Forget the Lobby: Renovate Your Hotel's Loyalty Program

Have you ever checked into a hotel and been let down by the way things have changed since the last time you stayed? You’re not alone. I searched Google for Tripadvisor reviews containing the phrase “not what it used to be” and got 50+ pages of results. People don’t like their expectations dashed, and that’s part of what makes hotel management so challenging. The years chip away at even the most impeccable finishes. Grout gets mouldy, carpet gets stained, wood gets tarnished. Running a successful hotel requires a great deal of vigilance. If we rest on our laurels and allow the physical aspects to wither, our credibility (and bottom line) will wither too.

But material renovations aren’t everything. In a manner of speaking, every aspect of a hotel is under constant renovation—and even the immaterial. For example, mobile booking and check-in is about saving time and eliminating stress. Good promotions can save guests money for other purchases and experiences. Excellent service leaves guests feeling connected and looked after during their stay. Loyalty programs are designed to make repeat business easier and more mutually beneficial.

Loyalty programs in particular are badly in need of renovation. In many cases, they’re every bit as deserving of attention as the lobbies, guest rooms, fitness centers and restaurants in today’s hotel properties.

Big hotel brands know this—and while they don’t publish information on how much they spend on loyalty programs, it’s safe to say the numbers are significant. Wyndham, which owns hotel brands around the globe, recently launched a “magical” marketing campaign that encourages clients to earn points for a network of 25,000+ properties. Likewise, Marriott recently advertised its 30-brand empire as a way for guests to choose from a wide array of options while racking up points that can be used throughout the world.

The emphasis of these new efforts, aside from sleek new imagery and slogans, is on flexibility. You can earn points by booking directly with the hotel, by flying with certain airlines, and by shopping at certain stores. Once you decide to cash in, the network of possibilities is wide. And if you look at the rewards pages of these hospitality giants, there’s a clear shift toward experiences and moments—much like a certain online platform that recently upset the industry.

But are these loyalty programs working? If a recent study by Morgan Stanley is any indication, the answer is ‘yes’ and ‘no!’ Travelers who actively use hotel loyalty programs are actually more likely to try AirBnb. At the same time, according to the study, over 50% of hotel loyalty customers are loyal to a single brand. This is what the big hotels want: A consolidation of loyalty amidst a flurry of competition from new hospitality models. 

Too much hassle

Other studies and data suggest that loyalty programs have a long way to go, with 60% of memberships becoming inactive within a year and up to a third of all rewards wasting away unclaimed. New innovations like Thanx have appeared on the market, using the guest’s credit or debit card to automatically create a rewards account and rack up points. The bet here is that people can’t be bothered to maintain yet another account or fish out a plastic rewards card every time they stay at a hotel. By allowing rewards to accrue seamlessly, the barrier to access is removed. The same demographic might choose a cash back credit card over a loyalty card for the same reasons. 

Whether or not these “automated” systems are an evolutionary step for hotel loyalty remains to be seen—but the reality is, people might not mind a little more plastic in the wallet if the rewards were significant enough. (Mind you, several hotels do have virtual loyalty cards so plastic isn’t always the worry.) It’s no coincidence that travelers who actively use hotel loyalty programs are also more likely to experiment with AirBnb. They want value, plain and simple, and they’re not completely convinced that staying loyal will bring them the best value in every situation.

What about boutiques and independent hotels?

For obvious reasons, loyalty programs have traditionally been off-limits to boutique and independent hotels. The market has also sought to fix this problem by introducing a number of loyalty networks for independent hotels (examples are Stash Hotel Rewards, Preferred Hotel Group, Leading Hotels of the World, Discovery and Viola Hotel Rewards).

The idea is to take the concept of hotel rewards and de-couple it from the advantage of being a big hotel brand. Unlike the major players, independent hotels affiliated with Stash (or a similar program) have no uniformity in management or corporate policy—yet guests can stay at one property using points earned at another. This feels like yet another nod to AirBnb, where choice between independent providers is valued over branded property management. Those who prefer boutique flavor can go that way without sacrificing the rewards they would get from a big hotel brand.

But when you boil it down, even these independent rewards networks are themselves brands. They introduce some sense (however small) of a shared identity, and if their constituents do not maintain a high standing in the eyes of guests, the platform may suffer and ultimately lose credibility. Stash indicates on its web site that member hotels have an average score of 84% on TripAdvisor. It’s unclear whether this is incidental (e.g. reputable hotels are naturally drawn to an offering like Stash) or is the result of a vetting process for incoming affiliates.

Independent loyalty programs can theoretically deliver more choice than global networks of brands. What they lack—and where big companies have the advantage—is quality control. People want choice, but they also want to know what they’re getting.

The good news for boutique hotels is that not even global hotel chains have mastered the balance between choice and quality. You don’t have to dig too deeply to find glowing reviews for a branded hotel in one city, and consistently lower averages for the same brand in a different locale. OTAs and platforms like TripAdvisor will continue to provide meaningful ratings and feedback, which guests can use to check the quality of hotels who participate in rewards networks.

The goal of loyalty programs

The more complex and isolated the loyalty system, the less likely people will use it. What constitutes value today isn’t necessary what seemed valuable twenty years ago, and there is something to be said for rewards programs that ask less participation of the guest while affording more flexibility in terms of accruing and redeeming points.

It’s also important to remember that the essence of brand loyalty is found in the guest experience, not in the points system. Unless good value is delivered today, the idea of asking guests to join a loyalty program in anticipation of tomorrow is comical. This is where we begin to see that hotel renovations are truly a combination of things, material and virtual, all of which must work together to maintain and enhance the perception of value.

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