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How to breathe life back into loyalty
August 14 2013

Loyalty programs have become table stakes—except for those companies that boast innovative offerings and stress personalized guest experiences over points.

Highlights
  • A Deloitte report found that accumulating points towards a free night’s stay was meaningful at one time.
  • Kimpton’s InTouch loyalty program eschews points in favor of personalize perks that include free Wi-Fi and a “raid the mini bar” credit.
  • Instant gratification is one way Wyndham is getting members to sign up for its Rewards program.

REPORT FROM THE U.S.—Loyalty programs must evolve with changing guest preferences or risk becoming irrelevant drivers of demand, sources said.

While points-based programs were once a novel approach that fueled strong brand advocacy, today they’re table stakes—more often than not a commoditized offering that only becomes conspicuous by their absence, said Christine Cutten, a principal at Monitor Deloitte Consulting.

“What we’re seeing is that loyalty programs have gone through the maturity curve,” she said. “We’re seeing high volume of frequent travelers with many loyalty program cards in their wallets. They used to be interesting and drive buzz and frequency. They’ve sort of evolved into transactional, earn-points-and-redeem programs.

“It doesn’t necessarily fully engender what loyalty could be.”

Deloitte, in a report titled “A restoration of hotel loyalty” published earlier this year, found “accumulating reward points towards a free night’s stay was meaningful at one time—before the landscape became saturated with loyalty programs and consumers’ kitchen counters were littered with account numbers and point-summary statements. Today, in many cases, loyalty programs amount to dressed-up price discounts which contribute to undesirable brand switching behavior.”

Instead of points, guests want personalization, Cutten said. They want experiences that let them know they’re patronage is valued.

Kimpton Hotels & Restaurant Group has long been mindful of this desire. The group’s InTouch loyalty program began at a concierge’s desk at the Hotel Palomar San Francisco when associate Shirley King began keeping a stack of index cards containing personalized notes and preferences—guests’ spouses’ names, favorite candy bars, birthdays—for the hotel’s most frequent travelers, explained Maggie Lang, senior director of loyalty and consumer marketing.

The program has expanded and has become more automated since then, although it’s never lost that personal appeal, she said. InTouch eschews points in place of perks that include free Wi-Fi, a $10 “raid the mini bar” credit and spa vouchers.

Members who stay enough nights can redeem for a free night, however.

“We’ve stuck to that. As the program grew, we needed to keep up with the industry and incorporate free stays in terms of rewards, but we didn’t want to go into the miles and points space,” Lang said.

While executives at Wyndham Hotels Group recognize that providing personalized service is the underlying hallmark of loyalty, they still prescribe to a points-based system with their Wyndham Rewards program.

“We’ve done a lot of consumer research and hotel owner research. What we find is consumers join hotel loyalty programs with a specific goal of getting a free night at a hotel. The harder you make it the less sticky it is,” said Mike Muller, the company’s VP of international loyalty marketing and partnerships.

Wyndham has refined its loyalty program during the past year, adding new tiers and reducing the requirements to redeem a free night stay. Members also can cash in points for gift cards and other rewards.

The emphasis on points is a necessity given Wyndham’s brand portfolio, which skews heavily toward economy and midscale hotels, Muller said.

“When you think about our portfolio of hotels, largely in the economy and midscale segment, what is it they expect from a tier? Intuitively you would think they want things like upgrades and free Wi-Fi and free breakfast, but what you find is that typically in the economy segment that’s already included anyway,” he explained. “You wind up with very few things you can offer that is a differentiator in membership class. Most economy segment hotels don’t have upgradable inventory.”

Making roomnights easier to redeem also benefits owners, who during focus groups and other communications expressed their desire to entice guests to stay on property rather than redeem points for gift cards and the like, Muller said.

“It’s to the hoteliers’ benefit to accept as many free nights as we can send them,” he said. “The hotels are very happy to have free nights.”

Wyndham reimburses owners for redeemed roomnights a predetermined, set amount, Muller said.

Winning the moderate traveler
The most effective loyalty programs make frequent travelers feel special but still entice moderate travelers to join, sources said.

But striking the right balance is not easy, Deloitte’s Cutten said. If a loyalty tier becomes too accessible, it loses value and becomes less special in the eyes of the most frequent traveler. If it’s too difficult to ascend the ranks, moderate travelers are less likely to join in the first place.

Wyndham jumps this hurdle with its “guaranteed rewards” promise. After only a single night’s stay, a member of its rewards program is guaranteed to have accrued enough points to redeem something, such as a gift card or iTunes song download, Muller said.

“No other hotel company is doing that,” he said.

The company also rewards new members with a free gift at sign up. “What we found is instant gratification is really important to try to attract that customer into the program,” Muller said.

Someone who signs up for Wyndham Rewards instantly receives a gift, such as a code to redeem a free hardcover, 20-page color photo book from Shutterfly.

The goal, Muller said, is getting them in the door. As soon as you have someone’s personal information, you’re better able to tailor offerings and reach them on an ongoing basis.

Leveraging big data is key, Cutten said. Targeted messaging can convert moderate brand loyalists into frequent guests.

“The efforts tend to generally be, ‘Let’s target those moderate customers who are on the verge and help them along on the process to move them up,’” she said.

The technological gambit
While the content of the message is crucial, equally important is where and how that message is delivered, Cutten said. Smartphones and tablets are playing an increasingly important role in these efforts, “especially for those high-value and frequent travelers who tend to be much more digitally savvy and also have a much higher expectation around those digital and social interactions.”

Kimpton has dedicated a significant amount of resources to do this better, creating an infrastructure that allows the company to reach guests according to their preferences and habits, Lang said.

The company was also one of the first to allocate significant funds to a “social media listening desk” that monitors social media chatter on a variety of different websites and platforms. Kimpton representative and GMs have nearly a 100% response rate to every comment or review that’s made, she said.

That dedication is reaping huge dividends converting tech-savvy millennials, who represent InTouch’s fastest growing demographic, Lang said.

“They’re seeing this love for the brand out there. It’s making them curious. It’s making them stay with us,” she said. “As they move up with this progression in their careers and they’re spending more money, they’re finding us and willing to spend with us.”

“(Technology gives us) better insights about what the travelers needs are,” said Mark Weinstein, VP of strategy and loyalty, commercial services, for Hilton Worldwide. “It allows us to tailor the experience and be more responsive … Technology enables us to curate the relevant journey for the members to make it personalized and relevant. It also holds us more accountable to deliver against our commitments and be even more authentic.”

But technology can have its downsides, too. Deloitte’s study found technology fosters more transparency and makes it easier for consumers to switch from one brand or loyalty program to the next.

“Today, hotel consumers have greater access to information and more choices than ever before. They make informed decisions about where to stay based on recommendations from friends and family as well as online travel websites and use of mobile applications. Further contributing to hotel consumers’ power are the low switching costs enabled by the Internet. From anywhere, and at any time, consumers can cancel reservations and book at a different hotel with a few mouse clicks. The cost of switching is even lower where customers can cancel without paying a penalty and without giving 24 hours’ notice,” according to the report.

Bolstering loyalty programs
The same report also lists a number of ways hotel companies can improve their loyalty programs.

Basic steps include redefining loyalty by securing “organization-wide understanding and agreement as to the specific customer behaviors and attitudes that will be considered characteristic of a loyal customer.”

The report also advises hoteliers to reimagine their existing loyalty offerings by encouraging specific behavior with unexpected rewards. “For example, a hotel can analyze booking data to determine which loyalty members often travel with children. When these loyalty members return to the hotel, offer them complimentary children’s programming and story-time turn-down service to help kids remain calm and quiet at night.”

Benefits must be relevant, Hilton’s Weinstein said. They must also show a loyalty from the company to the member, and not vice versa, he said. 

But the key, sources reiterated, is personalized service.

“The way to earn the loyalty of customers is not with points or elite tiers; it’s really by focusing on the caliber of service and experience delivered on property to the guests so the guest will seek out either returning to that property or other properties within the flag, and recommending it to their friends who are traveling to the destination,” said Henry H. Harteveldt, travel industry analyst with Hudson Crossing.

“If it is a business traveler, it’s making sure the check in is swift and efficient, that there are electrical outlets where they need to be, the room is quiet, the Wi-Fi works,” he added. “I’m describing fundamentals. This isn’t about big data, it isn’t about (customer-relationship management), this isn’t about butlers. This is about making sure you’re doing your job and tangibly better and in a much more consistent manner than your competitors.”

That’s why Kimpton has been so successful in fostering a more loyal customer base, Lang said.

“Our loyalty program isn’t some program borne out of an office or managed out of an office. It’s actually managed by our employees,” she said. “We don’t differentiate between the brand and the loyalty program. It’s all the same. It’s the experience, and that’s why you’re loyal to us.”

Hotel News Now’s Ed Watkins contributed to this report.

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