Hotel loyalty programs: a pointless spinning of wheels?

A recent article in technology news site Whatech had a language challenged headline "Loyalty Pays: Hotel benefits on their loyalty program". The post asserted that "loyalty programs don’t bring much gain to all types of industries, but when it comes to hospitality industry it definitely benefits from it." Citing an unnamed study from Cornell University's hotel school it noted that "guests who engage in loyalty programs at a particular property will increase the number of room-nights by 50 percent". Most hoteliers and hotel company would probably give anything for those stats.

The reality though is better captured by some of the more recent trends in loyalty in travel as mentioned in The Wall Street Journal's Middle Seat Column recently.  The article, as it pertains to hotels, could be summed by one line "Consumers are often loyal to a particular airline for frequent-flier miles, yet agnostic about hotel brands, shopping by price, location, ratings and reviews."  Whether agnostic or indifferent most hotel loyalty programs, even in the upscale segment, suffer from a plethora of issues that don't really engender loyalty.  Prime among those is the fact that many hotels won't pay points in their own loyalty programs when booked through an online travel agency; this includes the "helpful" hotel booking feature among some airline reservation sites. It is an unacceptable limitation given the diversity of distribution channels and has done little to steer customers towards the brand site; which was the principal objective of the brands.

It is unhelpful to hotels that the recent publication of the American Consumer Satisfaction Index by the University of Michigan showed online travel agencies had the highest satisfaction scores among travel industries. It likely will spur the development of loyalty programs of the OTAs. Further, the tendency of most hotel loyalty programs to reward the OTAs more richly than airlines (from the WSJ: "Expedia Rewards offers two points for every dollar spent on a hotel, but only one point for every $5 spent on airfare" ) does little to enhance hotel loyalty programs.

Having multiple levels of elite status and layered and involved reward parameters also diminishes their appeal. Airlines too have multiple levels but the benefits are tangible: upgrades that ranging from domestic to international and even special handling for the few that reach the stratosphere as in the invitation only United's Global Services level.  Rather than expend the considerably resources of time and money to maintaing and advance their loyalty programs hotels would probably be better off meeting the primary expectations of their guests, whether it is service, in-room comfort or some combination of attributes.



Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.