outside core hubs, and through digital channels.”

It is now working with American Express’s Plan It, which is a buy now, play later scheme to offer “more flexibility and convenience” he added. “Miles are a currency like cash, we want to provide value when they want it and where they want it.”

He also told Skift’s Sumers that members had a higher desire to invest in experiences, and not just flights. “There’s a stronger desire because they were constrained for a couple of years. We have made changes to make sure customers get more value. One way to do that was removing the mileage cap.”

IHG’s Balsley noted earlier: “There are so many different needs, from the new generation, but also guests don’t want any constraints after the pandemic lockdowns.”

June 29, 2022
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Tags: climate change, covid-19, delta air lines, future of lodging, ihg, loyalty, skift live, sustainability, sustainable tourism

Photo credit: Grenada launched a program called 473 Connect for the island's 360,000-strong diaspora. Hugh Whyte / Unsplash