REPORT FROM THE U.S.—Hotel companies are pulling out perks and pushing promotions, trying to boost occupancy—or at least steer consumers away from competitors and toward their properties instead.

Loyalty club members can cash in on extra nights, earn higher status more quickly or even trade points for an airline ticket. With consumers cautiously booking travel and looking for greater value, the role of loyalty programs in this economy is more critical than ever, several executives said.

As in past recessions, the trend emerging is the resiliency of business generated by loyalty program members, said Don Berg, VP of loyalty programs for IHG.

“The guy who’s on the road calling on clients, going to his regional headquarters, has no choice,” Berg said. “He’s going to travel. After 9/11, we didn’t see nearly the drop-off with that group. It has a lot to do with why you see the hotel companies targeting that group a lot.”

Don Berg

“When the economy tightens, people tend to use more of their points,” Berg said. “A lot of our members view their points as currency. They have a 401k and a 529, and they see them going down. Then they look at their loyalty points, and those aren’t going down. They can offset some of the expenses with their hard-earned points.”

Although the majority of members’ points are used toward hotel rooms, which Berg said is probably the best value to members, he’s seeing a fairly dramatic shift of people using points for other rewards.

“They might not go on a vacation, but they can use their loyalty points to redeem for a gas card, groceries or a repair,” he said.

In some cases, members are splurging on big-ticket items they wouldn’t spend cash to buy right now with their points, which Berg calls guilt-free currency.

“If I have 100,000 points in my account, I can use my points to redeem for something my wife doesn’t want to buy—guilt free,” he said.

The reverse is that a business traveler might ease some of the guilt of being away from home by redeeming points for gifts for the family.

IHG also has worked to remove usage barriers because redemption is the moment of truth, Berg said. Customers don’t want blackout dates or other complications. A personal shopper is even available to put a point price on merchandise that isn’t already a part of the program, such as a particular golf club.

Marriott International’s point redemption increased 15 percent year over year.

“It’s a nice option when people are trying to conserve cash that they can still stay at a five-st ar hotel,” said Bob Behrens, VP of operations for Marriott International.

Marriott has been removing barriers for redemption, unlike the airlines, Behrens said. The company launched its no-blackout program in January, joining several other companies. While it’s difficult to create stays during down times, the promotions, such as redeeming three nights for the price of two, are more about shifting share.

The role of Marriott Rewards isn’t different during a downturn, Behrens said.

“You build the loyalty during the good times so they remain during the down times,” he said.

More than half of roomnights throughout the portfolio are from loyalty members, and the loyalty program helps cross-sell the portfolio. Even Ritz-Carlton properties are participating in the PointSavers redemption program because it’s a more difficult time in the luxury segment, too, Behrens said.

Cost vs. ROI

In theory, loyalty programs exist for the hotels, said Lana Yoshii, VP of Smith Travel Research, who had worked for Hilton’s HHonors program prior to joining STR. But for franchisees and owners, increased perks and promotions can mean more costs.

“They’re like a Polish wedding,” Yoshii said. “Everyone’s trying to find ways to one-up. Slowly that creeps up the cost to the owner.”

Besides paying for the points earned, there are incidentals, such as a bottle of water or snacks at check-in. Other recognition, such as a room upgrade, isn’t a cost out of pocket, but the upgraded room could have been sold to someone else, Yoshii said.

Economy of scale provides franchisees and owners more power.

“For the owners in the bigger ones, it’s not cheap, but it could be the thing that’s saving them in terms of the purchase decision,” Yoshii said.

While there clearly are expenses related to loyalty programs, there are many advantages, said Bill DeForrest, president and CEO of Lane

Bill DeForrest