What the Lyft-Hilton Partnership Says About the Future of Hospitality Rewards

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What the Lyft-Hilton Partnership Says About the Future of Hospitality Rewards

By Ya-Bing Chu, VP of Product, Formation - 07/31/2019

In an on-demand world, how can hotels keep up with consumers’ desire for immediate, unique experiences?

Hilton may have found a solution. This spring, the hotel giant announced a new rewards partnership with Lyft that allows rideshare passengers to earn Hilton Honors points with every ride. By year’s end, Honors points also will be valid currency for Lyft rides.

The partnership is an important one for Hilton as consumers’ preference for peer-to-peer lodging companies like Airbnb grows. Sixty percent of travelers who use both Airbnb and hotels prefer Airbnb over comparable hotels when going on vacation, and 72% of travelers say they plan on staying at an Airbnb within the next 12 months. In order to remain relevant, hotel brands need to get creative and offer data-driven rewards and experiences that peer-to-peer lodging can’t.

Hospitality brands should keep these guidelines in mind as they dip a toe into new reward partnerships.

Find complementary partners

The genius of the Hilton-Lyft partnership is that each partner is leveraging the other’s strengths. In Hilton, you have a highly valuable reward currency. People want to accrue Hilton Honors points to help defray the cost of that big-ticket vacation. Hilton’s problem is that, other than for business travelers, a hotel stay is a relatively infrequent purchase. This means Hilton can’t stay top of mind for most consumers — let alone engender lasting loyalty. By partnering with Lyft, Hilton is trying to alleviate this problem by alloying its program with a high frequency purchase like Lyft.

In Lyft, you essentially have the opposite — an offering with high purchase frequency but whose reward currency has little value. Psychologically, people tend to value points that can be put to a high-cost purchase. Lyft purchases are relatively cheap, so there’s less desire on the part of the average consumer to accrue Lyft points.

By partnering, each company is playing off the other’s strengths. Hilton can piggy back off a high frequency purchase to help it remain top of mind; Lyft, on the other hand, gets to use Hilton’s high value rewards currency to incentivize its customers to purchase more rides.

Smart companies should look to form a similarly mutually-rewarding relationship.

Extend your demographic reach

Growing your reach organically is a costly proposition, and partnerships are an easy, cost-effective way to expand your market. For the hotel industry, millennials represent the fastest-growing customer segment, and one that’s particularly difficult to market to. In addition to being more likely to try hotel alternatives like Airbnb, millennials are less receptive to traditional rewards; instead, they want unique experiences that cater to their interests. Major hotel chains are investing heavily to attract this coveted and elusive segment — witness the launch of Marriott’s Moxy brand or Tru by Hilton. Lyft — with its large pool of young, digitally savvy customers — makes for a logical partner.

Create thematic consistency to build an ecosystem

Hilton is not alone in looking to extend its reach past the four walls of its properties. Accor’s senior vice president of guest experience and engagement, Fernand Fernandez, recently noted, “We are multiplying the touch points that we have with our guests, from our airline partners to mobility partners, and beyond our hotel brands. We want to integrate that into what we do today and how we can engage with guests.”

Hilton is particularly savvy in pursuing partnerships where there are clear thematic consistencies in the offerings. By doing so, Hilton is able to be part of the customer’s journey, doorstep to doorstep.

Examine data-sharing partnerships … carefully

It’s not immediately clear whether there is a data sharing aspect to the Hilton-Lyft partnership, but regardless, hotels have a huge opportunity to leverage partnerships to enrich customer data. While hotels have insight into guest preferences — down pillows or hypoallergenic ones, for example — this is but a small slice of who the customer is. Partnerships can help fill the gaps and paint a richer picture.

This is not without its perils, of course. Hotels that fail to offer value in exchange for customer data risk alienating customers — or worse. The days of passively collecting data are over, thanks to stiffer regulations and savvier customers. Yet hotel brands can still connect data if the benefit to the customer is clear. Customers may be willing to allow DoorDash to share meal order history with Wyndham, one of DoorDash’s hotel partners, if they knew their favorite food would be waiting for them upon check-in as a result.

Hospitality partnerships will require constant experimentation due to the rapid evolution of both technology and consumer preferences. But companies that plan their rewards programs based on the current projections instead of taking a chance stand to miss the boat on growing trends. Going forward, the hotels that find the most success will be those that leap now and problem-solve throughout the journey.

About the Author

Ya-Bing Chu is VP of Product at Formation.ai. He brings extensive experience in product management, data science, and growth to his position as head of Formation’s product team. Prior to Formation, Ya-Bing worked in mobile technology, including serving as general manager of Zynga’s mobile division, where he oversaw the FarmVille and Words With Friends franchises and guided that company's platform development efforts. Prior to Zynga, Ya-Bing worked in product development at Yahoo! Search, Expedia, and Microsoft Xbox. He earned his bachelor’s in computer science and engineering from MIT.

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