If I were to ask you about your best rewards program experience, what would come to mind?
NB: This is an article from Laasie
Conversely, if I were to ask you about your worst rewards program experience, what comes to mind? This is an exceedingly valuable exercise for hoteliers with their sights set on the moving target of guest loyalty in the modern world. Because to define the loyalty paradigm of the future, we must first define what does (and doesn’t) work within our current protocols and platforms.
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Although there is certainly an opportunity – if not an outright demand – for the evolution of legacy loyalty systems, it’s essential to recognize that traditional loyalty is not, in itself, a failed experiment. Loyalty programs can, in fact, work to elicit guest satisfaction, and global travelers are, in fact, capable of exhibiting loyalty. The lapse in guest loyalty behavior we are witnessing today is not a testament to the end of loyalty – it’s simply a call to action for hoteliers to revisit (and perhaps, adjust) their playbook.
A better, more engaging loyalty program doesn’t necessarily require our industry to start from scratch; rather, be open to exploring a new approach to guest loyalty that is not only innovative but can build upon existing loyalty programs and structure. “If it ain’t broke, don’t fix it,” is the classic adage, but, in this case, a new sentiment reveals itself: Identify what is broken, salvage what works, and develop a solution that fills in the gaps.
The Pros and Cons of Traditional Loyalty Programs
Traditional, ‘legacy’ loyalty systems operate on a relatively simple concept: encourage customer action (in this case, a booking decision) by rewarding guests with points which, over time, accumulate to qualify that guest for reward tiers. Much like a ‘frequent flyer’ program, this system encourages repeat booking decisions. The only way guests can qualify for high-value rewards is to continuously book at the same hotel.
In an article published in Forbes earlier this year, author Zsuzsa Kecsmar spoke specifically about this approach, noting the limitations of loyalty programs centered solely around the buying cycle. “But if loyalty programs are built around transaction-based thinking and marketing, they won’t be capable of building real brand loyalty. And that’s an argument I see play out a lot online and in the boardrooms: “Isn’t the loyalty program a discount scheme?” “Does it really have the power to build true loyalty?,” she explained. “So, yes, loyalty programs have the power to create true loyalty, but first, companies need to stop thinking within the confines of the buying cycle.”
In many ways, Kecsmar is correct. Guest behavior and preferences are ever-changing, and loyalty systems must evolve to reflect those changes. However, these traditional loyalty systems have benefitted major hotel chains, especially among boomer travelers. To this effect, in 2019, loyalty programs helped major hotel chains increase repeat business. According to research, over 59.2% of room nights at the major hotel chains were booked by loyalty members, and 62% at Marriott and Hilton (Kalibri Labs).
When we look at younger travelers, however, we see a different story. Surveys published in 2018 found that just 30% of Millennials are satisfied with the loyalty programs they are offered, compared to 56% of baby boomers. In fact, 57% report that they have let their hotel loyalty points disappear, significantly more than any other age group. Why does this matter? Well, research indicates that millennials travel more than any previous age group in history.
Moreover, when we look at independent hotels, we realize another gap in the traditional, points-based strategy. Unfortunately, less than 10% of independents have any form of a loyalty program or guest appreciation program, and repeat business is reportedly only in the range of 10%-15%. We also have to acknowledge that, in the wake of the pandemic, many hotel loyalty programs had to undergo drastic changes, as travel had effectively come to a standstill, and hoteliers could no longer capitalize on the purchase moment. If no one could travel, how could anyone take advantage of traditional, transaction-based rewards models?
So, do these observations mean we scrap traditional loyalty programs altogether, even those which have been well received by select demographics at major hotels? Not necessarily.
A ‘Best of Both Worlds’ Approach
In many cases, major hotel chains will not want to completely abandon the white-labeled, points-based loyalty systems which have long become synonymous with their brand. In this case, a call for continued innovation and creativity does not necessarily render traditional systems obsolete; that is, as long as those hotels are willing to explore additional programs that look to fill in the gaps that traditional loyalty fails to address.
The points-based loyalty systems of the past are, as we know, based on a delayed gratification model, which requires guests to book directly (often at a high frequency) at the same hotel to accumulate enough points to unlock attractive rewards (discounted stays, free upgrades, etc.). This model, as we know, does appeal to some travelers who are accustomed to this format and can utilize those points before they expire. However, next-generation loyalty, centered instead on delayed gratification and personalized rewards, allows hotels to simultaneously take care of and establish a 1-to-1 relationship with younger leisure travelers who exhibit different travel behaviors. With this in mind, we created Laasie – a platform capable of creating (and maintaining) a new kind of loyalty through AI and instant gratification while capturing the guests that traditional loyalty programs neglected.
Looking beyond a singular transaction moment, this new era of loyalty asks hoteliers to offer their guests more personalized, instantly tangible rewards that incentivize guests to partake in a variety of actions (beyond the booking decision). Unlike most traditional programs, guests are granted access to a curated marketplace of thousands of rewards partners offering instantly redeemable, high-value incentives (products, discounts, experiences, etc.) across shopping, dining, and activities to breathe new life into guest loyalty. Finally, guest loyalty can be viewed as a meaningful influence on the guest experience and a key revenue driver rather than a cost to the hotel.
Using a more dynamic loyalty platform, any hotel can build upon their existing loyalty programs to reward customers for their actions in a new way while generating insights from every interaction. With the allure of points-based, delayed gratification offered by traditional programs still intact, hotels can implement Laasie’s platform to simultaneously tap into the power of instant gratification and personalization, ensuring they have a program in place that will appeal to every kind of traveler.
If the goal of a loyalty program is to attract more business and encourage repeat business, shouldn’t hotels cast as wide a net as possible? Does the selection of a loyalty program always have to be reduced to a dogmatic game of ‘this or that,’ legacy or next generation? If you ask me, no. I think the future of hospitality loyalty will be unlocked with a program that combines what worked for travelers in the past with what we know appeals to modern travelers in the present. Finally, hotels can adopt a ‘best of both worlds’ approach, which sees traditional loyalty programs and new-age, instant reward programs working together seamlessly to capture and delight more travelers than ever before.