Zurich, Switzerland | 15th April 2020
By Gabi Kool, Chief Commercial Officer, Loylogic
In the global Coronavirus pandemic, travel has come to an abrupt standstill. Airlines and hotels must find ways to keep their best customers optimistic, engaged and primed to rebound.
Much has been written about the impact of the Coronavirus pandemic on the travel industry. The consensus is clear: In its speed, global reach and severity, the current crisis is unprecedented. Amidst fear, health advisories and travel restrictions, a major part of the world’s population has gone into lockdown.
Consequently, the demand for flights, hotel rooms, tours, cruises, taxi rides, and all the many other services related to mobility has dropped to near zero. Until the situation improves, no amount of price drops or marketing messages will get people travelling again.
But eventually, the crisis will pass. Many travel companies will survive. And they will need their best customers to breathe fresh life into their businesses when travel is again possible.
More than ever, loyalty programs are a vital lifeline to maintain and deepen customer relationships. The question is: How do you do this when a program’s core value proposition, earning and redeeming miles for travel activities, is unavailable for an undetermined period?
Non-core to the fore
Mileage accrual represents gross billings to loyalty programs, so opportunities to earn miles outside of the company’s core travel offering now come to the fore. Programs with a broad range of such partnerships in place have an edge.
Where available, co-brand credit cards will play a crucial role, both due to the significant accumulation volumes they produce, and considering the increased importance of cashless credit purchases to members restricted to shopping online from home.
Other earn opportunities, such as affiliate shopping portals or embedded shop-with-miles solutions are also highly relevant. They allow members to continue associating rewarding experiences with the travel brand whose miles they earn. And with aspirational destinations temporarily out of reach, now is the time to feature those lesser-known partners in program communications.
A bolder move is to offer miles for sale outright. Small, targeted campaigns can test members’ appetite to buy miles at this time. The resulting take-up rate is a good indicator for engagement.
Slow burner
But what about redemptions?
Here, program managers must strike a delicate balance. Redemptions represent costs for loyalty programs, since rewards must be paid for. But they also allow the program to recognize the revenue it had deferred when miles were earned, and book any profit resulting from the difference between that revenue and reward cost per mile.
Since the duration of the crisis is as of yet unknown, it will be difficult to encourage members to book reward flights for the future right now. Making booked award tickets free and easy to rebook will help.
Later though, when travel restrictions are lifted and capacity is restored, airlines and hotels will need to back-fill their entire booking curve. Normally, a good part of seats or rooms for any given day is booked a long time in advance, but this is not happening right now.
The pent-up revenue represented by members’ loyalty account balances can stimulate demand: Reward inventory will be wide open, and programs can boost redemptions with special discounts, cash and miles combinations, or account pooling tools. Members thus lured back not only experience the joy of travel once again, they also represent an opportunity for ancillary sales along their journey.
Today, some programs report a big increase in members redeeming for merchandise rewards, gift cards and other tangible items. Understandably, this can cause concerns about program cash flow, and we have seen a few instances of programs halting or restricting these redemptions.
Such restrictions can hit a raw nerve with an already rattled member base. Much like airlines currently refusing ticket refunds may end up with lasting damage to their reputation, so programs halting redemptions could rapidly fall out of members’ favor.
Therefore, loyalty managers should emphasize opportunities for members to stay engaged by offering relevant and financially sustainable rewards to carry members through this crisis.
Raffles, where small amounts of miles can be wagered to win big prizes, are one way to keep members excited. Donations to charities addressing virus-induced hardship are another.
With cost per mile properly managed, highlighting such attractive and instantly gratifying rewards will go a long way in ensuring the program’s commercial health in this extraordinary moment.
The goal is clear: The loyalty program and the travel company owning it must survive the crisis. But so does that precious thing called “customer loyalty”. Only members able to continuously engage in the program will be willing and able to return to the brand’s core travel offering when the pandemic fades away.
Now there’s something to look forward to!
Loylogic is the world’s leading innovator of points commerce experiences and trusted partner for some of the largest frequent flyer programs in the world. In these challenging times, we are at your side to address the topics listed in this article, or to support you with any issues you may face in order to safely steer your business through this stage and beyond. Thanks to our award-winning and proven solutions as well as our capacity to constantly innovate and quickly respond to a changing environment, we are perfectly equipped to help you deal with this new situation.
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