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08/24/2022

It's Time for Travel Brands to Modernize and Democratize Loyalty Programs

It’s hard for consumers these days to get excited about earning enough points for an upgrade or a free flight. Here are three ways travel brands can make their loyalty programs more appealing.
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Family in a hotel room

Travel rewards have lost their luster for many consumers. With the double whammy of reduced point value, and the threshold of travel points required to redeem for anything meaningful being high, it’s hard for consumers these days to get excited about whether they will ever earn enough points for an upgrade or a free flight.

And on the other side, for businesses, interchange fees funded a lot of the value these travel programs offered in the past. But now, interchange is under siege, with pressure to reduce fees even coming from the US government.

On top of all of this, Millennials and Gen Z audiences, which make up more than 42% of the U.S. population, just don’t care about travel programs -- they prefer to focus on value and experience, not program status. 

With these headwinds, how can the travel industry enhance loyalty programs to make them more appealing and relevant to new audiences, while still maintaining the value their loyalty customers provide? Here are three potential areas to explore:

Reducing Redemption Thresholds

Brands can look at offering incremental redemption opportunities or offers to their loyalty program members while they’re at different stages of any travel journey (literally and figuratively), as well as their overall lifecycle as a customer.

When it comes to travel, a customer encounters many stages as they move through the travel shopper journey - from researching a trip, to booking it, to then embarking, experiencing their trip, finishing it, and finally, coming home. Throughout this journey there are multiple customer touchpoints that a loyalty program should take into consideration, offering appropriate loyalty rewards to a customer at the appropriate time, reflecting where the traveler is in the overall lifecycle journey with the hotel, airline, etc.

Because the redemption levels for many flights and hotel rooms in loyalty programs today are so high, they can seem out of reach for all but the most seasoned travelers with hundreds of thousands of points or miles accumulated. Consider revamping a loyalty program’s rewards to offer smaller, incremental rewards at the right consumer touchpoints, with lower redemption values so that even members with small levels of accrued program currency can still feel like they are “getting something” out of the program. This helps to build an emotional connection with the member and increases the likelihood they will continue participating.

Offering Additional Ways to Earn Travel Currencies

The traditional travel loyalty program model has become a bit transactional and commodified. Members simply “earn and burn” points or miles as they take trips through the program and make travel-related or connected-card purchases, then redeem them for travel or other perks.

It’s true that many of today’s programs allow customers to earn extra points or miles by shopping from designated rewards-generating links, à la Rapid Rewards Shopping or AAdvantage e-Shopping, or by shopping with a specific loyalty-program-connected credit card.

But these types of extra-point-earning activities require consumers to modify their behavior. Consumers are asked to visit a directory of only a few hundred retailers, sometimes hidden behind a login wall, or they must remember to use their connected card to buy things. What if, instead, they could earn from just shopping online as they normally would?

The next evolution of travel loyalty programs should allow customers to earn travel currencies (or even just cash back) in additional ways. One relatively easy way to address this is by facilitating rewards from online merchants. With browser extensions such as those employed by Capital One Shopping, already familiar to millions of customers, loyalty program members can be notified of the opportunity to earn a small reward percentage back from their purchase. And because these rewards are funded by the online retailers, cards and travel brands do not have to cut into their margins by carving out a piece of interchange to offer the rewards - the rewards are purely incremental.

Offering Enhanced Experiences AND Personalizing Reward Opportunities

One way to improve the participation by Millennials and Gen Z customers is to improve the personalization of a program while offering enhanced experiences. Because these generations prioritize experiences and the value they perceive they’re getting from a program, it may be time to look outside your own travel ecosystem (as an airline, resort or hotelier) and provide member-only access to adjacent services.

Before doing this, it is critical to have a good understanding of not only the customer journey and the opportunities for loyalty touchpoints, but also of the loyalty program members’ desires and needs as well.

One good way to learn more about program members is to survey them to determine the type of additional services or goods that would provide them with more value. The next step would be to identify potential partner organizations that you can align with to deliver your members these benefits. Finally, using loyalty program software or a CRM, figure out the most relevant and appropriate touchpoints for where you can deliver these new benefits, and continue surprising and delighting your members, showing you appreciate their business in the process.

For example, IHG (International Hotel Group) has made significant adjustments to their rewards programs, offering elite members easier thresholds to earn free nights, free upgrades, and dining perks. As a result, point redemptions have increased 14 percent, and 18 percent more reward nights have been booked since they improved the perks.

Loyalty programs have become a competitive differentiator for brands across the travel and hospitality industry, however, many programs have become dated and are not addressing the needs of today’s travelers. Rather than offering static, run-of-the mill loyalty programs, travel brands can deliver dynamic offerings that allow them to reward all members – at every step of the journey –  eliminating the commodified “earn and burn” cycle that has become the norm.

 

ABOUT THE AUTHOR

At Wildfire, Andy Newman develops strategic revenue-enhancing partnerships with financial institutions and fintechs, helping them incorporate value-adding customer loyalty features powered by Wildfire’s platform. He has deep experience in partnerships in the payments and loyalty space, having held leadership positions at Cardlytics, Truaxis (acquired by MasterCard), and then at MasterCard as Vice President Loyalty Solutions. Andy founded his own retailer consulting firm in 2018, counseling early stage Series A companies on business development and vertical account management, generating fast-track growth and market expansion for his clients through the use of fintech technology.