Top loyalty trends in hospitality
As hotels prepare and refine their loyalty program strategies for 2018 there are apparently three key hospitality trends that the collective industry needs to prioritize.
That is according to Barry Kirk, vp of loyalty at Maritz Motivation Solutions, which creates loyalty programs for U.S. and global companies. The first of these trends concerns liquid currency, which refers to the ability to spend loyalty points in a retail setting, as if it was actual money.
“It’s a growing loyalty trend that could help hotel brands significantly increase on-property spend outside of the portfolio,” Kirk said. “Some hotel brands may see value in having their points be totally liquid and spendable at any point of sale. This is the approach La Quinta has taken, but I suspect most companies will see value in a less liquid approach by enabling points to be spent only within the brand experience. This could include guests using points at an on-property restaurant, spa or gift shop.”
With consumers demanding more flexibility and less friction in their loyalty program experiences, a hotel’s point currency needs to be flexible enough to offer value that represents the member’s current life stage and needs. After all, not everyone wants an extra night’s stay in exchange for their loyalty, or they may have other high priority near-term needs that aren’t travel related.
“So, by enabling points to be used whenever, wherever, and for whatever, you are meeting the consumer where they are and that will have a lasting impact on loyalty,” Kirk said. “A caveat to this is that when a customer redeems points for a room night, you can see a clear path to that experience reinforcing brand loyalty. But, the more liquid your currency, the harder it will be to see that connection. If I spend my hotel loyalty points on gas or groceries, the positive impact on brand loyalty might be significantly reduced.”
A second trend is a rise in coalition programs, which represent the dominant form for loyalty strategies outside the U.S.
“These programs work by allowing consumers to earn and redeem points freely across a network of brands [the coalition],” Kirk said. “Over the last few years, American Express has attempted the first large-scale U.S. coalition program, Plenti, but it has seen little to no success. However, the apparent failure of large-scale coalition loyalty in the U.S. is a positive development for the hotel industry as it removes the temptation to join a coalition where their brand equity is likely to be diluted.”
A 2017 Maritz study found that 50 percent of consumers were not familiar with Plenti and that the majority of its members only redeemed with one or two coalition members, defeating the value proposition of the program model.
The status of the Plenti coalition program is really a sign to the hotel industry to maintain their course in regard to customer loyalty. Kirk feels a coalition loyalty model would likely add little additional upside, and it carries the challenge that the biggest beneficiaries of those programs tend to be high-frequency merchants like gas and grocery brands, not aspirational companies like hotels and airlines.
“While the coalition model might make sense for some smaller or boutique brands looking to share the costs of a loyalty initiative, for larger brands with mature programs, there are already many partnership offerings established in the space that enable hotel program members to convert points to miles or share states with a partner airline, such as Marriott’s partnership with United,” Kirk said.
In 2017, almost every sizeable loyalty program was a victim of attempted fraud, Kirk said, as hackers see them as accessible assets, ripe for exploitation.
“These programs are unlike their large loyalty counterparts in the credit card space who deal in financial fraud on a daily basis, and therefore have stronger account protections in place by default,” Kirk said. “Hotel companies have a large population of members with sizable point balances who have not used strong unique passwords and who are more passive about checking their accounts on a regular basis.”
The result is a potential risk for account takeover and point theft, and replacing those stolen points is not free to the company. It’s no wonder that a Maritz study revealed that 56 percent of consumers were concerned about loyalty program fraud.
That leads to the third trend—a rise in fraud protection.
“Reducing the risk of loyalty accounts being hacked or points being stolen is a significant issue for the hotel industry simply because of the scale of their involvement in the loyalty space,” he said. “U.S. consumers accumulate tens of billions of dollars in point value annually. Hospitality and travel programs claim about a third of all program memberships, so those programs represent significant consumer equity with real dollar value that must be protected from hackers.”
There are also some smaller trends that the hotel industry should be keeping an eye on in 2018.
“One certainly would be focusing on delivering personalized member experiences beyond just the hotel stay,” Kirk said. “They could be tied directly to the trip—an amazing restaurant or tour experience. Or it could be unique, once-in-a-lifetime experience like a members-only concert.”
Others, he shared, is the increased use of mobile devices as the key interaction point between the hotel brand, loyalty program, and the on-property customer experience; and more attention given to the Silver Tsunami, which refers to the increased rate at which Baby Boomers will turn 60 and begin to enter retirement.
“Starting this year, about 10,000 Boomers will cross that threshold every day for the next 20 years. This shift will have a significant impact on the travel needs of that Boomer population, and will likely see them increasing the demand for leisure travel,” Kirk said. “At the same time, it will create an imperative requiring hotel brands to focus on catering to the needs of the even larger Millennial consumer segment.”