How LBS technology can revive the dying hotel loyalty programs

Once upon a time guests would feel compelled to sign up for loyalty programs with their preferred hotels and earn some real privileges. The more stays a person had within a year, the more points he earned; the more free offers he received. But due to increased competition within the hotel industry and numerous other factors, these hotel loyalty offers have gotten … shall we say, stale(?).

The typical loyalty offer from a 5-star hotel was something like this:

Stay a minimum of 6 times in a year and your 7th night is on us.

For hotel guests, it's a wonderful prospect, isn't it? They travel. They enjoy the amenities and the service is exceptional. Why not take advantage of it? This loyalty program doesn't cost them anything.

Then a couple of years later, when guests start looking through their account for their next free night, they notice that the requirements have changed. Now it's going to take them 12 stays to get that one free night.

Suddenly, they don't care as much about it. It's too much, will take too long, and there are, after all, plenty of other high-quality establishments out there.

Most loyalty programs come with too many fine prints. The points can expire after just a year of inactivity, or rooms at higher end hotels require a large number of points or reservations cannot be made against blackout dates. All these reasons are disappointing guests far too often.

Customers Are Giving Up

Hotel guests throughout the world have been discovering the shrinking value of loyalty programs. It is primarily due to consolidation in the marketplace and attempts by brands to increase their profitability. But the truth is - these devaluations aren't going down well with customers and they are giving up. With the advent of apps and other easy-to-use programs and websites that find the best deals and offers, there's far less incentive for customers to remain loyal. Moreover, disruptive new competitors like Airbnb and HomeAway are also testing the loyalty of hotel guests.

Hotels need to understand that the explosion of digital and the rate of innovation is having a great effect on customer expectations. They value the 'total experience' a brand delivers and not just irrelevant discounts and offers. They expect hotels to know and address their individual needs. Not just their present needs, but brands are also expected to proactively address their future needs while personalizing their experiences.

The obvious question: What's a hotel supposed to do about it? Scrapping the loyalty program is not a good idea. The key is to find an innovative solution.

Shifting Gears and Rethinking Loyalty Programs

Success in business is all about innovation, spotting trends early, and boarding the train before it leaves the station. Running to catch a moving and accelerating vehicle rarely ever works out for the ones left behind, and the same holds true for hotel managers, owners, and representatives.

Loyalty programs, without a doubt, are a great idea. It draws in thousands of highly loyal customers. It created what marketers would call a "barrier to exit". But now it's time to think forward.

It's time to see what's coming next, how consumers will respond and react best to incentivizing programs. Loyalty isn't dead. It is merely in the process of evolving. The shift is leading the industry to a more individualized, focused loyalty program.

Imagine how customers feel when the hotels they do business with know their needs, wishes, and desires!

Imagine how guests would feel when the next trip they take, they are greeted by their name; their favorite beverage is waiting for them in their room with compliments from the management; they are sent personalized offers in the city they're visiting. Wouldn't they feel that they are getting a lot of value for every dollar that they are paying?

But How to Reward Genuine Loyalty

Technology today makes it possible to discover what your customers enjoy, what they prefer, and how to reward them. The data that is collected by tracking the behavior of hotel guests provides clear and amazing insights, which can be used to improve loyalty programs, in-room guest experiences, and overall customer service.

Online social networking and new age LBS technology have the potential to inject new life into loyalty programs. It also provides plenty of opportunities to capitalize on true, genuine loyalty. For instance, if it is found that a particular guest dines at the restaurant each time he stays at the hotel, he could be sent a personalized dinner recommendation. Or if there's a guest who uses the gym at every visit, it would be great to stock his fridge with sugar-free drinks and gluten-free snacks.

The personalized attention that the loyalty members receive will be sincerely appreciated. It will leave them more inspired to want to go back and use that brand again and, almost more importantly, to share their experiences with friends and family.

Use Data to Create a Sense of Momentum

There are always some guests who do not claim all the privileges they are entitled to. And others, who are stuck at a certain tier of the loyalty program. It is possible that since they have not made much progress, the rewards and the benefits seem too distant to be realized.

This is where data collected through LBS technologies can be used to give a slight nudge, to get things moving. For example, after a hospitality chain learned that Platinum loyalty business travelers used the gym most often between 4 PM to 6 PM, they were able to offer member-exclusive fitness classes at that time. Location data insights like this provide valuable knowledge that hotel managers could not have discovered otherwise.

Bring the Value Back

90% of social media comments about loyalty programs is negative. That's not exactly reassuring for hotel companies seeking to improve loyalty.

But no, loyalty programs are not dead yet and they're not fading into that long sunset, but there is a shift happening and for those establishments looking for the competitive edge, they would do well to pay attention to the shifting winds of customer loyalty.

Analytics, following latest trends and capitalizing on the power of social media, reviews, and more are fundamental keys for the hospitality industry to move their loyalty programs away from a generic point-based system to something much more personal.

Shahzad Syed
Marketing Manager
July Systems