Growing pains of loyalty programs

Receiving hundreds of emails a day, it’s always nice to get an embedded link to a funny YouTube video from a friend, especially when it pertains to hospitality. I admit, the implied joke is needlessly long and unpolished, and the eight-bit graphics and speech really don’t help. They say that the essence of comedy boils down to truth and pain. In all likelihood this video was painful to watch, and you now read on wanting your precise minutes back. But there is nonetheless some truth here. Loyalty programs aren’t as dependable as they once were.

For hotel chains, a successful loyalty program relies on the core premise that faithful users will continue to select your properties based upon the ability for them to accrue benefits (or points) redeemable in the future. Many such programs exist, all with unique qualifiers and rewards. In fact, I cannot name one mid-priced hotel chain that doesn’t have a loyalty reward program in place right now.

From the gas station and the local grocer to the cavernous department store, we submit our loyalty card or credit card and happily receive points. It seems as if our human DNA is hardwired to accumulate these points for everything we purchase or consume. Call it a game or bravado, but many of us — this humble scribe included — fall victim to this stimulus.

While the gathering of points is perhaps the most tangible aspect of the loyalty program game, a more intangible part of many programs is the establishment of preference levels. With nomenclature imbued by some luxury adjective or sparkling precious metal, all have the goal of differentiating the best customers for some extra-special onsite treatment, thereby deepening the hotel-client relationship. By being a top-tier member, guests are awarded perks not bestowed to the teeming masses. This could be room upgrades, late checkout, free Wi-Fi, complimentary spa packages and more.

The challenge now is the cumulative nature of top-tier member acquisition. As these programs have grown, an increasing number of guests have become eligible for this elevated status, making it exceedingly difficult for the hotel to accommodate these supposedly exclusive demands. This is particularly important now, as loyalty programs are a great way to combat the brand-obfuscating effects of the OTAs.

I chalk it up to growing pains. As loyalty programs continue to evolve and innovate in the near future, this is a problem they must come to address.

More challenging still is the point-redemption aspect when viewed from the individual property manager’s side. In this case, individual properties that are part of a chain are paid a token amount for redemption stays at their hotels — so much so that these “point-paying guests” can seriously displace direct revenue clients during critical leisure destinations or periods.

Typical hotel chain policies allow guests booking with points (at least those in the top tier) to reserve right to the last room available. This makes sense to the individual point accumulator, but far less so to the property owner or operator. Moreover, the points-wielding guest does not distinguish their sense of entitlement — if they are a member of the top tier, they demand accordingly, as the video so ineloquently puts it.

There are numerous issues for the operators of loyal program-adherent hotels. Is it time to retool these loyalty programs to instill a better sense of fairness for the individual hotel with respect to the chain as a whole? Is it appropriate for corporate managers to examine their policies and employ tactics similar to airlines by limiting the point utilization at any one time? 

This is just food for thought. If you are affected by this, definitely consider what will happen when your loyalty program reaches critical mass and can no longer fulfill all the proscribed service perks.