How Investing in the Right Tech Can Grow Your Hotel’s Loyalty Program
Travel loyalty programs are vital to a hospitality business. According to Skift Research, program members are responsible for between 30 to 60 percent of a hotel’s room revenue and tend to spend more per room than non-members. Unsurprisingly, growing these types of programs is a top priority for brands. Data collected from loyalty leaders in late 2022 by iSeatz indicated that nearly 60 percent of companies with existing travel loyalty programs are looking to expand their membership in the coming year, while 55 percent want to boost member engagement. That could prove to be challenging based on the findings of a concurrent iSeatz survey focused on what consumers want from their travel loyalty programs. Together these data sets reveal a mismatch between customer expectations and what brands are investing in. Hospitality companies can circumvent this threat by adapting their strategies to align with what matters most to consumers, namely: better booking experiences, bespoke travel content, sustainability, and innovation in payments. The thread tying all these opportunities together: technology.
THE UNFULFILLED PROMISE OF BOOKING PLATFORMS
Historically, hospitality brands have had limited IT resources, and predominantly allocated those resources toward supporting their core brand offerings and strategies. Hotel IT is traditionally focused on the development and maintenance of core technologies that enable them to manage, price and distribute their inventory and check guests in ...or otherwise known as put heads in beds. These technologies inclusive of central reservation systems, revenue management systems, brand.com websites, and property management systems can be dated and just don’t have the capacity to support the type of customizations and integrations that their loyalty members crave.
Instead of being able to book a stay, a car, a restaurant, and a tour from their loyalty portals, members are often re-directed to other websites or are simply not offered these options. For a hotel, building out these capabilities on their own would require an investment of time, money, and expertise for what could be only incremental returns.
But these limitations lead to a disconnect between customer expectations and experiences. While 30 percent of industry leaders describe their platforms’ booking capabilities as “state of the art” and 63 percent believe their programs are members’ first choice when booking travel, consumers disagree. Only 51 percent turn to their loyalty programs as a first resort, citing the inability to book all the options they want and pay for their purchases via a single platform as major pain points.
The 18–34-year-old cohort are particularly bothered by these capability gaps. Almost 40 percent say they dislike being linked to another site for payment and 33 percent are frustrated when they can’t find all the options, they want in one place. With a significant portion of market growth coming from younger generations, hospitality brands that fail to improve the user experience on these fronts won’t make inroads with these groups.
PERSONALIZATION AND VALUE-CREATION
Optimizing the booking process isn’t the only path hotel loyalty programs have to improving their relevance among travelers. Travel loyalty programs are rich with data about their members’ purchasing patterns and preferences. Loyalty technology that translates that data into individualized and personalized content including past-trip rebooking, dynamic recommendations, and customized inventory display can exponentially increase a program’s value proposition.
But according to the iSeatz survey, the travel rewards industry is lagging when it comes to personalized recommendations. Only 37 percent of consumers report getting personalized recommendations via their loyalty booking site and 36 percent through email. Why does that matter? It’s all about value. Nearly 45 percent of respondents who receive no personalization from their travel loyalty programs also don’t consider their programs very valuable.
Value is also derived from how content is delivered to consumers. Just over 70 percent of consumers who said they receive personalized recommendations through their rewards booking site say their current loyalty programs provide them with the value they are looking for. But for those that primarily receive personalized recommendations through marketing emails, that number drops to 48 percent.
That’s not to say hotels should forget about email marketing. Rather, investing in a configurable and dynamic booking platform should be a top priority to support existing marketing efforts and coincide with a broader push toward a more responsive loyalty strategy, including by offering earning and redemption options that align with members’ values.
SUSTAINABILITY MAKES ITS MARK
The iSeatz survey revealed that amongst younger generations in particular, sustainability must be a central feature of any travel loyalty program. Nearly 40 percent of millennials and 44 percent of Gen Z said they would be more likely to book a trip through a loyalty program if the provider contributed a portion of its revenue to sustainability causes or organizations. They would also book more travel if the program had sustainability-related redemption options (28 percent for millennials and 37 percent for Gen Z). And regardless of age bracket, the interest in sustainability increases when consumers are rewarded for making more ecological choices.
There are simple ways hotels can do this. For example, they can award loyalty members with extra points if they hang on to their towels for a set portion of their stay, provide discounts to members who buy public transportation passes or book a shared ride through the loyalty booking platform, or enable members to gift their reward points to sustainability-related causes and match their donations. Any of these initiatives would go toward addressing consumers’ demand for more sustainability-related earning and redemption options.
Unfortunately, many companies with travel loyalty programs are undervaluing the importance of this feature. Less than 10 percent are planning to introduce carbon offset/other sustainability features to their rewards portfolio in the next 12 months, while fewer than 40 percent contribute a portion of revenue to sustainability causes or organizations, and about the same percentage partner with suppliers that prioritize sustainability. With 45 percent of millennials and Gen-Z indicating they plan to travel somewhat more or a lot more in 2023 and 2022, travel brands that don’t make sustainability part of their value proposition risk missing out to those that do.
PAYMENTS MUST MODERNIZE
Along with sustainability, younger generations are increasingly demanding that vendors adapt to the new ways of paying for goods, especially in this era of financial and economic uncertainty. At the top of consumers’ wish list is the ability to buy now, pay later (BNPL), a type of short-term financing where consumers pay a fraction of the cost up front and the rest in installments.
Just over 31 percent of consumers want their travel rewards provider to add BNPL options for purchases made via their loyalty programs. This number jumps to 53 percent when considering the combined responses from millennials and Gen-Z. Travel loyalty providers on the other hand, are more focused on convenience-oriented payment tools such as digital wallets and account-to-account payments with only 37 percent offering BNPL.
But do payment methods really matter? Of course they do, especially in uncertain economic times. Consider that consumers are more than twice as likely to book travel through their loyalty program based on the availability of payment options like BNPL. Loyalty platforms with robust and diverse payment capabilities give consumers opportunities to pay for trips that help them balance their wallets.
Hospitality brands with loyalty programs must be aligned with what consumers want and find ways to achieve that alignment within the framework of their current IT capabilities. By seizing on the unrealized opportunities in booking technology, personalization, sustainability, and payments, they can successfully grow their membership, capture a greater piece of their customers’ travel spend and generate additional revenue off ancillary products sold through their platforms. Rethinking their loyalty programs in this way may be cost-prohibitive for most hotels, but travel loyalty programs administered through third-party vendors with deep relationships across multiple travel and lifestyle touchpoints enable hotels with limited resources to offer more memorable experiences for new and old customers alike.
ABOUT THE AUTHOR
Ed Silver is the Chief Information Officer at iSeatz, a loyalty technology company. As iSeatz CIO, Ed leads a diverse team of engineers, operations professionals, product managers, project managers, and quality assurance specialists. He utilizes his passion for blending technology, product management, innovation, and marketing to grow iSeatz’ core business, while also accelerating innovation and new product development. Ed has over 25 years of travel technology and new product experience, including co-founding Lodging.com and Hudson Crossing.