By offering travel insurance as a way to provide end-to-end customer care to their guests, hotels can improve the traveler experience while winning repeat business, growing loyalty, and building customer lifetime value.
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The lodging industry may be cyclical, but good customer relationships are not. Hotel brands with strong customer loyalty will have an advantage over competitors, no matter what happens with hotel rates, travel demand, and guest expectations, or whether the economy is good or bad.
On the heels of the Covid-19 pandemic and the unpredictability and volatility in the travel industry following in its wake, hotels have been squarely focused on ways to show guests that they care about them personally. By offering travel insurance as a way to provide end-to-end customer care to their guests, hotels can improve the traveler experience while winning repeat business, growing loyalty, and building customer lifetime value.
Why Travel Insurance Is Having a Moment
Travelers have become more attuned to travel insurance than ever before. According to a 2021 Allianz Partners USA survey, 84 percent of customers who had purchased a policy in the year prior said they’d be likely to repurchase travel insurance in the future. Notably, 48 percent of those respondents were first-time purchasers of trip protection, highlighting the surge in demand over the past several years.
The waves of unpredictable scenarios that became synonymous with global travel in 2022 — inconsistent travel restrictions, flight cancellations, systems outages, etc. — are expected to smooth out as the shock of the pandemic fades further into the rearview.
While travel planning and booking is nearly back in full force, consumer trust has been harder to regain.
“Each experience throughout a traveler’s journey can make the difference between dream vacation, business-as-usual, or trip-from-hell,” said Chris Garlock, vice president, marketing strategy, Allianz Partners. “Today’s less predictable travel experiences have many travelers now seeing travel insurance as an essential, and simple, part of trip planning — they don’t just expect it, they demand it.”
With consumer sentiment trending in this direction, it’s important for hotels to reconsider their role in offering peace of mind to guests. As hotel brands compete with each other for opportunities to build long-term relationships with loyal customers, many are starting to offer travel insurance directly as part of the purchasing process.
How Hotels Can Build Trust Through Travel Insurance
Unpredictability is the new normal, and travelers are seeking protection from the unknown. Indeed, according to a December 2022 survey of 971 travelers from Personal Finance Insider, 35 percent of travel insurance buyers did so “primarily because they were concerned about the travel provider they booked with, and feared issues like delayed flights or moved reservations.” Only 11 percent said they always buy travel insurance out of habit.
Furthermore, the survey found that just 55 percent of insured travelers went through their provider, i.e. an airline, cruise, or tour group, to purchase protection. These statistics point to a big opportunity for hotel brands to step in and highlight the unique benefits they can provide across the entire travel journey.
Hotels have historically been able to offer more variable cancellation policies that best suit the traveler in comparison to flights and tours, for example, which require more rigid scheduling and inventory. As a result, customers may be more naturally inclined to purchase insurance through a hotel, if they’re aware of the offer.
“We’re in the midst of a historic shift across the travel industry, where travel suppliers are breaking free from the notion that each is simply an independent actor within their respective piece of the travel value chain,” said Garlock. “While travel insurance has traditionally been seen as a welcome security blanket for things like flights, cruises, and vacation packages, hotels have long offered something others haven’t: flexibility.”
One of the advantages travelers may not recognize is that purchasing insurance through a hotel can extend coverage to everyone staying in a room — including friends and family. It can also provide reimbursement for prepaid, non-refundable expenses beyond just the cost of the room, like flights, rentals cars, or tickets to a Broadway show for all of those individuals.
Timing Is Everything
Given the potential benefits to the customer experience, hotels should be considering how insurance fits into the larger context of each guest’s trip. The question remains how they can create the right offers for the right guests at the right time.
Facilitating guests’ consideration of trip protection throughout the research process and offering it at the time of booking can help travelers save valuable time and effort. Garlock noted that it’s important to look at all phases of a traveler’s journey, the emotions they are feeling throughout, as well as the rational financial decisions along the way.
“Many travel companies have seen travel insurance as a great ancillary revenue opportunity, but it’s way more than that, especially for hotels,” he said. “Ensuring the aspects of awareness, education, and decision-making are spread throughout the journey builds confidence to book, which translates to happier customers and results in more revenue.”
Picking the Right Partners
By gathering as much customer data as possible during the booking process, hotel brands can contextualize an offer that protects as many aspects of the trip as a traveler needs. Partnerships provide access to additional information that can help customize offerings further.
“We see travelers, not transactions, and it’s our responsibility to be an extension of our partners’ brands,” said Garlock. “At the end of the day, we want our customers to feel great, our partners to look good, and to provide a friction-free way to make customers happier. Guests want it, and frankly, deserve it.”
As an illustration, Allianz’ proprietary e-commerce booking platform curates the most relevant travel insurance offer personalized to each guest’s reservation. Additionally, Allianz collects and measures customer preferences while providing feedback and resolution points for customers in need. Hotels and other travel brands wouldn’t necessarily gather this information on their own, and it gives them a more complete view of their customers.
“If you’re not already offering your guests travel insurance, consider what a partnership can do for both you and your business,” Garlock added. “Everyone in the travel industry is in a race to figure out who can take care of customers best — and that’s a win-win leading to higher customer lifetime value gains, competitive advantages, and long-term growth prospects.”
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