They started more than 30 years ago by enabling customers to redeem points for free flights, but today’s hotel-loyalty programs are increasingly relying on distinctive experiences in order to attract and retain customers.

Jennifer Bryl, director of Loyalty Marketing and CRM, Canada, for Marriott International, says customer feedback and internal research suggests its loyalty-program members increasingly value experiences over traditional rewards.

“Access to these experiences, at lower points thresholds, is especially important for members,” she says. Guests are also seeking out immediate gratification and tailored communication, she notes.

From Starwood Preferred Guest (SPG) Moments inviting members to bid on a chance to throw out a ceremonial first pitch at a World-Series game, to the new Wyndham Auctions program allowing Wyndham-Rewards members to use points to bid on a chance to swim with dolphins in Orlando (current bid: 38,000 points), hoteliers are discovering that guests are more responsive to experiences, not just a free room or upgrade.

That’s not to say the allure of a free night has disappeared completely, as many consumers are pragmatic when it comes to point redemption. Dorothy Dowling, senior vice-president and CMO for Best Western Hotels & Resorts, says up to 70 per cent of Best Western Rewards members still choose to redeem their accumulated points for a free night.

“Many people have that dream [to use their points] to go to Paris or Tokyo or Shanghai, but the reality is that their kid has a soccer tournament, or they get invited to a wedding and they redeem those points because it saves them money,” Dowling explains. Yet chains continue to innovate to encourage customers to keep patronizing their brand. Dowling recounts the story of a Best Western guest who put his points towards a Home Depot gift card for a $6,000 backyard Jacuzzi. “People who are frequent [loyalty-card] users have plans for that currency, just like any individual does in terms of saving up with money,” she says.

A recent study from U.S.-based Oracle Hospitality described loyalty programs as “the path to hospitality salvation,” providing a framework for nurturing guest relationships while providing patrons with recognition, perks and options for redeeming rewards. First introduced by Holiday Inn and Marriott in 1983, hotel-loyalty programs are now a firmly entrenched part of the industry. According to Skift — a New York-based business-intelligence company catering to the travel market — the nine largest hotel-loyalty programs alone boast nearly 350-million members worldwide.

However, Oracle’s What do Consumers Want from a Hotel Loyalty Program? study also found more than half (58.7 per cent) of all hotel guests don’t belong to any program, suggesting that hoteliers have an “ample opportunity” to recruit customers.

Bryl estimates about half of Marriott International’s guests are members of its various loyalty programs, but acknowledges there is an “awareness issue” when it comes to unlocking the true value of membership. “Guests who don’t travel as frequently may perceive that hotel-loyalty programs aren’t as beneficial to them compared to a frequent business traveller, but that’s not the case,” says Bryl.

Marriott communicates the benefits of its loyalty program to guests through its website and the booking process, while front-desk associates are instructed to remind non-members about its loyalty program when they check in.

One-fifth of respondents in the Oracle study said they don’t join loyalty programs because they have no interest in the offered rewards, while 29 per cent said they don’t join because they believe it takes too long to earn rewards.

Eliot Hamlisch, vice-president of Worldwide Loyalty and Partnerships for the Wyndham Hotel Group, says the increased complication of hotel-loyalty programs, combined with what he calls “a steady devaluation” of what customers can get with their points, is creating frustration among customers.

At the same time, he adds, the sheer number of loyalty programs offered by businesses as varied as gas stations, grocery stores, dry cleaners and movie theatres, can be overwhelming for consumers.

“Despite the very real threat of loyalty fatigue, hotel-loyalty programs have never mattered more,” he says. “From better understanding guest preferences to driving increased stays and greater room revenues, they’ve become an essential part of modern marketing.” While getting customers to enrol in a loyalty program might be tricky, the Oracle report says they’ve been proven to lead to a “strong pattern” of repeat business. This is particularly true of leisure travellers, with the study finding strong correlation between participation in loyalty programs and repeat visits.

“Loyalty is one of the key platforms all hotel companies are continuing to invest in, in terms of driving a level of engagement with their customers,” says Dowling, noting they serve two primary functions: encouraging more direct bookings by offering incentives for customers who book directly through the hotel rather than using an online travel agency, such as Expedia or Booking.com, and helping hotels earn a greater share of wallet. Dowling says contemporary loyalty programs have evolved to the point where chains such as Best Western are better able to understand what triggers specific customer behaviours in order to create more personalized and relevant offers.

Some hoteliers are also increasingly grasping the value millennial customers place on experiences, as they are expected to comprise more than half of the world’s hotel guests by 2020. A 2016 survey of U.S. consumers by PwC found that hotel nights are the leading redemption choice for both millennials and older customers, but there were stark differences between the two groups. While 85 per cent of non-millennials said that they prefer to redeem points for hotel nights, this number dropped to 64 per cent among millennials. Meanwhile, 36 per cent of millennials opted for room upgrades compared to 16 per cent of non-millennials.

Millennial customers, PwC noted, tend to behave more like business travellers when it comes to point redemption, favouring “softer” benefits more than the 30+ crowd. There are even hotel-rewards programs built around specific customer subsets, such as the Best Western Ride Rewards Program — which caters to motorcycle enthusiasts with a 10-per-cent room discount; 10 points for every dollar spent on each qualified stay; and automatically upgrades members of the Harley Owners Group (HOG) to platinum status. Wyndham Hotel Group, meanwhile, recently introduced the Wyndham Auctions program. The program typically features between 25 to 30 offers, ranging from a food walking tour of New Orleans’ French Quarter for four (starting bid of 10,000 points) and tickets for two to see Celine Dion at Caesar’s Palace (starting bid: 25,000 points).

Wyndham Rewards — which boasts 53-million worldwide members and 30,000 redemption options — topped the third-annual CarTrawler Hotel Reward Payback Survey, based on 1,350 reward queries for six global frequent-guest programs including Best Western Rewards, Marriott Rewards, SPG and Wyndham Rewards.

The report found the Wyndham-Rewards program returned an average of $16.70 for every $100 spent on a hotel room rate — more than double the typical payback range of 5.4 per cent to 8.8 per cent.

Wyndham also recently partnered with Caesar’s Entertainment’s loyalty program, Total Rewards, allowing Wyndham Rewards members to link the two programs and have their status matched (eg: Diamond-Level members in Wyndham Rewards will match to Diamond and Seven-Stars members in Caesar’s Total Rewards).

“We want to be a program that delivers for all travellers — from the newly graduated millennial who stays two nights a year, to the seasoned road warrior who stays 200 nights a year,” says Hamlisch. “One of the ways we create that kind of broad-reaching value is through new offerings and partners.”

Written by Chris Powell

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