As the hospitality industry has simultaneously ballooned and consolidated, rewards programs have been forced to evolve. Now, rather than just free nights, some offer perks like free WiFi and experiences like concerts, spa treatments and unique dining to secure brand loyalty — especially among millennials.

TW Illustration by Jenn Martins

TW Illustration by Jenn Martins

With pressure coming from OTAs, home-sharing platforms and an unprecedented level of brand proliferation, the global hospitality market has never been more competitive. As a result, earning customer loyalty has also never been more challenging, and hotel companies are pulling out all the stops in their efforts to attract repeat guests and drive direct bookings. 

Once a relatively straightforward concept, with hotels offering guests points with each stay and guests then able to redeem points for free nights, loyalty programs have changed significantly in recent years, growing larger in size and broader in scope. 

They’re also more ubiquitous than ever. According to the 2017 J.D. Power Hotel Loyalty Program Satisfaction Study, the average hotel guest is a member of 3.25 hotel programs.

“Nowadays, loyalty is in your everyday life, whenever you travel, at your favorite store and the grocery store,” said Dave Canty, vice president for global loyalty programs at InterContinental Hotels Group, whose program has expanded to roughly 120 million members. “In some cases, people don’t even realize they are members of a loyalty program. Greater awareness of loyalty programs enables us to actually engage with members at the beginning for their travel selection and build relationships with them over time. That’s critical for us.”

As loyalty membership continues to expand into the mainstream, the programs have also spawned a subculture of loyalty-focused fanatics, who, like their miles-obsessed airline loyalty program counterparts, look to maximize their points earnings and redemptions. While these superfans have proven to be valuable allies, often sharing information on their favorite programs or redemption deals on blogs or online forums, they’ve also been highly critical of the evolving loyalty landscape. 

Gilbert Ott, founder of loyalty-focused travel blog God Save the Points, said, “For the median customer, the foremost concern is still how quickly they can earn that free night. But then you also have this segment of business travelers and other high-level users, and of course, they still care about that free night, but they get much nerdier about the benefits, and things like free breakfast, late checkout and suite upgrades are much more important to them.”


Merging programs sparks controversy

Few loyalty programs have stirred up as much controversy recently as Marriott International’s Marriott Rewards, which made headlines when it merged with the Starwood Preferred Guest (SPG) loyalty program earlier this year in the wake of Marriott’s acquisition of Starwood Hotels and Resorts in September 2016. The newly integrated program, which concurrently added Marriott’s Ritz-Carlton Rewards, is now one of the largest, with more than 110 million members, an unparalleled portfolio of 29 brands and more than 6,700 participating hotels worldwide.

For SPG loyalists, who had long regarded that platform as the gold standard among hotel loyalty programs, the Marriott Rewards merger represented a potential threat to the benefits they were accustomed to getting, with elite status SPG members particularly voicing concerns.

Consequently, Marriott made efforts to placate SPG’s user base, promising that it would now be easier for guests to earn more points, tripling SPG members’ points balances and revamping the program’s qualifying system to enable members to achieve Elite status faster. 

On an investor call earlier this year, Marriott president and CEO Arne Sorenson said the company had introduced late checkout and other perks well ahead of the merger in order to “send the message to the SPG loyalists that we were going to protect some of their benefits.”

“While it would be too much to say that every single Marriott Rewards or SPG member has stood up and applauded,” Sorenson said, “I think what we’ve heard from the bulk of the community is, ‘You’ve made a collection of decisions that has caused us to feel very good about that program.’”

The Marriott-SPG merger continues to receive some mixed feedback online, but Ott agreed that the transition has largely been positive for most program members.

“In many ways, the move is a good one, because SPG had a much smaller footprint than Marriott did,” Ott said. “So, if you were an SPG loyalist, it was much more difficult to stay brand loyal in certain places. Now, with the combined programs, you pretty much need just as many nights to earn a higher status, but it’s a lot easier because you have so many more hotels to choose from in any given location.”


Strengthening the loyalty footprint

Marriott isn’t the only major company consolidating its loyalty platforms. AccorHotels also made an integration move this year, with the company’s Raffles Ambassadors, Fairmont President’s Club and Swissotel Circle programs all coming under the fold of its flagship Le Club AccorHotels program in July. 

The move extended Le Club’s reach to more than 3,500 properties worldwide and enabled guests to earn and consolidate points from across the group’s economy, midscale and luxury and upscale tiers. 

In addition to program integrations, other companies are strengthening their loyalty footprint via strategic partnerships. Hyatt, for example, recently announced it would be launching a “loyalty alliance” with the Small Luxury Hotels of the World (SLH) network later this year, which World of Hyatt senior vice president Amy Weinberg said will enable loyalty members to earn and redeem points at a wider range of upscale boutique properties, particularly across Europe and Asia. 

The World of Hyatt program has some 10 million members. The SLH collection, which offers the Invited loyalty program, includes more than 500 hotels across 80 countries.

“The mandate with World of Hyatt is constant evolution,” Weinberg said. “As our business grows to meet the needs of an increasingly connected world, we believe that we have a great opportunity to connect with high-end travelers.”

Meanwhile, loyalty programs are not just changing in terms of scale. They’re also experimenting with innovative ways to attract members and retain brand loyalty. 

“Hotel brands are getting very creative in offering value to their loyalty program members using both sticks and carrots,” says Chekitan Dev, professor of marketing at Cornell University’s School of Hotel Administration and the author of “Hospitality Branding.” “One much-used ‘stick’ is not getting points if guests came through a third-party booking channel. The carrots, more effective in my opinion, range from free WiFi, a curated amenity such as a spa treatment or fruit basket or unique and proprietary experiences only available to loyalty program members.”

These perks have played an instrumental role in helping brands attract millennial consumers, who are notoriously fickle when it comes to sticking to a favored program. 


Make way for the millennials

The J.D. Power study, which defines millennials as those born between 1982 and 1994, reported that roughly 21% of that generation switched their primary loyalty program over a 12-month period, compared with just 10% of loyalty program members in general. The study also revealed that 32% of millennials prefer to redeem their points for a quick reward instead of saving up for a bigger reward, versus 17% of other age groups. 

Among the most appealing rewards for millennials, the study found, were access to special events, dining and retail purchases.

Jennifer Corwin, associate practice lead for travel and hospitality at J.D. Power, said, “Millennials definitely redeem rewards more quickly. There’s a sense of having something top of mind when you get something recently, and it allows you to also have higher satisfaction.”

‘Millennials definitely redeem rewards more quickly.’
—Jennifer Corwin, J.D. Power

She added: “And even though they don’t fall into the quick-redemption category, there’s something about the exclusivity of events that makes them much more attractive to millennials.”

Hotel companies have responded to these preferences by offering more instant redemption benefits, like free WiFi, as well as rolling out expansive experiential rewards programs. 

One of the largest players in the experiences space is Marriott with its Marriott Rewards Moments program, which has an inventory of roughly 8,000 events and experiences. 

David Flueck, senior vice president for global loyalty at Marriott, described the program as “uniquely suited to millennials. Our members can do things like get the chance to get a coaching lesson from Andy Roddick at the U.S. Open, or with the NFL we have the Courtyard Sleepover, where members actually get to sleep overnight in a stadium suite during the Super Bowl.”

While sports remain a popular Moments category, Flueck said that culinary and concert events are also in high demand. This year, Marriott is building off of the latter two categories with its new Moments Live offshoot, which marries intimate live music events with access to high-end dining. 

The inaugural Moments Live event kicked off in Paris in September, showcasing singer-songwriter KT Tunstall and Michelin-star chef Stephanie Le Quellec, while this month, an event in Santa Barbara, Calif., will feature Grammy-winning artist Colbie Caillat and chefs Cat Cora and Alexander Bollinger.

Also making a strong play on the experiences front is Hyatt, which introduced its Find program in July. Featuring more than 100 curated experiences in key global markets, Find focuses on the food, drink, fitness, relaxation and exploration categories, with events ranging from a yoga session with baby goats in Las Vegas to a Vietnamese cooking class in Saigon in addition to many others. 

Hilton is similarly beefing up its Hilton Honors program, extending its partnership with entertainment group Live Nation to offer a new Lawn Days rewards program this year. Running from June through October, the initiative offers thousands of concert lawn seats to Hilton Honors members, with a pair of tickets to amphitheater shows featuring artists such as Rod Stewart, Styx, Thirty Seconds to Mars and 3 Doors Down available for just 10,000 points. 

Ott cited a recent SPG and Marriott Rewards experience that offered a cooking class with famed chef Daniel Boulud at his New York restaurant Daniel. 

“Lifestyle-based experiences are still a very underrated way to use points, from a consumer standpoint,” Ott said. “These things are still somewhat under the radar, but they’re great because, essentially, hotels are leveraging their power and access to get things that you can’t typically buy. First, you can’t buy something like that, and second, a single tasting at Daniel can be like $300, so with points, it becomes an excellent value and opportunity.”


Will the gamble pay off?

As hospitality companies continue to augment their platforms with more bells and whistles, it’s clear that hotels are betting big on loyalty programs. Whether or not that bet will pay off, however, remains unclear. 

Sean Hennessey, clinical assistant professor at New York University’s Jonathan M. Tisch Center for Hospitality, said hoteliers are taking something of a gamble with such offerings. 

“With loyalty programs, hotels are hoping they will gain more customers at a lower transaction cost,” Hennessey said. “And they believe that the ultimate cost of steering guests to their direct websites will be less than the costs they would otherwise pay with commissions going to OTAs. 

“In a way, hotels are taking a bit of a gamble that investing in perks for their guests will get them to book direct. It could well turn out that hotels spend a lot of money trying to secure loyalty but in fact don’t end up earning all that much loyalty at all, and then they would still end up paying a robust commission to intermediaries. It’s a bit of an unknown right now as to how that’s going to play out.”

Hennessey cautioned that hotels also have to contend with OTA loyalty programs., Orbitz and Expedia all have entered the loyalty program fray in recent years, enabling consumers to earn points on hotels, flights and vacation packages. 

Airbnb is also getting into the loyalty game, announcing a limited trial rollout of its Superguest rewards program earlier this year. Airbnb said the platform, which was initially made available to 10,000 users throughout the summer, will reward members with unique experiences and other perks. 

Meanwhile, not all hoteliers are buying the hype when it comes to loyalty programs. Luxury brand Four Seasons, for example, has notably eschewed the practice, and for some boutique players with small footprints and upscale clientele traditional points programs hold little appeal.

Cornell’s Dev said that “brands like Four Seasons have realized that there are many ways to create fanatical customer loyalty, the ultimate endgame, and loyalty programs are not the only means to doing this.”

He added that “superb design, attention to detail and an obsession with flawless service” have played key roles in establishing Four Seasons’ strong customer base.

Still, for most larger hotel companies, Dev agreed that loyalty programs remain a valuable tool. 

“As hotel brands move from an operations-centric model to a customer-centric model, creating and managing customer relationships has become job one,” he said. “Loyalty programs offer brands the perfect means to measure and maximize customer lifetime value.”