Loyalty programs should soften impact of economic uncertainties: CBRE

Hotel loyalty programs could be beneficial in softening the blow of an economic downturn on the hotel sector, a recent study has said.

According to a CBRE report, a record volume of hotel loyalty program members should help hotel brands reduce customer acquisition costs, increase direct-to-consumer engagement and offset occupancy shortfalls during an economic slowdown.

Direct contact with loyal customers can benefit hotel owners and operators as members can help boost occupancy during off-peak periods or slower economic situations.

In 2022, loyalty members redeemed a record number of points earned and saved during the pandemic. Loyalty program metrics available publicly of five big U.S. hotel brands have suggested that more points may be required now than in the past to book some hotel rooms, which is consistent with record-high ADRs, or that an increasing number of guests are booking stays at resorts, all-inclusive properties and pricier destinations in key locations.

A study of multiple metrics has suggested that average loyalty programs may be less valuable than earlier. This, however, may not be the case for top-tier members.

In the last 10 years, room nights, loyalty members, loyalty program liabilities and redemption revenues appear to have been influenced by changes in accounting, brand mergers and acquisitions, dispositions, rebranding and dynamic point pricing. While efforts were made to check for outliers, this observation should not be considered same-store.


The number of loyalty program participants has grown faster than the total room supply in the past 10 years. In the last ten years, the number of loyalty program participants has grown faster than the total room supply. This helped in expanding the possible guest base and lowering customer acquisition costs. While this trend may increase occupancy contribution from loyalty members, their share stayed relatively steady at 47% in the last five years.

This could indicate that:

  1. The average member contributes less in terms of occupancy.
  2. The pandemic-created shift away from traditional business travel to leisure travel has led to reduced “brand stickiness”.
  3. There has been a temporary disruption in loyalty member booking patterns driven by the pandemic.

If the shift is short-lived, growth in occupancy contribution is anticipated as trends return to normal.

When members earn points for their stays, credit card purchases, airline travel or activity with other affiliated partners, it leads to liability on the balance sheet of the brand parent representing the prospective future value of those point redemptions.

There has been a decline in hotels’ outstanding point-liability-per-member since 2020, suggesting that an average member may be earning lesser points and may have a reduced contribution to the overall occupancy per person in the near to medium term.

The average point liability per member dropped to a new low of $19 in 2022, down from $22 in 2019 and $26 in 2017. Two more reasons for this decline could be a devaluation of the liability associated with each point or an increase in the value of points redeemed, which lowers the outstanding liability.

The total value of loyalty point redemptions and “other” revenues increased to $982 million in 2022, up 36% from 2019’s former record of $721 million. If revenue associated with point redemptions increases while the average occupancy contribution from points does not, this could imply that it now requires more points to book a room.

This could be due to a combination of the variable number of points required to reserve rooms and record-high ADRs in the U.S. or that points are being redeemed for more expensive properties, like full-service resorts or prime destinations.

Although an average member has a lower value than before the pandemic, the CBRE report could not conclude anything specific about the top-tier or highest-yielding members.

The five hotel brands analyzed only disclosed aggregate loyalty metrics. It’s possible that the brands’ most loyal customers were just as loyal or even more so before the pandemic, yet the proliferation of credit card programs and other strategic alliances has resulted in more inactive or marginally engaged members on the periphery.

Despite all of this, the 35% increase in the average number of loyalty members and 22% rise in the number of members per room since 2019 indicates that the major brands now have the largest database of potential guests. This is possible to continue to lower customer acquisition costs and help provide “occupancy insurance” in case of economic uncertainties.