The Loylogic Podcast: Hotel loyalty - the trends, challenges and strategies for success

In this episode of the Loylogic Podcast, we welcome Vicky Elliot, an independent consultant specializing in travel and hospitality loyalty, to talk about the trends, challenges and strategies for success that all hotel loyalty program leaders need to know.

Together, we discuss:

The evolution of loyalty programs in the hotel industry:

- How loyalty programs have evolved
- The catalysts behind developments
- How hotels are measuring success from their loyalty programs

The challenges and barriers to success:

- Challenges hotels face today in recognizing and rewarding members of their loyalty programs?
- The discussion around sustainability across hotel and the wider travel sector
- Solutions that exist to overcome the challenges and roadblocks

The future of loyalty in the hospitality industry:

- The new trends that Vicky sees being tried and tested in the hospitality loyalty space
- How loyalty programs can leverage data analytics and customer insights to offer more personalized experiences and rewards
- How program leaders should go about selecting which one to partner with?
- Advice to a hotel company either wanting to launch a loyalty program or review their existing loyalty proposition

A must listen for anybody involved with travel and hospitality loyalty, listen here, or read the transcript below.

(1:30) You've been a leader in loyalty marketing and CRM in the hospitality sector for many years now. So how has the hotel loyalty program evolved during this time?

"Yes, probably more years than I care to remember! The hotel loyalty space, if I'm not mistaken, is about 30 years old now. I think Marriott or Holiday Inn were the forerunners of hospitality loyalty and it was very much the collect points for free nights type of program. And then obviously, a lot of the bigger chains jumped on board in the following years and hotel programs became very much a conduit into the airline programs, which were already more established and already much bigger. Through partnerships they fed into the airline travel programs. That then led on to partnerships with financial institutions, especially the likes of American Express.

"Today, the hotel programs are very much essential programs in their own right. Marriott now has nearly 200 million members, over 30 brands, nearly 9,000 hotels worldwide. Hilton is not far behind with 173 million members. And then now you've got alliances such as the Global Hotel Alliance, which is bringing together some of those smaller to medium sized hotel chains. I think they have now 40 brands and over 800 Hotels within their alliance and all joined through a loyalty program. So, co-brand credit cards, partner networks, sponsorship of major events, celebrity endorsement...these aren't just linked to the big retail brands anymore, you see a lot of loyalty programs out there sponsoring, whether it's global football tournaments, tennis, cricket, motor racing, etc.

"Loyalty programs within the hotel industry and moving more away from the points for free nights model, to really becoming a self service experience for the member throughout their hotel stay, whether that's giving them access to things like online checking, keyless door entry, preferred room choice, and even room settings before they arrive, as well as more the transactional benefits. Still collecting points but being able to redeem them for a plethora of other rewards, whether it's in hotel or through partnerships that they have."

(3:56) What has been the catalyst for this change? Why are these big hotel chains looking at the wider experience rather than just points for nights?

"I think a lot has been brought about through industry consolidation. Really the only competitive advantage now is the experience that you can give to your members and to your guests. It's very easy for competitor hotel chains to copy awarding points or a particular in hotels say benefit. But what resonates with the customer, what resonates with the guests and therefore your key differentiator is how you make them feel when they're staying with you. So really through the customer demand and customer expectation and moving away from that transactional to the emotional loyalty. Guests expect to be known. They expected to be recognized. They think they've told you their preferences once, so they don't want to have to repeat themselves. Loyalty is about bringing in this much more one-on-one emotional loyalty that has been the catalyst."

(5:14) That's a nice little segue into the next question, which is how are hotels measuring success from a loyalty program? How do they know that they're delivering the best experience?

"I think obviously they still have the usual loyalty measures of healthy program redemption rates, breakage, number of active members. In the hotel industry, we've obviously focused a lot on the impact on business. So, retention rates, customer lifetime value, and then looking at the average spend of a member versus a non-member during their stay throughout the year. And looking at that recency, frequency, monetary value. We're now also pulling in customer satisfaction scores, customer effort scores, net promoter scores, and how your relationship with that customer influences other people to come and stay at your property as well."

(6:06) There's a lot to think about for these hotel chains now, in terms of their loyalty program. So therefore, there must be lots of challenges and barriers to success. From your perspective, what challenges are hotels facing today in recognizing and rewarding members of their programs?

"I think there are two big challenges. I think one is making sure that colleagues and employees in the hotel chains on the ground are familiar with, educated with, and involved with the hotel loyalty program, so that they don't see it as just something they've got to do, but understand the reasoning, why they have the program, and what those benefits are and what the members' expectations are, and being able to deliver that consistently at a hotel level. There's quite a lot of staff turnover, whether it's front desk, in restaurants, etc. So, it's really that employee engagement, I think that's going to become increasingly important. And looking at employee loyalty is almost as important as looking at the customer loyalty as well.

"And then secondly, data. There's a lot of siloed, disconnected systems within the hotel industry, whether it's from the reservation platforms to their point-of-sale terminals and restaurants, Spa and fitness, to the property management systems, table reservation systems, their CRM, their revenue management... There are so many different locations where data is stored, not necessarily in a consistent manner. They've all evolved over time, but the data hasn't really been brought together. So, I think a major challenge is being able to pull that data together in a manner that's GDPR compliant, that captures member consent and preferences, but then is also being processed in a way that empowers and enables hotels to be able to reward and recognize their guests on an ongoing basis.

"So, I think those two areas are the main challenges for hotel chains today, whether they're small, individual properties, or the I imagine those challenges are even bigger for some of the mega chains out there."

(8:24) So how do we overcome those challenges? What solutions are out there to help loyalty programs?

"I think there's a lot more now in the employee loyalty space, whether that's connecting with learning management systems. And often this is something overlooked from a loyalty program perspective, there's a lot to focus on delivering service in the hotels, but maybe not so much on educating around the loyalty program, etc. I know the big chains definitely have that, but some of those smaller chains, not necessarily so. Then, hotels need to have a reward mechanism that incentivizes colleagues to engage with the hotel loyalty programs as well.

"From a data perspective, there is a lot of middleware out there. There are quite a few companies that specialize now in taking your data and delivering it to your front of house employees. So, they're able to take action on it as well. So, it's out there. It's just being able to choose which one's the right fit for you and fits the gaps within your customer journey that are currently maybe pain points are somewhat disconnected."

(9:34) On that, what questions should a loyalty program leader manager be asking to ensure they get the right software?

"I think they start with their customer journey. At the end of the day, technology is an enabler, it shouldn't be the solution. So, looking at your customer journey from the time that they even start to think about booking a holiday, when they haven't necessarily chosen your chain, all the way through to once they've left and the reminiscing and that whole customer cycle. It's looking at how you interact, where you interact, what platforms you've got, what data you have. And then again, going back to that customer effort measurement, what effort is it for a customer to engage with you across all of those different touch points within the customer journey? And then from that, you're able to identify where your gaps are, where your pain points are for your customers. And from there, you can look at what technology solutions will help you bring that together, whether that's complementing what you already have within your tech stack, or whether it's replacing what you have out there."

(10:38) Before we move on to discuss the future of loyalty, going off on a bit of a tangent here, but I would quickly like to talk about sustainability, which is a topic that I know is close to your heart, and is a topic that that's impacting the wider travel sector at the moment. Is sustainability becoming an important element of hotel loyalty programs? And if so, how are hotels incorporating these aspects to engage customers?

"Yes, it is becoming an increasingly important element into drivers of consideration for a traveler when they're booking their hotel stays, their airline, whether it's with a travel agent, or directly, it's becoming much more of a consideration as to which hotel brand they're going to choose. How is that being incorporated into loyalty programs? To be honest, the answer is not very well.

"The hotel industry overall, is taking amazing steps in addressing sustainability measures, protecting natural environment, promoting societal wellbeing, whether that's through eco-friendly products, waste minimization solutions, energy saving technologies, environmentally-friendly guest services, bike rental, those little notes that you get on your beds to remind you not to use the towels, or change the towels every day, locally sourced food products, even being able to track the food through the process within the hotel to minimize waste there. And then also supporting local communities through food banks or charitable initiatives. And then on the social responsibility side through the hiring and ensuring equality within the hotel teams.

"The World Travel and Tourism Council has come up with 12 basic criteria for the hotel industry based on three core pillars of efficiency, planet, and people. Hotels are starting to share those on social channels. They're starting, they're obtaining certification from distribution channels, but it hasn't really filtered down as much into loyalty programs yet. You see some brands incorporating the ability to donate points to charitable organizations, or to participate in experiences, it could be things from tree planting, or whatever. But there's nothing that really matches what they're doing at a higher level at a more substantial level. And this could ultimately be rewarding guests for eco-friendly choices during their stay.

"I think you know, green loyalty programs do attract the environmentally conscious traveler who seek to have the hotel experiences align with their values that they have. But the ability to do this hasn't really evolved as much. But these initiatives and once a hotel company understands how they can track trace and reward what a guest will do on property, then they could definitely foster that emotional connection with guests and encourage them to return and recommend the hotel to others as well."

(13:47) That sounds like an important part of a future loyalty strategy for hotels there, which moves us very nicely on to the future of loyalty in the hospitality industry. With that in mind, what are some of the new trends you see being tried and tested in the space?

"There's a lot around AI at the moment. Whether that's from chat bots helping you book your hotel stay online, you maybe get stuck with something and the Chatbot pops in and says how can I help you, then connects you to a real live person if the if the bot can't answer, to answering simple questions, being able to connect through chats to order your room service or a cocktail on the beach, there's a lot of AI driving efficiencies and improving the guest experience on property or when they're booking. I think these will only continue to improve.

"From a loyalty program perspective, there's huge potential in card linking products when you're talking about having your loyalty program not only during your hotel stay but meaning something to you or being incorporated into your life when you're back at home, whether that's being able to redeem points for merchandise that you use every day for gifting, being able to collect points whilst you're shopping or in your day to day activities. So being able to connect that value proposition to outside of the of your hotel stay."

(15:17) Does that mean hotels need to work with loyalty platforms that have a really wide rewards marketplace and can drive to connect brands to communities? Is that where the future is do you think?

"Definitely, that's a component of it? Absolutely. So Being able to reward members outside of their own ecosystem, and employees as well, I think such platforms or play will be very important to employee loyalty and driving that employee space who don't necessarily want to or have the means to go and dine or stay at the hotel properties, but want to be able to choose some sort of reward that's relevant to them. So yes, definitely.

"I also think that just understanding how and why a customer wants to engage with you, or engage with other travel partners, and who those travel partners are through the enhanced data analytics and customer insights that will help drive those personalized experiences, that emotional connection. You want members to think, okay, these people really get me they really know me, they're going to make my travel experience seamless, so I can get make the most out of my time, whilst I'm in my destination."

(16:26) We've touched on this already, but there's a huge choice of platform providers and technology out there vying for business. Is there anything else you would like to add on that topic in terms of selecting which one to partner with?

"As I said before, I think it's very much linked to the customer journey and where your gaps are. But then also, the hospitality industry is quite unique in the way its tech stacks are structured, and how everybody interacts very differently with the technology. So having a partner that potentially has that experience already with the hospitality industry, or at least within the travel industry and understands what you're trying to achieve, and is aligned with you and understand your vision, then I think that's important, too."

(17:14) Bringing all of the different strands we've talked about together, what would your advice be to a hotel company who either wants to launch a loyalty program or who wants to review their existing proposition?

"I think there's a lot of hotel companies, not only hotel companies, but a lot of businesses that go out there today saying, "I need to get my I need to understand my customers better I need to get customer data, I need to have a loyalty program to do that". Okay, there's a couple of objectives in there, but it's maybe not the best way to start. I think understanding what type of behavior you're looking to drive. What loyalty actually means to you as a business, you know, is it repeat stays, is it increased wallet value? Is it multiple stays across multiple destinations? Is it advocacy? It could be a combination of all of these things, but very clearly setting out your objectives that are very much aligned with your vision of your company and what your company stands for and what its purpose is, remains vital. Start from the top work your way down.

"And as I said before, the technology part is really an enabler to all of that, rather than the solution. So, work on your strategy, work on your objectives. And from there, look at what your customers want from you what they're expecting from you speak to your customers, understand what they value, what drives consideration when they're going to book with you, how they like to be treated on property, and start there, rather than starting with a solution of I need a loyalty program and I need to tech solution to do that.

"I think spending more time on that whole discovery and design phase is really important, rather than jumping straight to delivery."



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