Loyalty programs had been a somewhat neglected weapon in the marketing arsenals of both hotels and online travel agencies until recent months.
Major hotel chains have been adjusting their loyalty strategies to support the campaigns. Last Friday CNBC interviewed Marriott CEO Arne Sorenson, and he said, “I think the most important thing for us to succeed at is the loyalty program.”
Sorenson referenced several upcoming changes. These moves mirror efforts by other companies to morph loyalty programs to be more than just places for points, free nights, and ego-boosting status tiers. Hotels are retooling their loyalty programs to drive more bookings via personalized pricing and perks.
This effort comes in tandem with ramped up marketing campaigns to persuade travelers to book directly through their websites instead of through third-parties, such as with Hilton’s “Stop Clicking Around” campaign (which has annoyed some OTA executives).
Analysts at investment bank Stifel recently wrote in a report: “We view this move as possibly the beginning of a series of global campaigns by major hotel chains to incentivise customer loyalty and control distribution costs.”
At the same time, major online travel companies are dusting off their loyalty programs and retooling them to encourage more repeat business.
A case in point: Expedia Inc officials say that they been studying the loyalty program of its recent acquisition Orbitz and the one at Hotels.com. Their aim is to soon tweak or relaunch the loyalty programs for the organization’s many brands to drive more repeat business.
What should hoteliers make of all these shifts?
We spoke with Patrick Bosworth, co-founder and chief executive of the profit optimization startupDuetto, for his analysis.
“The recent contract negotiations between large lodging companies and giant intermediaries have been interesting.
“Both Hilton and Marriott have announced that they have new contracts with Expedia. Those contracts include certain concessions that were made by Expedia. For instance, Expedia is no longer guaranteed last-room availability. There is also a reduction in margins being paid to Expedia for those two hotel companies.
“Most important, in some ways, the new contracts finally made explicit what was implicit before, which is it is no longer deemed to be a violation of the rate-parity clause of their contract with Expedia to offer better pricing to the members of a hotel chain’s loyalty program.
“That means 2016 could be a big year for large lodging companies to begin to tailor rates and offers for their most loyal customers.
“I have been working with online travel agencies for many years. I have negotiated deals with them in the past when working with hotel companies, and it was always the case that if you had a fenced offer … a fenced group of hotel customers, you could offer them a better price than you were offering Expedia.
“The major chains never did that. They never had the technological capability to do it and frankly they never had the insight that that was where the world was going. They always could have done so, they had the market power and the money, but what you see in the last round of negotiations is that they made this wish explicit.
“And they discovered that Expedia wouldn’t punish them! That Expedia would not file a lawsuit against them for violating that parity agreement by offering members of their loyalty program a better deal…. This happened even though Expedia has been executing its business plans exceptionally well and, of course, made a number of key acquisitions last year.
“Now, what I found to be fascinating about what has happened in the aftermath of that is those negotiations happened in Q4. They were announced on a staggered basis. I think Hilton came out first and then Marriott announced a similar deal to Hilton’s.
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