THE CLARUS Blog

Why Travel And Hospitality Brands Need To Fly Away From Traditional Loyalty Programs

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Guest booking behavior has been changing dramatically, yet loyalty programs in the travel and hospitality industry have remained the same.

The internet, and more specifically search engines, have evolved over the years and travelers now have more information available to them than ever before.

However, most brands in the hotel and travel industry are still relying on points-based systems to attract and retain customers which are becoming less and less effective.

These free loyalty programs allow any consumer to participate without any cost to them, but since the benefits are “one size fits all”, there isn’t any room for customization and these programs are not tailored to individual consumers.

Historically, companies have tried to win over and keep customers with these traditional loyalty models of transaction first, benefits later, but that is proving to be unsuccessful today.

Travelers Have All The Options

Today, travelers have all the information they could ever need at their fingertips. It’s easy for them to instantly compare what each brand has to offer.

With so many websites to crawl through, consumers are no longer restricted by where they purchase an item, who they get their content from, or what site they use to book travel.

That means that travelers are now constantly evaluating your brand against your competitors and as they are making their selection, they often find that many brands in the travel sector offer similar perks and rewards.

Mark Hoplamazian, Hyatt CEO, said in an interview, “Hyatt has recognized that if you conceive of loyalty through the lens of a transactional interaction, then you’re destined to a commoditized future.”

The question that brands need to ask themselves is, “How can we attract and retain our best customers in an age of increased competition and decreased loyalty and not be seen as a simple commodity?”

Give Them A Premium Experience

The points systems of the past have no emotional connection to a brand.

As we’ve seen in retail, transactional, discount-based programs simply train customers to wait for discounts. This doesn’t create any true sense of loyalty.

A successful loyalty program for today and the future needs to give immediate value and and become conveniently integrated into the daily lives of your customers.

That is exactly what premium loyalty programs do.

Within a premium loyalty program, members pay a fee upfront in exchange for benefits they can use right away. It encourages them to remain loyal since they’ve made a monetary commitment.

The challenge is ensuring that your consumers get enough value out of the program to keep renewing.

Many major retailers are doing it right.

Amazon Prime, Gamestop PowerUp Rewards, and the Restoration Hardware RH Members Program are some examples of premium loyalty programs where members pay a recurring fee in exchange for great rewards and benefits.

In return, these customers are extremely valuable for these retailers. Prime members spend almost five times as much as non-members and GameStop uses the data collected from their members to make important business decisions.

Simply put, the quality of the audience is much higher because people that are willing to pay for a program that adds a lot of value to their lives are much more committed to the brand and therefore engage much more regularly.

But Will Travelers Pay For Membership?

Yes.

This is especially true of millennials who are now influencers in the travel sector. They book not only for themselves, but also influence their friends and families on their bookings.

A survey by LoyaltyOne found that 75% of millennials ages 18-24 and 77% ages 25-34 say they’d consider joining a fee-based rewards program if their favorite merchant offered one. 79% of 18-24-year-olds and 76% of 25-34-year-olds said relevant rewards are worth paying for.

61% of 18-24-year-olds and 54%  of 25-34-year-olds thought rewards in fee-based programs are better than rewards in free programs.

The writing is on the walls. If the program adds enough value, consumers are willing to pay for it.

It’s Boarding Time For The Travel & Hospitality Industry

The loyalty programs of the past aren’t enough to attract and retain the travelers of today.

With the retail sector as proof, it’s clear that we are seeing a significant shift in what consumers want, and how important premium loyalty programs are for the future of customer facing industries.

The brands that are ready to evolve with their customers in this new loyalty revolution will be the ones that will reap the rewards that come with happier and more engaged customers.

Don’t get stuck at the gate!

Get in touch with us to see what we’ve learned from retail and how your brand can implement a premium loyalty program in the travel and hospitality industry.

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