Personalization is the most effective loyalty strategy

In what seems like a blink of an eye, loyalty has become the new measure of success in the hotel industry. The big brand companies all recently relaunched or retooled their loyalty schemes as a way to both steal share in a stagnating demand market and to attack the stranglehold online travel agencies have on distribution.

And while the trend toward rate discounts for loyalty club members has received all the press in recent months, there’s a lot more complexity to how hotel companies and individual properties need to approach loyalty: Free nights or upgrades? Lower rates or recognition? It’s hard for hotel marketers and brand executives to know which path or paths to pursue.

No matter the approach, many hotel companies and individual properties plan to focus more resources and brainpower to solve the loyalty dilemma. A new study from CrowdTwist showed that more than half of all marketers in the U.S. plan to spend more on loyalty programs in 2017. Nearly half (44%) plan to “somewhat increase loyalty budgets” while 13% plan to spend significantly more.

Of course, the biggest splash in hotel loyalty came from the big brand companies, led by Marriott International, Hilton Worldwide, InterContinental Hotels Group and others, as they launched full-court presses to leverage their loyalty programs to build direct bookings and steal share away from the OTAs.

Pricing for loyalty guests needs to be personalized around their lifetime value. Click To Tweet

Most recently, IHG said it recorded a 2-percentage-point shift in direct bookings away from OTAs since the launch of its loyalty club member rate program.

Red Lion Hotels, that upstart regional chain that wants to be a major player in the industry, further shifted the paradigm in late August by aligning with Expedia, Inc. to offer access to its Hello Rewards loyalty program and member room rates to consumers who book on the Expedia and Hotels.com sites. Bookers can sign up for the Red Lion loyalty program directly on Expedia sites and also get the benefits associated with the OTAs’ loyalty schemes.

For Red Lion, the move is as much defensive and offensive. As Red Lion executive Bill Linehan said, “It can be difficult for brands to generate any real, meaningful demand or [return on investment] through loyalty programs without spending substantial amounts of marketing dollars on a long-term basis.” By partnering with OTAs, Red Lion can extend its marketing and loyalty reach at an affordable cost.

A bigger loyalty question

Despite the frantic moves by big and small brand companies, the jury is still out on what consumers will actually trade for loyalty. The same CrowdTwist survey perhaps surprisingly revealed that 57% of consumers join a loyalty program for reasons other than a desire to earn rewards.

Small hotel companies and independent properties are forced to view loyalty through a different prism as they’re generally unable to mount sophisticated and effective loyalty programs that use either room discounts or free stays as their currencies.

It’s not about points or discounts

While guest knowledge and recognition of frequent stays is an important component of many loyalty programs, hoteliers shouldn’t forget the power of pricing. To be effective, however, pricing for loyalty guests needs to be personalized around the lifetime value of customers, their reasons for travel and the hot buttons that make them want to return to your hotel.

As with many aspects of solid Revenue Strategy, an effective loyalty program depends on data. Every guest is different, so it’s important to understand what rewards or recognition each one wants, who’s paying the bill and what direct and indirect factors will convert them into a loyal customers.

But ultimately it might go back to personalization. To enable to hotels with the ability to tailor a rate for each guest, new technologies allow loyalty rates to be yielded up and down based on customer worth, as well as supply and demand.

In order to win the loyalty game, a hotel must make each guest feel special and of high value to the hotel, its staff and even ownership. To be effective, loyalty can never be a one-size-fits-all strategy.