Is Hotel Guest Loyalty Still Alive?
By Rocco Bova General Manager, Chable' Resort & SPA | June 02, 2019
Let's start a little back in time. The very first loyalty programs (Hilton Honors, Marriott Rewards, IHG Rewards Club, etc) launched in early 80's following Airlines mile-for-mile system which would rewards users for using their services.
It was a jackpot for large corporations, using hotels or airlines for their sales teams traveling around the world and saving millions of dollars each years.
It was convenient, immediate and most of all free to join. These programs have worked for many year collecting data and, most importantly, spending behaviour of their customers. Two of the most important information you need about your consumers.
In the early 2000's, as competition increased, the main hotel companies had to begin reviewing their programs and become more competitive too, increasing the reward system, including joining forces with airlines, providing better values and gain a larger share of the market.
Then the financial crisis of 2008 arrived and the decrease in travel impacted an entire industry where loyalty did not make any difference whatsoever but travellers were more focused on convenience in price and less in the brand.
Then, as technology became more and more powerful, data breach and security were the issue that worried both users and companies that run those programs. Basically every (large) hotel company was hacked into their systems and millions of customer data were stolen. As we all know how vital is to have data in today's business landscape, hotel companies had to (again) invest more millions to upgrade their servers, employ consultants to review their security systems and pledge to their users that data were now safer.
Loyalty programs have been renamed (see Marriott Bonvoy) or reviewed (Accor and Millennium), and more brands now are consolidating under few umbrellas with a handful or so of key players dominating the hospitality marketplace and consequently, joining the respective brand loyalty program, and this trend is not going to stop for sometimes at least.
Even consortia (SLH, LHW and Preferred) have launched sometime back their own loyalty program resulting in an even larger competitive landscape, particularly in the 5 star and upper luxury segment.
Simultaneously, the continuous birth of new brands is flooding the market and this, in my opinion, is confusing the loyalty world if not even diluting the sense of belonging and following of a certain program. But let's look at this new, more current trend in details.
In one previous article, I described how many new brands were created (in average one every month since the past 10 years), and its impact in the hospitality scene. This phenomenon it may slow down but will not stop, as younger travellers are no longer brand addicted and are lured more towards innovative experiences and products (see explosion of mobile technology with the launch of new models and new features each 6 months or less).
Personally, I am not entirely sure this overload of brands/products/services in continuous evolution and change are making it easy to decide to the new and upcoming market of younger and more curious travellers.
Yes, I agree that there is still an ''older'' market which probably will continue to take advantage of these programs, like the frequent travellers, business people, and those addicted to rewards type programs (yes there are those types too), as well as one small elite of VIPs who likes to be recognized when traveling and have access to higher level of privileges when using that particular hotel (see Platinum or Centurion Amex users for example).
The latter is proved by the enormous increase of ''concierge style'' personalized services like the modern butler and the concierge service in hotels, or the re-birth of Travel Agent, but now one with an in-depth knowledge of the destinations and experiences available around the world and not just a booker of air tickets and hotels.
In a recent interview Arne Sorenson, President and CEO of Marriott International, answered some questions about Marriott's new Bonvoy program. He mentioned that ''the results of early measurements are encouraging, but too soon to talk about'' and that the program ''it's going great''. He also added that ''more than half of the business (at Marriott) is coming from loyalty members'' which is something that has continued over time as I remember from other readings, where the larger hotel groups are indeed focusing on their business base and repetitive business.
However, generational changes, creation of new brands and need for novelty more than loyalty, in my opinion will affect the way we travel, visit same places and experience the same product over and over.
Take for example how much is affecting some tourist destinations being focused on one or two main markets. This double-edged sword is definitely a reality for places like the Caribbean Region where for many (maybe too many) years have focused mainly on north America as their main feeders and suddenly, when this particular market is slowing their travel pattern or perhaps, discovering new destination, panic comes in. I personally witnessed this in Mauritius some 5 years back, when the dependence on the European market was so evident, and when suddenly numbers from this ''old and loyal'' market began to slow down, every hotel had to (and continue to do so now) evolve in terms of offerings, service and brand value, as well as the country had to open to new markets in order not to free fall into crisis.
In other words, even hotels, or destinations in this case, should not be too loyal to just one market as this can bring some negative effect to a continuous and sustainable business.
We also know that another ''negative'' impact of loyalty is revenue, ADR and profit erosion. Repeat business expects more in terms of value and less in terms of cost. This is a fact and hotel companies have to be aware of how much to take in when it comes to ''loyal'' customers in order to maintain the bottom line and align with investors' and owners' expectations on their ROI.
Various reports (and also personal experience), including a 2018 report by McKinsey, find that approximately 69% of customers are more likely to be loyal to a company that personalizes their online and offline customer experience. This claim is a prof that loyalty is worth doing it, but can someone explain to me how to ''personalize'' the experience of millions of users coming from different parts of the world, with different languages, culture and possibly expectations?
While I understand that technology, AI and other modern tools, can assist in this enhanced personal (online) experience, nothing will ever replace a human touch or a facial expression like a genuine smile, particularly in the hospitality business.
In my opinion, what we should do instead, is not to create brand loyalty but brand ambassadorship. When I see my guests coming with a shake of hands and leaving with a hug to one of our team members, then I know we have created an ambassador, and even if that person will never return, I know they will be my ambassador and spread the words out to their friends and family.
The focus should be in acquiring new ambassadors who will then create new markets and so on and then focus on such personalized experience that will convert the user in the human media we all need to diffuse the word out, otherwise called word of mouth, to me still the most powerful media, which with the help of the more common social media get the message amplified up to millions of times.
Perhaps a study that should be done by the larger hotel companies would be to understand and measure if is better to create new brands each year to keep their users engaged, or maybe invest the same (if not less) money to train and/or reward its staff members in order to provide a more personalized experience while staying at their hotels.
My personal opinion is to create ambassadors for the brand not loyal users. As new experiences are now more accessible and available, people wish to discover something new all the time, and sometimes only for the sake of ''been there, done that'', being able to share new experiences with one own network, seem to be a real trend.
I personally see only ''personal concierge'' type of reward to continue as mean of loyalty to use the product or service. Otherwise being one drop in the sea of sameness will not make much difference, being that all loyalty programs offer more or less similar privileges.
Loyalty is gained through the building of trust between the provider (in our case the hotel) and the end user (the guests), I am personally not sure that a simple reward, even if attractive, can generate more loyalty to the brand, other than for convenience.
True loyalty is when a guest become your very own brand ambassador, whether they continue using your product or services or not. That is, when someone will be very likely to recommend your brand and will talk highly of it.
Observing the newer generations' behaviour towards brand loyalty, I guess this will translate to the hospitality industry too. Only time will tell what is going to happen, and my recommendations are to read this article again in few years from now.
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