Mr. Johnson

Sales & Marketing

Customer Loyalty Trends Dominating the Hotel Industry

By Mark Johnson, President, Loyalty 360 - The Loyalty Marketer’s Association

With the hotel industry recovering, building a base of loyal guests is more important than ever. Just about every hotel has a loyalty program. And when these programs are created and implemented properly, they provide real value, differentiate the customer experience your hotel delivers, and turn your guests into brand advocates.

So, just what goes into an effective loyalty program?

Loylogic, a leading provider of loyalty technology solutions, recently announced the results of the 2010 Frequent Traveler Survey that was conducted to gauge frequent travelers’ opinions towards their current loyalty programs and reward redemption. The results of the survey indicate a shift in satisfaction of rewards currently offered by loyalty programs and show the need for a wider variety of reward options to effectively engage consumers - especially frequent travelers.

Findings such as these are the driving force behind some of the trends we are seeing in hotel industry. Here is a look at a few of these trends.

Driving Guest Loyalty with Corporate Social Responsibility Programs...

According to the 2010 Cone Cause Evolution Study, a benchmark of cause marketing attitudes and behaviors, 41 percent of Americans say they have purchased a product in the past year because it was associated with a social or environmental cause, a two-fold increase since Cone first began measuring in 1993 (20%). But even as their purchasing power grows, consumer desire for socially conscious shopping is growing. A full 83 percent of consumers want more of the products, services and retailers they use to benefit causes,

Looking deeper into the findings, Americans' enthusiasm for cause marketing continues to strongly influence their purchase decisions:

• 88% say it is acceptable for companies to involve a cause or issue in their marketing;
• 85% have a more positive image of a product or company when it supports a cause they care about; and,
• 80% are likely to switch brands, similar in price and quality, to one that supports a cause.

Hotels that show their dedication to social responsibility will leave social footprints that drive guest loyalty. For example, Starwood’s “Make a Green Choice” optional housekeeping program (which launched at North American Westin and Sheraton hotels last fall and is expanding to select W, Le Meridien, Four Points by Sheraton and Aloft properties this year), is rewarding for both guests and the environment. “Make a Green Choice” gives guests the option of not only opting out of towel and linen replacement but also all housekeeping for a day. Guests can choose to participate in the program for one night or up to three nights at a time during their stay. To participate, guests must hang a “Make a Green Choice” card outside their door before 2 a.m. In return, they earn either a $5 food and beverage credit or 500 Starwood frequent stay guest points for each day of their stay, excluding checkout day.

Not only does the program help drive additional business to each hotel’s own restaurants, but by giving participating guests frequent stay points, Starwood is creating an even more loyal group of guests who now have an added incentive to stay at Starwood hotels in the future.

Sheraton Seattle, which pariticpates in the “Make a Green Choice” program was the winner of the American Hotel & Lodging Association’s 2009 Good Earthkeeping Award in the large hotel category. As general manager Matthieu Van Der Peet tells GreenLodgingNews.com, the program has been a big success. “We have received great feedback from individual travelers and meeting planners. It has been very well received in the convention community.” In fact, Van Der Peet points out that there have been times when the Sheraton Seattle has been booked solid and had a 15 percent participation rate.

Driving Guest Loyalty With Games...

Roughly 42.5 million people enter online sweepstakes yearly and millions more participate in SMS and social media contests, according to ComScore. Contests and games are, in fact, the most popular brand tactic used to grow followers and fans in the social media space. Twenty-four percent of the U.S. online audience play branded social games at least once a month with 68.7 million U.S. consumers expected to regularly play branded games of chance by 2012.

A growing number of marketers are realizing that playing games is no longer just for people’s entertainment. Increasingly, marketers are using gamification - or more specifically, the psychology of gamification - to attract, cultivate and retain brand enthusiasts over the coming years.

Some people believe that gamification is just adding badges or points to their website. And yes, while some brands have used check-in programs such as Foursquare on that elementary level, they are missing a valuable opportunity to truly motivate and incent desired behavior - long term. This is because at its core, gaming is all about modifying people’s behavior by tapping into the psychological trigger(s) that prompt us to take action and keep us interested and engaged.

Starwood Hotels is incorporating gamification into their loyalty program. According to their website, members of the Starwood Preferred Guest (SPG) program “can collect more than just badges on Foursquare” when they link their SPG and Foursquare accounts - they get cool perks like 250 bonus points per check-in and chances to unlock a hidden Free Resort Night Award.

It’s also important to note that the benefits to Starwood are huge. When SPG members opt in to the Foursquare program, Starwood is able to access a myriad of information about their customers’ travel activities - such as what cities they go to most often, the hotels they choose, etc. This is just the type of customer-centric information that will help Starwood enhance its loyalty marketing efforts.

Hilton's Embassy Suites is also incorporating game techniques into its customer loyalty campaign. Created with a marketing company called Maritz, the campaign targeted 50,000 of Embassy Suites' most loyal guests, and solicited their participation with 10 different approaches, such as direct mail, e-mail, and asking customers to play a game.

As Christian Kuhn, director of brand marketing for Embassy Suites, tells Bloomberg BusinessWeek, the game option proved most effective. “The 5,000 people targeted by the game were most likely to open e-mails and later spent the most money. That group accounted for about $200,000 of the additional $1 million in revenue generated by the campaign.”

“The use of gamification to turn loyalty programs into enjoyable and social online experiences is seemingly the perfect marriage of technology and motivational psychology, leveraging people’s fundamental needs for achievement, reward, status, competition, and self-expression, says Barry Kirk, Vice President at Maritz in a recent article in Incentive Magazine.

Driving Loyalty with Experiential Rewards...

Most hotel loyalty programs are centered around earning points that can be redeemed for a free night. Increasingly, customers view these types of points-based loyalty points as a commodity that isn't worth redeeming. According to the 2010 Colloquy Census, last year $48 billion of loyalty rewards were earned in the U.S. and $16 billion went unused.

Behavioral psychologists have long argued that just 30% of human decisions and behaviors are actually driven by rational considerations. This means that more than 70% of consumer loyalty and spending decisions are based on emotional factors. This is why customers will embrace loyalty programs that reward them in non-traditional, experiential ways. Not only do experiences appeal to customers on an emotional level, but attaining something (a reward) that they wouldn’t otherwise get without the assistance of your brand helps forge a stronger, more emotional connection to the brand. And, this emotional connection is the holy grail of customer loyalty.

Fairmont Hotels & Resorts is infusing personalized experiential rewards into its loyalty program by offering for its Fairmont President's Club members new offers, experiences and benefits designed around specific travel-related interests.

"2011 marks the 10th anniversary of Fairmont President's Club, and over the last decade we've listened to our customers and continually updated and tailored the program to meet their needs," said Brian Richardson, Fairmont's Vice President of Brand Marketing & Communications, in a company press release. "Increasingly, they've told us that their interests are important to them and that incorporating those interests into their travel experiences would result in richer and more rewarding stays. We're excited to be broadening our marketing scope in this area and to bringing our most frequent guests a bespoke stay experience that is both memorable and distinctive."

Members of the Fairmont President's Club will now have the option of updating their member profiles to reflect a number of unique, passion-based themes - Food & Drink, Arts & Entertainment, Sports & Adventure, Spa & Fitness, and Leadership & Philanthropy - with custom offers and experiences being marketed to each specific group. Each group will receive special access to intimate events like concerts and exclusive wine tastings or be invited to book customized travel offers that feature noted speakers or sports personalities, for instance. Fairmont has also added a philanthropy element that enables members to count volunteer work towards a share of their membership status or have a donation in their name made to one of Fairmont's charitable partners.

Fairmont also reports that platinum level members, guests who stay 10 or more times or accumulate 30 room nights in a calendar year, will also be afforded additional benefits as part of the hotel’s new passion-based focus. These benefits range from a complimentary round of golf or spa treatment to a special seasonal food offering from a Fairmont chef.

There’s no doubt that has the hospitality industry continues to rebound, hotels need to focus on building customer loyalty to gain a competitive advantage and increase market share. Taking a look at these trends will help hotels create and implement programs that provide real value, elevate the customer experience, and turn your guests into brand advocates.

Mark Johnson is President and CEO of Loyalty 360 - The Loyalty Marketer’s Association. Loyalty 360 is the only organization that addresses the full spectrum of both customer and employee loyalty issues. An unbiased, market driven clearinghouse and think-tank for loyalty and engagement opportunities, insights, and responses, Loyalty 360 is the source business leaders trust for industry metrics, market driven research, case studies, and networking opportunities. A sought-after speaker and writer, Mr. Johnson is frequently called upon by media worldwide to share his expert insights into customer and employee loyalty issues. Mr. Johnson can be contacted at 513-290-5147 or markjohnson@loyalty360.org Extended Bio...

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