Hotel rewards programmes are in the mature phase of the product lifecycle and, as a result, hoteliers are challenged to differentiate their programmes from those of competitors.
The stage is set for programmes to be developed in new, increasingly creative, directions.
This is one of the findings of the Multinational Hotel Rewards Programmes 2009 survey, results of which were announced today. The survey report is the latest to come out of Razor´s Edge Business Intelligence, a research company with a niche focus on loyalty marketing.
The survey examined, in detail, the 12 programmes operated by the world’s largest hotel groups. They included high-profile programmes like Choice Hotels Choice Privileges, Hilton HHonors, Hyatt Gold Passport, InterContinental Priority Club Rewards, Marriott Rewards, and Wyndham Rewards.
Says Bruce Conradie, Managing Director of Razor´s Edge, “Given their size and complexity, this is probably the most homogeneous set of loyalty programmes examined in a Razor´s Edge study. Although we did not formally measure it, it is clear that the surveyed programmes are highly similar.”
The similarity should come as no surprise even to observers outside the industry, as the programmes are relatively mature. The oldest profiled programmes, Priority Club Rewards and Marriott Rewards, are both 26 years old, followed Hyatt Gold Passport (23), and Best Western Rewards (21). Five of the 12 profiled programmes are older than 15 years.
Some of the similarities among programmes are extensive. To name a few, the programmes typically: limit the lifetime of membership without account activity; offer value-added services (such as, late check-out); are tiered; offer bonus points and additional value-added services to elite tier members; vary the points earn rate among hotel brands; allow points to be earned on multiple rooms per stay; have multiple earn and redemption partners; and allow their points to be exchanged for those of a variety of flyer miles.
The survey found that mature programmes had been adding benefits, features, and partners for years, to the point at which many programmes were as complex as a typical frequent-flyer programme.
“When it gets to that point, programme operators need to treat carefully, and not make their programmes unbearably complex,” says Conradie. “Complexity saps the consumer’s time and energy, undermining the value of the programme.”
Ironically, says Conradie, programme complexity makes it even harder to stand out.. The more complex programmes become, the harder it is for consumers to compare them. “The average consumer will not try and work out return on spend (the monetary value of earning points), never mind factoring in the value of value-added services, such as, early check-in or access to an executive lounge,” Conradie maintains.
The plethora of promotions seen during the current recession may be seen as an effort to differentiate by providing hard benefits (having a clear monetary value). Such promotional activity is here for the foreseeable future, although we can expect a return to other forms differentiation, once the recession is over.
An aspect of this is experience rewards. Hotel accommodation is an experience product and experience rewards fit well with hotel rewards programmes. Thus, the surveyed programmes allow members to redeem points for holiday packages, cruises, theatre tickets, entrance to theme parks, and spa treatments, to name a few.
A form of this that is expected to gain popularity is one-off or exclusive rewards. A typical example is an opportunity to meet a celebrity. Such rewards are often offered to members via an auction (whereby they burn points, rather than cash).
The researchers expect hotel rewards programmes to move on from simply adding more partners and more benefits, and to develop in new directions. Development is likely to take place in, among others, further development of the experience reward theme, the creation of sub-clubs that appeal to special interest groups (such as, sportsmen, sports fans, or bikers), and addressing environmental concerns.
Small hoteliers, especially those without multi-brand rewards programmes, will seek to enhance the stay experience through superior personalised service. Large hotel groups will grow more sophisticated in using customer relationship management technology to provide personalised services to high-value customers.