How Independent Hotels Can Use Loyalty Programs to Appeal to More Customers
By Bill Caswell Principal, Hospitality Practice Leader, North Highland | January 05, 2020
Across industries, loyalty programs are a virtual battlefield where the fight for customers is happening. From airlines to retail chains, credit cards and hotels, companies are competing aggressively for business by offering loyal customers better perks than rivals.
Within the hotel industry, loyalty programs are table stakes. They also happen to be highly effective – especially for big brands with national or international footprints. According to Kalibri Labs, a hotel analytics company, nearly half of the business at U.S. branded hotels comes from loyalty members.
Loyalty programs are valuable for many reasons, including because they drive direct bookings and increase per room revenue. Business travelers are the most valued targets because they book frequently and produce more ancillary revenues, so it's important for hotels to provide a compelling loyalty value proposition to this customer segment. This is especially true in an uncertain economic environment, when business travelers can soften the impact of depressed consumer spending if there is a downturn.
The ascendance of loyalty programs represents a unique threat to independent hotels, however, especially those that aren't located in major cities, coastal towns or other tourist destinations where filling rooms is less problematic. The challenge is redemption. Large hotel chains allow travelers to earn and redeem points across their various brands, which could include thousands of properties globally. This is an enticing benefit for people who want flexibility when it comes time to spend their rewards.
The big hotel brands have made several recent missteps, however, which has diminished the value of their loyalty offerings. They continue to alter the rules and redemption process, confusing consumers and frustrating frequent travelers. Specialized perks have been watered down, and many benefits are now also offered to certain credit card consumers or customers of a partner company. As a result, somebody who rarely stays at a particular hotel might enjoy the same benefits as someone spending dozens of nights with the brand. This imbalance doesn't go unnoticed by business travelers.
Independent Hotels Should Play to their Strengths
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