The Importance of Hotel Loyalty Programs

By Jennifer Nagy President, jlnpr | March 04, 2012

Everyone in the hotel and hospitality industry knows that, more often than not, travelers book a hotel room based on two factors: price and location. Of course, there are travelers that would choose amenities over price any day, or those who are willing to drive a bit further to their destination to save a buck or two. But one factor that many hotels disregard is the importance of their customer loyalty program - also know as the frequent guest program (FGP) - in motivating customers' purchasing decisions.

We are all familiar with the basics of a hotel frequent guest program: customers earn points for staying with a particular property or chain, which are redeemable for anything from discounts, upgrades, to a free stay. While most hotels have loyalty programs, most place very little importance on their loyalty programs as a driving factor for increasing consumer bookings. But the truth is that loyalty programs can be a very important decision-maker, especially for frequent travelers, often hotels' highest-earning customers.

Don't believe me? Let's look at the stats:

In 2010, Epsilon Strategic & Analytic Consulting Group conducted a study of 400 travelers asking about their recent hotel bookings and found that, in addition to price, location, good reviews and recommendations from others, loyalty programs were absolutely a motivating factor in booking. In fact, the study showed that more than eight in ten program loyalty members consider the hotel's loyalty program and rewards before booking their hotel(1).

A more recent study by Market Metrix has proven that hotel loyalty programs now rank fourth in the top deciding factors when booking a hotel. In 2009, 32.7% of customers said a hotel's loyalty program influenced their decision on where to stay and that number has increased by almost 2% in the past two years(2).

What Makes Hotel Loyalty Programs Effective?

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Coming up in February 2019...

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.