Loyalty: Is It For Sale?
Hotel brands are offering everything from points to Porsches and personal recognition to build their guests' loyalty.
By Mary Scoviak, Contributing Editor -- HOTELS Magazine, 3/1/2006
The price of loyalty is going up. First came free nights and upgrades. Then came data-mined guest recognition. Now, anything goes—from personal shoppers to Porsche leases. “Hotel loyalty programs are heading toward more personalization,” says Holly Mendelson, director of marketing, Marriott Rewards, for Washington, D.C.-based Marriott International. “People want to earn points and redeem them in any way that makes them happy. Redemption options will continue to expand to match each program member’s taste as much as possible.”
Focus On Flexibility
 “Loyalty is a two-way street. By giving members this kind of flexibility, we believe we will gain even more loyalty and earn even more repeat business.” — Steve Sickel, InterContinental Hotels Group |
Tickets to a World Cup soccer match or a wedding package will not eclipse the importance of the free stays and upgrades that matter most to members of points-based loyalty programs. What they do provide is a value-added option for the subset of members who want something more. “Priority Club members appreciate free rooms and upgrades. But the business traveler who already stays 150 nights a year in good hotels may want another way to spend those points,” says Steve Sickel, senior vice president, Priority Club Rewards, InterContinental Hotels Group (IHG), Atlanta. That was the rationale behind the launch of programs like IHG’s Personal Shopper and Marriott’s Dream Tracker. Programs such as these create a highly marketable wish-list environment in which members can send experts searching for anything from a rare antique grandfather clock to the fastest lawnmower on wheels.
Hotel groups are using demand for customizable options to differentiate their offers and to leverage the brand power of lifestyle- oriented partnerships that can reach and capture new markets. Chicago-based Global Hyatt Corp. is complementing programs that speed-up points accumulation with initiatives such as Hyatt Gold Passport Exclusives, a members-only online auction that teams Hyatt with travel partners such as MasterCard and retail icons such as Porsche. “Hyatt Gold Passport Exclusives offers our members a way to use their points to bid on unique experiences that other hotel programs do not offer currently,” says Amy Weyman, Hyatt’s vice president, marketing. “Through our relationships with companies such as MasterCard, Porsche and Bang & Olufsen, we can cross-promote our brands and leverage our products and services—as well as theirs.”
Flexibility is another hallmark of next-generation loyalty programs. Working with American Express, IHG shook up ideas about redemption and loyalty with its “Any Hotel, Anywhere” card. U.S. Priority Club members earn points at any of the chain’s 3,500 hotels in 100 countries, assign them to what functions as a pre-paid lodging card and redeem them at any of 500,000 lodging establishments worldwide, regardless of brand affiliation. Isn’t that counter-productive?
“We may be the world’s largest hotel company, but even we do not have a hotel everywhere our Priority Club members want to go,” Sickel says. “Loyalty is a two-way street. By giving members this kind of flexibility, we believe we will gain even more loyalty and earn more repeat business.”
 “Our new program, Flavours, will be a much more interesting and substantial package in the future. It will offer a great variety of options, including some surprising initiatives not limited to traditional hospitality industry promotions.” — Hans Kennedie, Golden Tulip |
Points matter, but points alone may not be enough. Before relaunching its loyalty program, Golden Tulip Hotels, Inns & Resorts, Amersfoot, Netherlands, conducted research into what mattered most to members. One of the things they wanted most was flexibility. “Formerly, our program was based only on frequent flyer points,” says Hans W.R. Kennedie, Golden Tulip’s CEO and president. “Our new program, Flavours, will be a much more interesting and substantial package in the future. It will offer a great variety of options, including some surprising initiatives not limited to traditional hospitality industry promotions. Extensive research and modeling with our hotels has shown this will be a significant factor in promoting customer retention and boosting sales.”
More Options, Better Yield
Giving members a wider range of redemption options is also good for the bottom line. Although hotel brands have created practicable reimbursement schedules to prevent free-stay redemption from undermining yield management, there is a growing trend toward finding property-level alternatives.
Taking a cue from the tiered loyalty program menu offered by the giants, Graves Hotels Resorts, Minneapolis, Minneapolis, structured both points and property-level recognition into its newly unveiled loyalty program. “We needed to launch a program that was compelling out of the gate, so we created an experiential and point reward model. The service levels increase as the spend increases,” says Scott Fischburg, vice president of sales and marketing. In addition to the big goals such as upgrades and free rooms when available are easy-to-earn short-term goals, ranging from a free shoe shine or free access to the hotel’s nightclub to priority check-in and pre-arrival contact by the concierge. Additionally, enrolled guests are offered an online concierge that tracks preferences and allows guests to manage their on-property experience before or after they actually stay at the hotel, creating a database Graves can use to tailor its offers more closely to guest demand.
Integration of loyalty programs with property management systems and yield management modules also is boosting the positive impact for bottom lines at the corporate and property levels. Kimpton Hotels & Restaurants, San Francisco, worked with e-mail marketing/retention consultant, iPost, Novato, California, and Dallas-based Pegasus Solutions to integrate its Kimpton InTouch guest loyalty program with its e-mail marketing and other customer relationship management (CRM) efforts.
iPost integrated its service directly with the Pegasus CRS, taking data from each Kimpton hotel reservation and sending confirmation e-mails to the guest. Through iPost, these e-mails now include personalized messages to guests promoting the Kimpton loyalty program and cross-selling guests to Kimpton restaurants as well as other Kimpton hotel properties.
Additionally, iPost sends periodic, personalized e-mails to these guests about hotel promotions and properties of interest. In this integration, Pegasus continually notifies iPost of new, changed and cancelled bookings at Kimpton properties. The results: growth of more than 80% in Kimpton’s database and more than 160% growth in room revenue driven through e-mail marketing promotions, says Renée Will George, Kimpton’s director of CRM and strategic marketing.
Recognition Programs
Recognition is taking on a bigger role in loyalty programs. Luxury operators such as Shangri-La Hotels & Resorts, Hong Kong, contend that luxury travelers want a personalized experience more than points. “Our Golden Circle is not a points program, but we do have over 30 airline partners allowing members to accumulate air miles,” says Brendan Inns, Shangri-La’s vice president of corporate marketing. “Our Executive and Elite Golden Circle members earn bonus air miles of 25% and 50%, respectively. The real loyalty driver of our program, however, is the exclusive recognition that members receive during each and every stay. This is what frequent guests want most of all.”
 “We are seeing more members using more of the hotel brands in the program, in addition to becoming more loyal to the brand with which they originally affiliated.” — Jill Noblett, Cendant Hotel Group |
Technology is pushing recognition into new territory. “Every hotel in the system should be able to communicate and download the customer’s likes and dislikes before he or she arrives,” says Adriana Toledo, Sol Meliá Hotels & Resorts’ manager—loyalty programs, Americas division, Miami. “If the guest wants Coca-Cola, stock the minibar with Coke. If he or she prefers Pepsi, stock that. Employees should be able to identify the customer and know what that guest wants from the moment he or she enters the door.”
Seamless data transfer means more cross-selling opportunities for hotels. Cendant Hotel Group’s TripRewards membership card pre-populates member information into a property’s management system—especially useful since many guests are walk-in to the system’s franchised properties, says Jill Noblett, Cendant Hotel Group’s vice president, loyalty and direct marketing, Parsippany, New Jersey. “We are seeing more members using more of the hotel brands in the program, in addition to becoming more loyal to the brand with which they originally affiliated. Rather than slicing the same-size pie into smaller pieces, we are a ctually getting a bigger pie,” Noblett says.
Although the hotel industry continues to argue the merits of points-based loyalty systems versus pure recognition program, the profit power of loyalty programs make them a hot topic in yield management circles. “Loyalty programs do put heads in beds. Would they deliver in the same way without points? Probably not,” says Thomas Corcoran, president and CEO, FelCor Lodging Trust, Irving, Texas. “Loyalty programs are positive. They do create loyalty, and they do deliver repeat business.”
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THE GIST
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THINK ENTERPRISE SOLUTIONS To move beyond the basics in building loyalty, Steve Webster, iPost’s president and CEO, recommends:
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