Guest Post: The future of hotel groups’ loyalty programmes

Up to now, hotel groups’ loyalty programmes have been about encouraging repeat bookings with the offer of points and access to higher membership tiers – much like airline frequent flyer schemes. Put another way, they’ve been a ‘gamified’ mechanism for offering discounts selectively.

Will Collin, founding partner of Naked Communications

Up to now, hotel groups’ loyalty programmes have been about encouraging repeat bookings with the offer of points and access to higher membership tiers – much like airline frequent flyer schemes. Put another way, they’ve been a ‘gamified’ mechanism for offering discounts selectively.

And as with airline schemes, competing hotel groups have tended to converge on similar programme structures and mirror any changes in rivals’ terms or benefits.

So from a competitive standpoint, loyalty schemes are table stakes rather than differentiators, as evidenced by the way a higher-tier member of one group’s loyalty scheme can often ‘status match’ across to the equivalent tier on a rival’s programme as an enticement to switch allegiance.

But if the history of loyalty in hospitality has all been about rewarding loyal guests with discounts, the future is increasingly about rewarding them with superior experiences as well.

How so? Now that the major hotel groups operate as brand owners rather than property owners, the loyalty scheme is one of the few major assets held by the business. So it’s of critical importance.

It’s a big part of the overall customer experience for the significant proportion of guests who are members, for example, Starwood Hotels & Resorts have indicated that about half of their bookings come from members of their loyalty programme.

By adding additional services and capabilities to loyalty club members, there are more reasons for guests to choose the same brand over and over. The loyalty scheme becomes the gateway to a superior guest experience as well as the gateway to discounts. Inevitably, this shift is being enabled by digital technology.

Hilton is one of the leaders in this space. The HHonors app now allows guests to select a particular room, just as an airlines have seat selection on their booking websites. The latest innovation even allows you to look at your room on Google Maps so you can see precisely what will be the view from the window. The app also offers functionality such as check-in and can act as a digital room key in those hotels which have the tech installed.

In a similar vein, Starwood Preferred Guest members who have the iPhone app can use an Apple Watch to unlock the door to their room.

The Hyatt Gold Passport app is developing a messaging function so that guests will be able to instant message the hotel rather than call down to reception whenever they need to ask for something.

Geraldine Calpin, chief marketing officer of Hilton Worldwide summed this up when she explained that using digital technology to enhance the guest experience for a loyalty club member means “that guy will come to us again because we delivered that better experience”.

So if the future of loyalty in hospitality is all about creating a superior experience for your best customers, one might reasonably ask: why now?

The answer lies in reducing cost of sale. There are two kinds of loyalty at stake here. Of course the first kind is loyalty to your hotels; but the second kind is loyalty to your sales channel.

With perhaps half of all room bookings coming through online travel agents, inventory aggregators and the like, middlemen are taking a big slice of the margin – maybe as much as 20%. If guests can be encouraged to book through the hotel group’s own platform by then all that margin stays in house.

That’s why the new service enhancements described above are only available to loyalty scheme members who booked direct rather than through a third party channel.

With the margin saved by cutting out third parties, these direct bookings can be incentivised with discounts and guarantees to beat cheaper prices offered elsewhere – thereby giving your best customers the permission not to chase around the web hunting for discounts and deals, and instead book through a brand they know and trust. This is of course the premise behind Hilton’s current “Stop Clicking Around” campaign.

While there will always be a need to be present on a wide breadth of distribution channels in order to reach as big a slice of the available market as possible, when it comes to your regular customers the loyalty scheme can help avoid sacrificing margin to middlemen.

So to sum up, the future of loyalty in hospitality will be about more than rewarding repeat customers with free nights and discount spa treatments. It will be about enhancing the entire brand experience – and so keeping your best customers loyal both to your hotels and to your sales channel.