What is the first thought that crosses your mind when you hear Loyalty Programs? If you ask a Gen X or a Baby Boomer they would instantly say – Air miles or The Hotel Industry.
Today, brands from across sectors are investing in loyalty programs, but the hospitality industry was among the first few to recognize its true scope and potential. More than three decades ago, the industry ventured into the unfamiliar terrain of loyalty programs and since then, there has been no looking back.
Table of Contents
Loyalty Programs in the Hospitality Sector
Loyalty programs in hospitality can be traced back to 1983, when Holiday Inn, and later Marriott Hotels, took inspiration from the Frequent Fliers Programs and its rapid success. It was a coalition loyalty program wherein Frequent Flier members could redeem their points at these hotels. Gradually, the hotel industry realized the untapped potential of loyalty programs and subsequently, hospitality loyalty programs became a stand-alone strategy that bought in major traffic and helped the brands to gain massive popularity in a short span of time.
Merits of a Hospitality Loyalty Program
- Client Retention – One of the major merits of initiating a loyalty program is that it significantly increases the client retention rate. A loyalty program ensures guests remain engaged with the brand for want of rewards and better offers; consequently, the guests end up spending more time and money on the brand to achieve this prerogative.
- Stronger Brand Promotion and Advocacy – Word-of-mouth marketing is one of the strongest forms of advertising. A study by Nielsen states 92% of people trust recommendations from the people they know, mainly friends and family. Initiating a loyalty or a referral program will encourage WOMM publicity, bringing in relevant and potential clients through organic marketing.
- Creating a Sense of Community – Members of the loyalty program often by default become a community of sorts. Their continual association with your brand, for rewards and benefits, helps in creating a community of serious and loyal customers that eventually become active brand advocates.
- Helps in Understanding Clients Better – Hospitality is all about caring for your clients, wouldn’t you agree? Hospitality loyalty programs help in the accumulation and curation of customer data. This data can further be used to create personalized experiences that are best suited to your customers’ needs and enable you to provide the best possible experiences at your property.
Demerits of Hospitality Loyalty Programs
- Expense – Initiating a loyalty program has a direct impact on operational, marketing, and management costs. A loyalty program will offer tremendous advantages and positively impact customer retention and acquisition rate. However, you need resources and ample funds to run and manage the loyalty program efficiently and for long enough to see incredible results.
- Market Saturation – The Hospitality loyalty program is a common concept that has been adopted by various hotel chains, mainly because of the high ROI it offers. The challenge here would be to create a distinct brand identity through loyalty programs because of market saturation. You might need to think out-of-the-box to stand out in the crowd with your version to gain the massive traction you want.
- Cost of Redemption – Hospitality loyalty programs may pose a challenge while managing and maintaining balance sheets, as well as in forecasting. Despite imposing an expiration date on points (if you choose to do so), you never know exactly when a customer might decide to redeem them and stay for free or at reduced rates. Sometimes the cost of stay can exceed the accumulated profit expected, particularly if you don’t have restrictions for when the visit can be, such as outside of holidays when travel increases and cost-per-night often soars, for which the hotelier might have to bear the additional cost.
Categories of Hospitality Loyalty Programs
The concept of loyalty programs in the hospitality industry has reached a dynamic stage. Hoteliers are designing their own strategies to help them accomplish their marketing objectives more conveniently and more effectively. Most hospitality loyalty programs encompass one of these three categories:
- Points Program – One of the oldest, yet highly efficient programs is the points program. In this system, the hotel issues point to their guests on every stay which guests can then redeem on their next stay, getting a lavish discount on the booking.
- Coalition Program – Coalition programs are much like the ones Holiday Inn and Marriott Hotels had with Frequent Fliers; as a partnership of two or more brands, it gives the guest/customer more options for earning points, along with more options to spend their points and money on.
- Customized Program – Customized programs are bespoke programs designed specifically for a hotel. The reward system is customized to suit the marketing requirements of that hotel and the rewards are chosen by the hotel as well.
The idea is to keep the concept comprehensible so that guests and customers are more inclined to participate in the loyalty program.
Examples of Successful Hospitality Loyalty Programs
- Hilton – Hilton Honors Loyalty Program is well-known for its flexibility. Customers can earn points through various means and redeem them on 14 different brands. They can even share or donate their points to family members and friends.
- Marriott – Marriott Rewards is one of the easiest hospitality loyalty programs to earn points from. Customers can simply post about the brand on their social media feed to earn points. For the simplicity and effectiveness of its program, Marriott Rewards won the Best Loyalty Program Award for the hospitality industry in 2017 by Smarter Travel.
- Shangri-La – Shangri-La’s ‘The Table from The Golden Circle’ allows guests to instantly redeem points on the restaurants. The instant gratification factor has worked successfully, making Shangri-La’s loyalty program highly lucrative for the brand.
Why and How Do Hospitality Loyalty Programs Work?
Creating a distinct identity and status for your brand in an already saturated market and attracting a strong brand following is an art. It is possible to get visibility through relentless advertisements and rigorous media campaigns, however, these strategies and campaigns take a toll on your marketing and management budgets.
Hospitality is a niche industry; you need a string of loyal customers who feel happy and proud to be associated with your brand. Hospitality loyalty programs help in retaining valuable and relevant customers and keep them engaged with the brand through rewards and loyalty programs. They not only improve retention rate but also bring in new customers through organic promotions and word-of-mouth marketing. Annex Cloud can help you design dynamic hospitality loyalty programs that match your brand aesthetics and excite your target audience. To know more click here.