A new metric for measuring guest loyalty programs

Franchisors often brag about the size of their loyalty programs as a symbol of their brand strength. The accuracy of that notion is clouded by the fact that most guests are members of multiple frequent guest programs, calling the “loyalty” descriptor into question. Moreover, one could argue that the growth of OTA rewards programs illustrate travelers’ agnostic view of hotel brands. Rewards’ membership level now sits just below the six largest hotel brand companies.

Nevertheless, if you believe the premise that a strong membership base translates to more room nights, a more relevant comparison would be the number of members per property or per room. The number of frequent guests in relation to the size of the respective portfolios provides a clearer picture of a brand’s ability to fill a hotel with loyal patrons.

For example, Hilton said that loyalty members accounted for 57% of its room nights in 2017 and Marriott stated that half of its 2017 occupancy was generated by loyalty members, despite the fact that Marriott’s program is more than 30% larger than Hilton Honors. However, when analyzing their sizes on a per-room basis, Hilton Honors pulls ahead of Marriott. (Marriott is announcing details of its new combined loyalty program on August 18.)  

Sources: SEC filings, press releases
Sources: SEC filings, press releases

IHG shifts to the top in the number of members per property, maintaining the strength of Priority Club, its powerful predecessor that was a key to Holiday Inn’s success. La Quinta Returns, which will eventually merge with Wyndham Rewards, has the highest proportion of members to rooms along with a strong ratio of members to hotels. Best Western Rewards also has a high number of members per room. These enrollment numbers continue to grow with many pushing lower rates for frequent guests to encourage direct booking.

Airline loyalty

In contrast to the hotel sector, the airline industry is reluctant to share frequent flyer numbers. (At one point, American AAdvantage was said to be the largest, with over 100 million members, and Delta SkyMiles once posted 91 million members, but current numbers have not been divulged.) If you scan the spectrum of consumer rewards programs, the most successful are actually paid subscriptions, most notably Amazon Prime, which recently revealed having over 100 million members. IHG Rewards Club and Marriott’s newly combined program are in that same stratosphere, but guests aren’t paying US$119 per year to be members! If hotel companies charged an annual membership fee, perhaps we would see the true value of guest loyalty.

Sources: SEC filings, press releases
Sources: SEC filings, press releases