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Loyalty Programs Must Move Beyond Discounts.
By Maeve Walls
Friday, 14th July 2017
 

Loyalty programs have become a more valuable tool for every type of hotel as the Book Direct movement has increased momentum.

They are seen, especially by major chains, as the natural progression to gain a longer term value from the guests. After working so hard to persuade guests to book directly for the first booking, hotels wants to encourage the guest as much as possible to come back directly again and again.

In pursuit of that, hotels have been initiating loyalty programs left, right and center since the book direct movement took off strongly nearly 2 years ago. Major chain hotels rely on points- based rewards programs, but those aren’t as practical if you don’t have a global profit portfolio for guests to stay at. Just as importantly, rewards points can feel slow to come to guests.

With that in mind, smaller chains and independent hotels are, in many cases, trying to promote different types of loyalty programs.

However, many of these programs, especially those run by independent hotels, are based on simple discounts. These discounts are unlikely to be sustainable in the long run, and there’s a strong argument to be made that their usefulness is limited even in the short run.

Here are the major problems with discount-focused loyalty programs for independent hotels, and an alternative to focus on instead: value-based, tangible rewards.

The Problem With Discounts

While discounts may suit in the short term, creating quick bookings and raising your profile briefly, there are two issues with this approach:

The financial pressure of discounting rates as a long term strategy

Focusing on price alone as the main benefit, instead of creating a memroable value proposition

Price alone will work short term, but in the long term it becomes stale quickly.

If your customer has nothing other than a good discount to focus on when they stay at your hotel, it won’t persuade them to come back. Instead, they will move onto a competitors who is offering them more benefits and a better experience for their money.

In these cases, the experience, or the perceived value of the stay, trumps price.

Value-Based Rewards: Give Your Guests an Experience

In the long term, value add-ons are more beneficial, for three reasons.

Financial Feasibility

Firstly, value add-ons are more financially feasible for many hotels. For example, a free breakfast that works out as a €10 euro value is a whole lot easier for a hotel to commit to than 15% off a 200 euro room night.

As a side note, it’s also impractical for hotels to offer a points-based reward program. This is for the simple reason that most independent hotels don’t have dozens or hundred properties for guests to redeem those points at, so they mostly go unused.

Don’t Devalue Yourself

Secondly, a discount simply isn’t memorable. You risk marketing your brand to a market at a lower price point than your hotel should really be going after. This makes keeping revenue up difficult if you need to later reduce or remove discounts.

For example, a hotel constantly running deals on Groupon or similar sites will eventually develop a customer base that relies on these deals being available. If the deals are removed, bookings will dip sharply. It can take months for booking rates to come back up to where they were as the hotel tries to market itself back to its appropriate market.

Make Your Brand Memorable

People want perks, they don’t just want discounts!

Most people’s brains latch on to “a free bottle of wine” much more quickly than a number (say, 10% off). While this can differ on individual levels, our memories tend to focus on objects and things they experience, not simple price differentials.

Offer these tangible items and experiences as part of your loyalty program with a few strategic discounts and add ons. This will give you a much stronger loyalty program.

Here are some good examples of independent hotel groups running loyalty programs:

Stash Hotel Rewards

Stash is somewhat unique, as they are a loyalty program used by many independents collectively. This allows them the flexibility of points, while still letting independents stay unique. They offer free nights at a rapid rate, with the added benefits of no black out dates & no expiration date.

You can book any of their partner hotels, and they bill themselves as a warm, independent-friendly space for hotels and guests to work together.

Kimpton Karma Rewards

Kimpton offers a tiered range of rewards to cover all their bases. They take care of the desire for instant rewards, along with increased perks for more regular stays.

They offer a range of items. These including a Raid the Bar offer, spa credits, earning free nights, birthday offers and more. At the highest tier, they even offer complimentary nights at new hotels and “exclusive direct access” to Kimpton’s CEO.

What hotels actually offer is especially important for midscale independent hotels, where standing out with a unique offering is becoming more important than ever. Think creatively – what makes your hotel special? Who are you catering to, and what would they most appreciate?

Research shows that guests genuinely do want more perks and options with a loyalty programme, not just discount. A recent article from Wanup loyalty club sums up ways in which millennials are first and foremost looking for ‘unforgettable moments & unique experiences.’ They claim that that ‘relaxation and practicality is now the bare minimum for a hotel stay – real quality lies in the emotional value’.

Collinson recently surveyed 2,250 global hotel and loyalty program members. Over half want flexibility on ways they can redeem their points, and want to be able to redeem them in-store. 75% wanted a greater choice of rewards.

Trip Tease, meanwhile, feel that these 3 basics are keys to a successful program:

  • Offer more than just a discount
  • Be transparent
  • Keep it simple

Also, it’s worth bearing in mind that research has shown that loyalty programs focused on price rewards actually encourage more comparison shopping, as guests seek to find the best program with the best discount. Price rewards risk making bookings purely about price, keeping value out of the mix.

Whatever rewards you decide are the most valuable for your guests, don’t forget this basic truth: it’s not the scale of the program that matters, but the actual goal. Your goal is encouraging actual loyalty, and driving direct bookings.

Loyalty is about encouraging and convincing guests to be loyal. The most important thing to make them loyal isn’t collecting points, especially for independent hotels. Instead, it’s great customer service and a great guest experience.

Conclusion

Keep the guest experience first and foremost in your mind. You can have the most amazing loyalty program around, but if people aren’t bowled over when they stay, they are not coming back.

You want to use your loyalty program as the hook to convince your guest to stay. To persuade them come back a second time or recommend it to a friend, they need to like your hotel enough for it to be memorable!

Think of your guest’s loyalty to your hotel as being the reward for exceeding their customer expectations. It’s what you get from going the extra mile for them during their stay.

Remember: when it comes to loyalty programs, don’t over-complicate it. Offer something tangible that’s of real value and seen as a perk, and don’t base it on discounts alone!

Maeve Walls has over 10 years of reservations and revenue management experience working with some of Ireland's leading hotels and hotel groups. As an integral part of the Net Affinity team, Maeve is responsible for managing, developing and,building relationships with our major key accounts to ensure continuous revenue growth, enhanced profitability and strategic online development. With broad experience including revenue management, online marketing and distribution, Maeve has been entrusted with initiating, developing and leading contemporary "best practice" revenue management techniques and intelligence for our clients within Net Affinity.

www.netaffinity.com  

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