Loyalty programs: What’s driving brands to revamp
Loyalty programs: What’s driving brands to revamp
18 APRIL 2016 8:10 AM

With so many competing programs available and OTAs promising low prices, hotel brands have revamped their loyalty programs to stand out from the crowd.   

REPORT FROM THE U.S.—Virtually all of the major brand companies in the hotel space want to lure consumers to their loyalty programs, which help drive the ever desirable repeat customer, but each have adopted unique tactics to make that a reality.

The different approaches to changing the programs are based on the individual goals of the brands and their loyalty programs, but the ultimate goal remains the same: increased revenue.

While all brands with loyalty programs constantly tweak their offerings, three companies have made recent changes that address the concepts of greater simplicity, rate discounts and instant rewards.

Loyalty discounts
As part of its recent “Stop Clicking Around” marketing campaign, Hilton Worldwide Holdings is offering discounted rates, benefits and more personalized service to members of its HHonors loyalty program, so long as those members book directly through any of Hilton’s channels.

Guests passed up the chance to earn a total of 57 billion HHonors points by not booking direct, said Mark Weinstein, SVP and global head of loyalty and partnerships at Hilton. The new marketing campaign tells the public that if they join the club and book directly, they get more benefits, such as the discounted rates and complementary Wi-Fi, he said.

“There is a huge misconception that third parties offer a lower rate, which is simply not true,” he said.

The rate discount applies to all HHonors members who book directly through the company’s brand websites, the HHonors mobile app, reservation call centers or preferred corporate travel partners and approved travel professionals, he said. The rate is reduced 3% for stays Sundays through Thursdays, he said, and 10% for Friday and Saturday nights if booked more than 15 days in advance. Reservations made within 14 days of the stay receive 2% off any day of the week.

Weinstein said he was unable to share details about Hilton’s agreements with third parties, such as online travel agencies, regarding the discount available to HHonors members and how it relates to parity agreements.

“As part of an ongoing review of our strategic partnerships and to deliver the benefits and services our Hilton HHonors members want, Hilton continuously evaluates our relationships with OTAs to ensure they are in the best interests of our guests and the entire Hilton organization,” he said.

Since launching the marketing campaign in February, Hilton has seen the highest HHonors enrollments, highest level of web activity and most downloads of its app in years, Weinstein said. Enrollment in the loyalty program increased 104% compared to this time last year, he said. Seventeen percent of HHonors members received discounted rates are new to the program, having signed up after seeing the campaign.

“And year to date, marketing drove $708 million in revenue, resulting in a 29% higher marketing ROI than last year,” he said.

Marriott International created a similar discount for members of its loyalty program, according to a news release. If a member books directly and then finds a better rate within 24 hours of making the reservation, Marriott will match the rate and add on a 25% discount. Marriott did not respond to a request for comment.

Instant, ancillary rewards
Choice Hotels International spent the past year and a half reviewing loyalty in general, said Robert McDowell, SVP of global marketing and distribution at Choice. Many programs in the hotel and airline industries have devalued their currencies and made upgrades harder to come by, he said.

To counter that, Choice Privileges offers Your Extras, an instant reward that benefits guests as soon as they check in. Guests can receive a $2.50 credit on Amazon, a $5 coffee gift card or gas reward points, he said, and they can cash those in at their leisure. The company has also lowered the number of points needed for a free stay at more than 1,500 Choice hotels so guests can redeem free nights faster.

The Your Extras offerings are aimed at transient business travelers, and the company has experienced an uptick in that demographic. The instant reward aspect has also proven popular with millennials.

“We’re extremely excited about it, and guests have given an extremely favorable response,” he said.

Since making the changes, Choice Privileges has had record enrollment days for almost every day, he said. Enrollment is up almost 50% year over year since updating the program.

“The new features in the space we know is really striking a chord with the customers and the (new) customers we’re signing up,” he said.

Differentiate through simplicity
Noah Brodsky, SVP of worldwide loyalty and engagement at Wyndham Hotels & Resorts, said hoteliers must keep in mind that loyalty has to provide value to customers to reach them, which was the goal of that company’s newly simplified Wyndham Rewards program.

“We saw an opportunity to go out and say, ‘This is the program for you. It’s so simple, it gives you back exactly what you have earned,’” he said.

Simplifying Wyndham Rewards a year ago has given Wyndham some of its best months ever, Brodsky said.

After doing some customer research by surveying guests and guests of competitors, Wyndham officials learned guests didn’t understand the programs, the rewards or how to redeem them.

“Airlines were probably the worst of all,” he said. “On the redemption side, they had no idea what they were saving up toward. It used to be back in the glory days, if they had 25,000 miles, they could have a free flight anywhere, so they would save up their miles.”

With all of the loyalty programs out there, consumers have loyalty saturation, Brodsky said. Through the research, the company learned the average consumer is member of 14 loyalty program.

To stand out from the that pack, Brodsky said Wyndham a more simple, straightforward program then rest. To that end, company officials changed Wyndham Rewards so guests could earn a free night anywhere in the system without any blackout days for 15,000 points.

“We saw more companies announce they’re going to daily dynamic pricing on rewards,” he said. “It’s getting impossible for consumers to follow. Our changes really resonated with our target demographics.”

Since implementing the changes, Wyndham rewards has experienced double-digit growth in membership, Brodsky said. Data from Wyndham shows that in 2015, slightly less than 75% of all redemptions were for hotel stays compared to 55% of redemptions in 2013.*

“It’s a gigantic consumer shift because we returned value back to the consumers,” he said.

Franchise engagement has similarly increased, he said, with as Wyndham is seeing “literally thousands” of hotels that haven’t engaged with the company this strongly before.

“It’s a win for the properties,” he said. “They’re seeing the revenue potential here.”

*Correction, 18 April 2016: An earlier version of this story included out-of-date information regarding Wyndham Hotels & Resorts’ redemption statistics.

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