Hotel Loyalty Programs Offered by Chains and Independents are Growing in Popularity

By Jonathan Barsky Partner, Market Metrix | October 23, 2011

Airline frequent-flyer programs are becoming less attractive to customers. It's hard to get a flight for free. With hotels, you can redeem the points much more easily. Hotel loyalty programs are getting easier to use and more generous, often with no blackout dates. Consumers are signing up to earn free hotel rooms, upgrades and other perks.

With improved benefits and guest-friendly rules, hotel loyalty programs are increasingly becoming one of the primary reasons for selecting a particular hotel. Loyalty programs now rank fourth among reasons why consumers select a hotel (the top three reasons are "Location", "Price", and "Past Experience"). Across the industry loyalty program membership is on the rise and the percentage of "Elite" members in these hotel programs rose sharply in 2011 (up 5%). This is good news for hotels because members of these programs are more likely to recommend the hotel, spend more per room, and are less sensitive to price increases compared to non-member guests.

Measuring loyalty program effectiveness

One measure Market Metrix uses to evaluate the success of a brand's loyalty program is called "Loyalty Program Effectiveness". This measure identifies the percentage of guests who say that their loyalty program membership was a primary reason for choosing that hotel.

In 2009, 32.7% of guests said that the loyalty program was a primary reason in deciding where to stay. That number has grown to 34.5% in the first half of 2011. Among the major chains, the most effective programs in the hotel industry are Hilton HHonors, Starwood Preferred Guest, and Marriott Rewards. Starwood's Preferred Guest has seen the biggest improvement (+5.9% to 37.7%) in the past three years. Industry wide, approximately one of every three members of a hotel loyalty program said their membership was "Very Important" in hotel selection.

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Social Media: Getting Personal

There Social media platforms have revolutionized the hotel industry. Popular sites such as Facebook, Twitter, Pinterest, Instagram, Snapchat, YouTube and Tumblr now account for 2.3 billion active users, and this phenomenon has forever transformed how businesses interact with consumers. Given that social media allows for two-way communication between businesses and consumers, the emphasis of any marketing strategy must be to positively and personally engage the customer, and there are innumerable ways to accomplish that goal. One popular strategy is to encourage hotel guests to create their own personal content - typically videos and photos -which can be shared via their personal social media networks, reaching a sizeable audience. In addition, geo-locational tags and brand hashtags can be embedded in such posts which allow them to be found via metadata searches, substantially enlarging their scope. Influencer marketing is another prevalent social media strategy. Some hotels are paying popular social media stars and bloggers to endorse their brand on social media platforms. These kinds of endorsements generally elicit a strong response because the influencers are perceived as being trustworthy by their followers, and because an influencer's followers are likely to share similar psychographic and demographic traits. Travel review sites have also become vitally important in reputation management. Travelers consistently use social media to express pleasure or frustration about their guest experiences, so it is essential that every review be attended to personally. Assuming the responsibility to address and correct customer service concerns quickly is a way to mitigate complaints and to build brand loyalty. Plus, whether reviews are favorable or unfavorable, they are a vital source of information to managers about a hotel's operational performance.  The February Hotel Business Review will document what some hotels are doing to effectively incorporate social media strategies into their businesses.