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Loyalty programs: From points to perks

Editor’s note: The following is an excerpt from “Special report: Loyalty, next” published in the March issue of HOTELS.

When Virgin Hotels opened its first hotel in Chicago this year, it launched a new loyalty program that – in true Virgin fashion – is designed to shake things up.

Centered around personalization, surprises and instant gratification, Virgin’s The Know program is building on what Doug Carillo, vice president of sales and marketing, calls the “holy grail” of the next generation of loyalty programs.

“It really focuses on their preferences, how we personalize their stay,” he says, noting that guests will be able to tell Virgin not only what they want in their minibar, but also what they never want to find there.

Virgin also promises a “surprise and delight” feature, rewarding guests with the little things, like maybe a big bag of that brand of potato chips that keep disappearing from their minibar.

Indeed, personalization and instant gratification are two key concepts the hotel industry is focusing on as hoteliers work to move their programs beyond free rooms and into an increasingly competitive landscape that revolves around the complex world of technology, big data and those tricky new customers, the Millennials.

“Consumers are much more demanding,” says Bob Behrens, vice president of rewards programs for The Ritz-Carlton Hotel Co. “Today they are interested in how do I get things yesterday.”

And while the days of using loyalty programs simply to collect points for free nights are in many cases no longer top of mind, most experts agree rewards programs – and their points – are as important as ever. “At the end of the day, there is nothing more powerful than … these direct relationships,” says Mark Weinstein, global head of loyalty at Hilton.  “It goes way beyond rewards. It’s about making their stay experience relevant.”

The complexities

From Chicago’s Preferred Hotel Group to Spain’s NH Hotels and Pacific Northwest’s Red Lion and newcomer Virgin, nearly every hotel company large and small now has a loyalty program, which enables them to collect that all important personal data for their digital marketing initiatives. “It’s what’s driving the whole narrative on digital,” Weinstein says.

But like technology, the programs are fast evolving, and in many cases, becoming much more complex as hotel companies seek to attract the loyalty of both the traditional road warriors trying to amass enough points for a family vacation in Maui and Millennials and less frequent travelers who want recognition and immediate paybacks with things like mobile and flexible check-in options, free Wi-Fi and the ability to cash in just a few points for a glass of wine or a spa treatment.

Many companies are also offering members opportunities to redeem their rewards for special experiences, likes behind the scenes access to special events, or events that might not always be open to the general public. “More than ever people have more cards in their wallet,” Weinstein adds. “The challenge is to make sure you are in the front of their wallet.”

Making sure the perks appeal to all travelers of all generations is key, says Mark Vondrasek, senior vice president, distribution, loyalty and partnership marketing at Starwood Hotels & Resorts, the first company to introduce keyless entry to its loyalty program members.

For example, Vondrasek says, “Keyless entry is not for everyone. My father is not going to check into his hotel room using his mobile device. But for Millennials, he says, “that’s an enormous win.”

Getting personalization right, however, is the challenge, particularly for the big brands which have tens of millions of members. “They might know everything about you, but most don’t have the technology to effectively translate it into the surprise ‘wows,’” says Adam Weissenberg, a partner with Deloitte & Touche’s hospitality practice.

To get that done probably requires more technology and investment,” Weissenberg adds. “In general, the industry has always been at the low end of the struggle because of the conflict over whether the brand or the owner has to pay for that,” he says.

Virgin Hotels and its founder Sir Richard Branson are building their loyalty program around personalization and instant gratification, and that includes what guests find in their minibar.
Virgin Hotels and its founder Sir Richard Branson are building their loyalty program around personalization and instant gratification, and that includes what guests find in their minibar.

Building trust

Hotels also must be careful to make sure their personal data collection doesn’t backfire. For instance, asking about personal preferences, then getting it wrong on delivery, is worse than doing nothing at all, says rewards program guru Randy Petersen, editor and founder of InsideFlyer magazine and several websites devoted to rewards programs. “The problem with personalization is when perfect, it’s the best thing in the world,” he says. “But it’s the easiest thing to screw up.”

The screw-ups, most agree, are the most memorable. That’s why Kristin Intress, CEO of Worldhotels, says she had her company pull back a bit on their new loyalty program to make sure they get the technology right. “With personalization, you have to deliver what you promise,” she says. “Don’t ask me what newspaper I want and then it never shows up. If you hadn’t asked me, I wouldn’t be upset about not getting it.”

Scott Fillian, director of IHG Rewards Club, says, “Knowing how to appropriately personalize is critical for developing and growing trust with consumers.”

And it’s usually just a few, but very important details, that matter, adds Vondrasek. “I think points are critical,” he says. “But understanding my unique needs, trip to trip, allowing me to curate my trip, knowing that my voice is heard, those are almost as important.

“Believe it or not, in the world of big data, it’s usually just a few critical things that matter to the guest, and being able to capture those unique needs trip to trip,” Vondrasek continues. “If you are traveling on business, it could be as simple as getting in late, and them knowing you would like a cobb salad in your room when you arrive. The next week you might show up in a resort with your family and have very different needs.”

 


Contributed by Jeri Clausing

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