How Hotel Brands Can Democratize Loyalty to Win
Beyond the Road Warrior
By Allison Ferguson Senior Strategist, Merkle Inc. | June 2017
As a frequent business traveler, I get clear value from my hotel loyalty program membership. My room is ready, I have check in and out flexibility, and usually free breakfast and wifi. I get points on the room spend (paid by someone else) that allows me to accumulate points for free nights, which I usually use for leisure.
When traveling for a family vacation, however, the impact of my membership is less tangible. When I travel for business, the hotel loyalty program captures my interactions well and rewards me for my loyalty. When I travel for leisure, however, the program often does a poor job of capturing my total spend and delivering a differentiated experience. That's because hotel loyalty programs are designed to build relationships with road warriors rather than vacationers.
Here's the problem: Whether it's frequent business travelers, like me, or infrequent travelers focused on leisure, the business travel formula doesn't work. Business travelers are often checking in late, checking out early, using the hotel only as a place to sleep after their business-sponsored meetings and meals. Leisure guests stay longer, order room service, watch movies on demand, and eat breakfast at the hotel restaurant. In other words, when traveling for business, my hotel stay is often peripheral to my travel experience; but when my family travels for leisure, the hotel stay is usually central to our travel experience.
That disconnect has left an opening for online travel agencies (OTAs) to build loyalty with leisure travelers left in the cold by most hotel loyalty programs. With OTA's enjoying a significant head start in leisure travel loyalty, how can hotel brands hope to recapture those relationships? There's good news: by democratizing hotel loyalty programs to appeal to members beyond the top 20 percent, hotel brands can form profitable and sustainable relationships with loyal leisure travelers – and take back some of that booking share from the OTAs.
The Growth of the Leisure Economy
It's true that hotel brands built their loyalty programs by catering to business travelers. That singular focus may soon need to change. According to the US Travel Association, through October 2016, the market for leisure travel grew for 82 consecutive months. That trend will continue, driven by millennial consumers who, copious research studies have shown, prefer to spend their money on experiences over material goods. Even as the retail industry suffers, the travel industry will benefit from this shift in spend: a recent Mintel study revealed that consumer spending on vacations and dining out will increase by 27 percent by 2019.