Ms. Ferguson

Guest Service / Customer Experience Mgmt

How Hotel Brands Can Democratize Loyalty to Win

Beyond the Road Warrior

By Allison Ferguson, Senior Strategist, Merkle Inc.

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.

And it isn't just millennials driving this shift; baby boomers entering their golden years also value experiences over material goods. A recent Synchrony Financial survey revealed that 40 percent of mass affluent boomers plan to spend more on travel in 2018, while AARP estimates that boomers spend more than $120 billion annually on leisure travel.

That's a lot of leisure - and hotel loyalty programs largely miss out on building relationships with these travelers. This gap has led OTAs to fill the need at the expense of direct bookings. OTAs were built on leisure travel, and their disintermediation of brand choice has led Phocuswright to predict that OTA market share will reach 41 percent of all travel bookings by 2020.

OTA loyalty programs are designed to cement leisure travelers' loyalty by exploiting one key difference from hotel programs: you don't need to travel as frequently to earn rewards. Orbitz Rewards, for example, offers cash back that travelers can redeem instantly to discount their hotel stays. Expedia Plus allows members to earn points for every part of their vacation itinerary but air travel, and offers low-points redemptions that spark immediate engagement.

As if OTA pressure wasn't enough, hotel brands also face pressure from Airbnb, which is now going after corporate travel bookers. Whether they are successful remains to be seen, but there is an opening: the phenomenon of "bleisure" travel, in which business travelers tack leisure days onto their business trips. A Carlson Wagonlit Travel study revealed that 20 percent of business travelers take "bleisure" trips - and that Airbnb promises to help you "experience a city like a local" may hold great appeal to younger business travelers.

The Democratization of Loyalty

With hotel brands facing pressure on all fronts, how can they regain the loyalty of leisure travelers while maintaining the loyalty of road warriors? The answer lies in retooling hotel loyalty programs to build relationships with travelers outside of the top 20 percent- call it the democratization of loyalty. By reimagining these programs as broad-based appeals to both business and leisure travelers, hotel brands can build relationships more loyal to the brand than to channel or price.

Here are a few key steps hotel brands can take toward implementing this vision:

Provide more ways to use points: Most large hotel programs are sitting on vast reservoirs of unredeemed points. Marriott, for example, recently reported $1.9 billion in outstanding points liability. That staggering number is indicative of hotel programs lacking a variety of redemption options. Indeed, a recent study from my company, 500friends, titled "The Loyalty Reset," revealed that perceived lack of redemption value was the top reason loyalty program members abandon a program (see chart):

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To burn off this liability, hotels must create innovative ways for infrequent travelers to redeem. Hilton, for example, recently instituted changes to itss Honors program to democratize program value: A "pay with points" option allows direct bookers to pay for their rooms by combining cash and points; a "points sharing" option allows family members and friends to pool points for travel redemptions; and a partnership with Amazon allows members to redeem Honors points for purchases on

These additional redemption options will broaden the appeal of Honors beyond business travelers, encourage engagement with leisure travelers who will now find real value in their Honors accounts, and help Hilton burn off a chunk of their own liability - a win for both Hilton and their Honors members. More hotel brands should follow suit.

Make hotels more accessible: By leveraging loyalty programs to increase the availability and appeal of leisure stays, hotel brands can make the program more valuable to both of their key constituencies: business travelers who redeem their points for leisure stays, and infrequent leisure travelers looking for memorable experiences. Here are two key ways to make the leisure travel experience more accessible:

  • Flatten Redemption Rates - One certain way to increase the value of your program to leisure travelers is to make more room nights available at more leisure destinations. Wyndham, for example, offers a flat redemption rate of 15,000 points for all its rooms - including rooms at its most sought-after properties. Wyndham also allows members to redeem as few as 3,000 points for points-plus-cash reward bookings, which makes the lower points balances of leisure travelers more valuable.

  • Stop Nickel-and-Diming Members - By democratizing soft benefits, hotel brands can provide memorable experiences to leisure and "bleisure" travelers who will in turn come back for more. Leisure stays are typically longer than business stays; hotels can take advantage of the longer stay by, say, offering free wifi at base level to members who stay three nights or more - and those members will respond by spending more at your restaurants and spa. In another example, Kimpton Hotels provides a $30 spa credit at base-level program membership - a benefit with appeal to both leisure and business travelers, as well as a way for Kimpton to capture the incremental revenue from redeemers who spend far more than the $30 provided by the voucher.

By providing more access to leisure destinations, and then making those stays more memorable by democratizing soft benefits, hotel brands can capture the loyalty of leisure travelers and steal booking share back from the OTAs.

Mobilize the Data

At the November 2016 Phocuswright conference, Chip Conley, Strategic Advisor for Hospitality and Leadership for Airbnb, said that for hotels, "data science would be the new revenue management." What Conley is saying is that to stay competitive in hospitality, hotel brands will need to develop data analytics capabilities that rival or surpass the efforts they invested to build revenue management capabilities over the past few decades.

To build relationships with leisure as well as business travelers, hotel brands will need to develop data sophistication along two fronts. First, they'll need to overcome the ownership or technology hurdles that prevent them from capturing a traveler's total on-property spend, including dining, spa, and other amenities. And second, they'll need to leverage the resulting data, often in real time, to provide personalized, relevant, and differentiating experiences at every stage of the travel cycle, from consideration and booking, through the stay, and on to the post-travel experience.

One glimpse of the future of data science as a differentiator may be found in the Marriott Mobile app. Marriott Mobile, should it fulfil the promises set out by Marriott, will combine sophisticated data use with a personalized concierge-like mobile experience for Rewards members. Guests can use the app to chat directly with hotel staff before, during and after their stays for special requests such as adjoining rooms, cots, extra pillows and the like; an upcoming feature called mPlaces will use data to deliver personalized offers based on preferences, past behaviors, and geo-locating beacon technology now installed at over 500 Marriott properties.

For consumers looking for memorable, emotional experiences from their travel spend, Hotel brands have an opportunity to leverage reward programs, technology platforms, and customer data to democratize loyalty programs and make them work for everyone, from the diehard road warrior to the family vacationer. As one of those road warriors, as well as a dedicated wife and mother, I'm looking forward to enjoying a valuable relationship with my favorite hotel brand - one that makes me a fan for life.

Allison Ferguson is a Senior Strategist and thought leader with 500friends. There, she works with clients on loyalty program design and organizational transformation across industry, business model and level of market maturity. Ms. has 20 years of loyalty experience including 10 years of brand loyalty experience with IHG and Leading Hotels of the World, and 10 in loyalty consulting, most recently with Accenture. She is deeply passionate about facilitating and shaping the best ideas from her client organizations in order to create a genuine value exchange with customers. Ms. Ferguson considers herself a value creator and problem solver and takes great pride in the many brands she has served. Ms. Ferguson can be contacted at 443-542-4200 or Please visit for more information. Extended Bio... retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by

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