4 Trends Shaping Next-Gen Loyalty Programs
Loyalty programs have come a long way since Holiday Inn and Marriott launched the first hotel programs back in 1983. Across all industries, it’s estimated that there are more than three billion loyalty program memberships in the U.S. alone — although the majority of folks don’t actively participate in their memberships.
These programs have grown to become an expected perk of many travelers, and yet many in the industry see an uncertain future when it comes to loyalty. A recent survey found that just 14% of millennials in the U.S. belong to a hotel loyalty program. As millennials become more prevalent in travel, hotels are scrambling to find new ways to build relationships with this all-important demographic.
In this piece, Aron Ezra, CEO of OfferCraft, breaks down four trends shaping hospitality loyalty programs over the next decade.
TREND #1: PREDICTION & PERSONALIZATION
The hospitality industry has been talking for years about moving from broad tier-based systems to experiences that are tailored to the individual. In this new paradigm, you receive a reward not because you’re a Gold member, but because you’re YOU. One loyalty club member might want ultra-high speed Internet included with the room, while another person might want a reservation at the best sushi restaurant in town, and another might want Starbucks coffee in the room. Creating hyper-customized loyalty experiences isn’t easy, but it is possible, and more programs will strive to achieve this level of personalization in the near future.
What comes after personalized analytics? Predictive analytics.
Rather than only looking at what a guest has done in the past and assuming he or she will want to replicate that past behavior, hotels over the next decade will become better and better at anticipating what each individual guest is likely to want. That anticipation of desires would be based not only on past stay behavior but cross-pollinated with other data streams ranging from social media, to purchases at related companies, to tracked location activity via your phone, and more.
Companies across many industries are becoming better and better at leveraging diverse data streams to predict customer preferences. These predictive analytic techniques promise to help the hospitality industry move toward greater sophistication and personalization. The loyalty program of the future won’t just ask travelers what they want, it will divine unanticipated and even unarticulated needs.
TREND #2: PROGRAMS THAT REFLECT THE SPIRIT OF THE BRAND ITSELF
Given all the competition out there, expect loyalty programs to transition from simple cookie-cutter experiences (earn X points for Y reward) to more creative experiences that better reflect the spirit of the brand.
Consider the example of a high-end resort that positions itself as a place for fun and possibility. People go there to be in the mix, entertained and pampered, and maybe catch a glimpse of a celebrity. But its loyalty program was boring. Participation rates were low. They chalked it up to being a destination property.
This resort teamed with OfferCraft to give members of the loyalty program the chance to play games online and at check-in to win surprise rewards like free hotel stays, tickets to swanky events, and discounts at the restaurant. The result: participation rates in the loyalty program almost doubled and profitability was increased.
TREND #3: LOYALTY THAT IS EASIER TO USE
There are different philosophies when it comes to reward redemption. Some loyalty programs are like hotels.com. Their program couldn’t be more straightforward, as they say on their website: “Collect 10 nights, get 1 free.” They want people using the earned rewards.
Compare that to the complicated rules and arcane redemption policies of so many loyalty programs: blackout dates, expiring rewards, continually degraded value of the points, etc. These businesses often pay lip service to wanting to encourage redemptions, but in practice they want to discourage them.
Annoying customers in an age of virtually unlimited choice is shortsighted at best. According to Rosetta Consulting, consumers that feel engaged buy 90% more frequently, spend 60% more per transaction, and are five times more likely to indicate it is the only brand they would purchase in the future.
Collinson Latitude reveals that 78% of consumers want the ability to redeem their rewards more easily. Over the coming decade, annoying redemption processes won’t fly. People will increasingly abandon programs that are a hassle.
TREND #4: NEXT GENERATION OF REWARDS
Rewards themselves will become far more sophisticated and effective. Today, most rewards are static; you get a reward for, say, a free night that expires next year.
"OfferCraft is transforming old-fashioned rewards into smarter, dynamic rewards," said Justin Shank, Digital Marketing Manager at Swinomish Casino Lodge, which includes a 98-room luxury lodge as well as an event center and casino. "Their rewards are actually tiny software programs that can continually alter themselves even after being distributed to become ever-more appealing to our customer."
Imagine rewards that, if they go unused, can evolve into something else the consumer is more likely to find appealing. Imagine a guest earning a reward for something she doesn’t like, but then having the chance to trade it for something else she prefers. Imagine allowing guests to combine multiple little rewards into one far bigger reward. Imagine a guest who can’t use a reward reassigning it to a friend with the touch of button. Imagine tracking all these interactions to better understand patron preferences in real-time.
It’s the next step in the evolution of rewards, and it will change the hotel loyalty landscape dramatically.
These programs have grown to become an expected perk of many travelers, and yet many in the industry see an uncertain future when it comes to loyalty. A recent survey found that just 14% of millennials in the U.S. belong to a hotel loyalty program. As millennials become more prevalent in travel, hotels are scrambling to find new ways to build relationships with this all-important demographic.
In this piece, Aron Ezra, CEO of OfferCraft, breaks down four trends shaping hospitality loyalty programs over the next decade.
TREND #1: PREDICTION & PERSONALIZATION
The hospitality industry has been talking for years about moving from broad tier-based systems to experiences that are tailored to the individual. In this new paradigm, you receive a reward not because you’re a Gold member, but because you’re YOU. One loyalty club member might want ultra-high speed Internet included with the room, while another person might want a reservation at the best sushi restaurant in town, and another might want Starbucks coffee in the room. Creating hyper-customized loyalty experiences isn’t easy, but it is possible, and more programs will strive to achieve this level of personalization in the near future.
What comes after personalized analytics? Predictive analytics.
Rather than only looking at what a guest has done in the past and assuming he or she will want to replicate that past behavior, hotels over the next decade will become better and better at anticipating what each individual guest is likely to want. That anticipation of desires would be based not only on past stay behavior but cross-pollinated with other data streams ranging from social media, to purchases at related companies, to tracked location activity via your phone, and more.
Companies across many industries are becoming better and better at leveraging diverse data streams to predict customer preferences. These predictive analytic techniques promise to help the hospitality industry move toward greater sophistication and personalization. The loyalty program of the future won’t just ask travelers what they want, it will divine unanticipated and even unarticulated needs.
TREND #2: PROGRAMS THAT REFLECT THE SPIRIT OF THE BRAND ITSELF
Given all the competition out there, expect loyalty programs to transition from simple cookie-cutter experiences (earn X points for Y reward) to more creative experiences that better reflect the spirit of the brand.
Consider the example of a high-end resort that positions itself as a place for fun and possibility. People go there to be in the mix, entertained and pampered, and maybe catch a glimpse of a celebrity. But its loyalty program was boring. Participation rates were low. They chalked it up to being a destination property.
This resort teamed with OfferCraft to give members of the loyalty program the chance to play games online and at check-in to win surprise rewards like free hotel stays, tickets to swanky events, and discounts at the restaurant. The result: participation rates in the loyalty program almost doubled and profitability was increased.
TREND #3: LOYALTY THAT IS EASIER TO USE
There are different philosophies when it comes to reward redemption. Some loyalty programs are like hotels.com. Their program couldn’t be more straightforward, as they say on their website: “Collect 10 nights, get 1 free.” They want people using the earned rewards.
Compare that to the complicated rules and arcane redemption policies of so many loyalty programs: blackout dates, expiring rewards, continually degraded value of the points, etc. These businesses often pay lip service to wanting to encourage redemptions, but in practice they want to discourage them.
Annoying customers in an age of virtually unlimited choice is shortsighted at best. According to Rosetta Consulting, consumers that feel engaged buy 90% more frequently, spend 60% more per transaction, and are five times more likely to indicate it is the only brand they would purchase in the future.
Collinson Latitude reveals that 78% of consumers want the ability to redeem their rewards more easily. Over the coming decade, annoying redemption processes won’t fly. People will increasingly abandon programs that are a hassle.
TREND #4: NEXT GENERATION OF REWARDS
Rewards themselves will become far more sophisticated and effective. Today, most rewards are static; you get a reward for, say, a free night that expires next year.
"OfferCraft is transforming old-fashioned rewards into smarter, dynamic rewards," said Justin Shank, Digital Marketing Manager at Swinomish Casino Lodge, which includes a 98-room luxury lodge as well as an event center and casino. "Their rewards are actually tiny software programs that can continually alter themselves even after being distributed to become ever-more appealing to our customer."
Imagine rewards that, if they go unused, can evolve into something else the consumer is more likely to find appealing. Imagine a guest earning a reward for something she doesn’t like, but then having the chance to trade it for something else she prefers. Imagine allowing guests to combine multiple little rewards into one far bigger reward. Imagine a guest who can’t use a reward reassigning it to a friend with the touch of button. Imagine tracking all these interactions to better understand patron preferences in real-time.
It’s the next step in the evolution of rewards, and it will change the hotel loyalty landscape dramatically.