Guest Post: ‘Scrapping loyalty programmes could help hotels keep up with OTAs’

Guest Post: ‘Scrapping loyalty programmes could help hotels keep up with OTAs’

Personalisation is the key to influence a shift in brand allegiance, says Kristian Valk, chief executive of Hotelchamp

The travel industry is monopolised by online travel agents, with the two largest, Expedia ($72.4bn) and Priceline ($68.1bn) racking up $141bn of sales between them during 2016.

The source of their popularity comes from their huge investments in innovation and technologies, with their increasing sales simply resulting in further improvement on the customer’s online experience, further widening the gap between online tech giants and accommodation providers, both big and small.

As a result, accommodation providers are becoming increasingly reliant on OTAs to provide both new and returning customers due to a significant decline in brand loyalty.

Most notably, brand loyalty has been hit hard due to two significant changes impacting the industry. Those are:
• The prevalence of rate comparison tools that focus on nothing but lowest possible price.
• The increasing popularity of immersive and authentic travel.

OTA comparison tools have led to more price transparency since the growth of metasearch websites like TripAdvisor and Trivago. This results in hotels having to implement increasingly competitive prices, which in turn asserts price point as one of the most important factors in consumer decision making.

However, with hotels paying up to 30% commission to OTAs just to be unceremoniously pitted dollar for dollar against their competitors in the OTA arena, this means that not only do hotels have to become more competitively-priced to incite interest from consumers, but they are also getting much less money per room.

In a world where brand loyalty has been undercut by competitive pricing, personalisation is the key to influence a shift in brand allegiance to achieve marketing and commercial success.

To build customer preference, hotels need to understand what their customer truly values – and to do that they need data. There are a variety of different incentives that can appeal to consumers, from a free breakfast, to a free cocktail or a 15% discount, and relevancy is really key here. Loyalty schemes are often the least persuasive tool to engage and retain customers as they don’t personalise a customer’s experience, which makes them feel special, on the contrary they are made to feel generic.

Recent immersive travel trends, showcased most notably with the success of Airbnb and the increasing popularity of boutique hotels over chains, reveal consumers moving away from cookie-cutter accommodation and searching for unique and different experiences every time they travel.

Consequently, traditional loyalty schemes become redundant – instead hotels need to entice new and old customers through an intelligent online experience which tailors deals for each different customer’s profile.

Not only is this more effective in terms of the marketing and sales conversion of hotel rooms, it’s also more engaging: building a stronger relationship with customers than a points-based loyalty scheme ever could.

It is this data-driven relevancy that is the key for hotels to keep up with OTAs in order to grow new, and maintain established, relationships with previous customers.

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