Loyalty program retooling focusses on personalisation

With online travel agents winning the war on accommodation bookings worldwide, hotel companies are revisiting loyalty programs as another marketing tool in the hope that consumers will start booking direct.

Many hotel operators are hamstrung with contracts with OTAs that limit their ability to undercut pricing, with the important exception of loyalty members. Loyalty programs have been a somewhat neglected weapon in the marketing arsenals of accommodation providers; there have been a lot of changes lately whereby some programs have devalued their points and/or made it more difficult for members to earn and/or redeem points, to the extent that customer satisfaction with hotel loyalty programs dropped dramatically from 2015 to 2016, according to the latest report from the American Customer Satisfaction Index.

Major accommodation chains have been re-inventing their loyalty strategies to support their campaigns. Marriott CEO Arne Sorenson maintains, “I think the most important thing for us to succeed at is the loyalty program.”

These moves mirror efforts by other companies to morph loyalty programs to be more than just places for points, free nights and “ego-boosting status tiers”.  Accommodation businesses are retooling their loyalty programs to drive more bookings via personalised pricing and perks, often using a plethora of apps. This effort comes in tandem with ramped up marketing campaigns to persuade travellers to book directly through their websites instead of through third-parties. Success story Hilton’s Stop Clicking Around campaign has already got some OTA executives worried.

 

[Hilton’s forthcoming redesign of its HHonors loyalty application will enable users to receive push notifications, use real-time chat to communicate with front desk personnel and share digital room keys with more family members. The hotel brand is ushering in an updated HHonors app later this year, which will include full iOS compatibility as well as the option to mark a favorite hotel room so that customers can book the same space for future visits. The redesign also brings about additional features for Hilton’s digital key program, such as the ability for consumers to use multiple digital keys on several smartphones for the same room.]

Both Hilton and Marriott have new contracts with Expedia that include certain concessions, most importantly, it is no longer deemed to be a violation of the rate-parity clause of their contract with Expedia to offer better pricing to the members of a hotel chain’s loyalty program. That means 2016 could be a big year for accommodation companies to begin to tailor rates and offers for their most loyal customers.

Analysts at investment bank Stifel recently wrote in a report: “We view this move as possibly the beginning of a series of global campaigns by major hotel chains to incentivise customer loyalty and control distribution costs.”

At the same time, major online travel companies are dusting off their own loyalty programs and retooling them to encourage more repeat business.

For example, Expedia executives let it slip that they have been studying the loyalty program of its recent acquisition Orbitz and at Hotels.com. Their aim is to relaunch the loyalty programs for the organisation’s many brands to drive more repeat business.

Patrick Bosworth, co-founder and chief executive of the profit optimisation startup Duetto, stresses where accommodation companies go wrong with securing direct bookings: “What hotels have failed to do adequately is to really create value for their customers in the discovery and booking process for hotel rooms.

“Up to this point, hotel companies, in my view, have been pretty inhospitable. They open their doors wide and are very gracious with their guests once they arrive on property, and so forth, but the pre-stay experience, and certainly the direct booking experience, has never been particularly good. What you’ve seen over the last several months is hotel companies starting to get away from a very impersonal points-based, tier-based type loyalty program, and begin to move in the direction of more personalisation, and actually delivering tangible value to all of their loyalty customers.

“For the vast majority of consumers who aren’t road warrior business travellers, there’s never been an incentive to book direct. In fact, there have only been incentives not to, because sites like Expedia and Booking.com provide a better user experience, more choices and the marketing message, true or not, of having lower prices. Hotels simply offering rate parity did not really address anything of value for the consumer.

“Hotels need to find a way to provide unique value propositions to those customers that they know and that trust them. In the absence of something special that they recognise, then the OTA promise of an efficient booking experience and low-prices with a wide array of choice, is going to win out in the vast majority of cases.”

A recent study from Phocuswright discovered loyalty programs are an effective tool to drive direct booking.

Surprisingly however, only 40 percent of properties in USA and 42 percent in Europe have a guest loyalty reward program. This is a result of lack of understanding of loyalty programs and therefore appreciation of what these can do.

The purpose of a loyalty program revolves around new customer acquisition, increased customer expenditures, retention of current customers and increasing revenue. Few actually achieve this.

Again, surprisingly, smaller, independent and boutique hotels have realised where they have been wildly successful is that they have understood their customer much better than typical hotel companies do, the typical ones that have attempted to serve those same demographics and markets.

These elite accommodation providers exactly customise their physical product as well as the services that are offered and the culture and the whole vibe of the place and the types of employees they hire into a coherent whole. They are all perfectly tailored to serve what is a very narrow niche but one where they can go very deep — where they can really engender loyalty by connecting at an emotional level and at a practical level of all of the true needs of those customers. And they let their customers know.

That’s where loyalty as a direct booking tool ultimately has to go.

An Expedia survey conducted in April 2016 revealed Aussie travellers are “addicted to loyalty” with 71 percent of the population using at least one hotel program “in a bid to make travel dreams a reality”.

The study found 23 percent of Australians use multiple accounts at once, such as a credit card combined with a hotel or airline program, and the tactic is working with 27 percent redeeming rewards more than three times and 50 percent adding memberships allowing them to book trips they otherwise may not take.

The platform is there, so why are OTAs still getting the lion’s share of accommodation bookings?

The Office of Australian Information Commissioner has found that 88 percent of Australians are now a member of a loyalty program, more than Expedia discovered.

But privacy commissioner Timothy Pilgrim warns that handing over personal data for loyalty programs comes with its own risks.

“There’s no such thing as a free lunch, nor a free flight. The data that loyalty programs collect is valuable and personal. So in this case, there is a price for the rewards from these programs.”

While details collected in isolation may seem insignificant, when they are merged together it can paint a picture of who consumers are and how they behave. This data is extremely valuable to marketers to better target messaging and campaigns.

OTAs are watching the loyalty program renaissance with a fair bit of concern. An interesting comment from onefinestay co-founder and CEO Greg Marsh last month stressed, “The loyalty program is basically just bribery. You’re participating in a loyalty scheme if you genuinely get value out of it, but it’s basically just bribery.

“Even if you’re a road warrior, I just think you’re basically just being bribed to attend to a brand. You have no real brand. There’s no actual product difference.”

Curiously, onefinestay is currently upscaling its own loyalty program!