Are points pointless? The evolution of loyalty programs for the modern traveler

Let’s play a game of “Would you rather?”

Would you rather live the rest of your life on a tropical island or in a big city? Would you rather have an unlimited gift card to your favorite restaurant or clothing store? Would you rather explore deep space or the bottom of the ocean?

These scenarios are likely to spark endless conversations with no clear consensus. Let’s try one more:

Would you rather slowly accumulate loyalty points to reach “gold tier status” at your favorite hotel group, or get instant rewards based on your individual interests and preferences?

You won’t see much discussion here. Nowadays, especially among younger generations that have yet to declare allegiance to a points program, we all seem to want instant rewards.

That’s because guest preferences around loyalty programs have changed. The COVID-19 pandemic sparked long-term shifts in consumer preferences — especially within the hospitality sector. This shift in preferences is fueling digital transformation. As PwC shared at the NYU International Hospitality Industry Investment Conference, 45% of CEOs cite changes in customer preferences as a top driver of transformation.

Points-based loyalty programs are losing ground to experience-led rewards that capitalize on guests’ desires for instant gratification and personalization. And to deliver on these new expectations, hoteliers need to harness their guest data and get creative with their loyalty rewards. Let me show you what I mean.

What’s wrong with points-based loyalty?

Think back in time to when points-based loyalty programs were a new thing. Forty-one years ago, to be exact — Hilton and Mariott were the first to pioneer loyalty programs. The rest of the industry was quick to follow suit. Gamification and bragging rights attracted travelers and spawned communities of avid points-chasers like The Points Guy.

The shift away from points was greatly accelerated by the COVID-19 pandemic. After lockdowns and thwarted plans (and halted the travel behavior of even the most seasoned aforementioned road warriors), guests wanted to take back control of their lives through revenge travel. Even the most points-centered website in the world started wondering if points-based hotel loyalty programs would continue to be worthwhile.

At the same time, guests realized their role in getting hotels to meet their expectations by expressing their preferences and voting with their wallets. For example, just two years after the onset of the pandemic, 78% of travelers preferred to stay in an eco-friendly location at least once in the coming year, with 81% of travelers valuing sustainable travel.

This is when the crack in loyalty points programs started to really show. With guests looking for new and exciting experiences to make their lives their own again, loyalty points lost their luster. Digital transformation only widened this crack, fueling guests’ push for convenient, novel, and exciting experiences that made them feel “understood.”

Points programs also became so commonplace that they stopped being exciting or enticing. Simply put, points got boring. They’re not as attractive as instant rewards, and they lack personalization. According to PwC, 40% of business travelers choose a loyalty program that they believe will give them more personalized experiences. Hoteliers who want to stand out from the herd need to use their guest data to create unique loyalty offerings.

Points have also declined in popularity as younger generations have gained dominance in the industry. As Deloitte shared at NAVIGATE Miami this year, Gen X, Millennials, and Gen Z will make up nearly 90% of trips by 2030, with the younger two generations representing over half of all trips. Deloitte data also shows that Millennials and Gen Z both have an increased enthusiasm for travel after the pandemic, as well as a strong preference for experience-based rewards.

Four decades since their inception, it’s time to give loyalty programs an upgrade.

Points are out — experiences are in

Ellis Connolly, Chief Revenue Officer at Laasie, an AI-powered loyalty platform, had this to say about the allure of experience-led rewards on the Hotel Moment podcast:

But what if there were unique experiences that were in the market that you could propose as reward content for someone traveling? Now you’re not just giving somebody points.

He went on to say, It’s about how do we take reward content that aligns guests to specific types of experiences, maybe even down to specific types of brands, and then allow the hotelier to leverage that data to re-engage with those guests with content to help email open rates, click-through rates, and driving more revenue?

If guests have an average of 5.1 positive experiences at your property, they’re more likely to become a loyalty member. Personalization on-property and online is the lever that makes a difference. Guests will tell you what they want if you listen. Gathering and actioning feedback is one part of the equation — but you also need to analyze all the clues that guests leave behind in the form of guest data.

One hospitality group that is knocking experience-led loyalty out of the park is Ennismore’s Dis-loyalty membership. In exchange for a small monthly fee, members receive 50% off of stays at newly opened hotels, 20% off at properties they’ve never visited before, 10% off return visits, and much more — not to mention a free barista drink every day at a hotel coffee bar. It’s a truly creative approach to loyalty, with not a point in sight.

I recently had a conversation on the Hotel Moment podcast with Carlo Del Mistro, Chief Digital Officer at Ennismore, where he shared about how the program makes the most of their guest data to drive ancillary revenue. He explained, Data is clearly at the core of what we do. And one of the reasons why Dis-loyalty is such a powerful tool is because it allows us to have a clear vision of our members' spending habits and their travel habits.

Food and beverage is particularly important to personalizing the guest experience. As Del Mistro shared, The whole atmosphere of the hotel, the F&B is a key to what we do. He continued, We have quite a significant number of members that are focusing more on the F&B experiences… then we have special offers in certain periods where there's a higher discount as well. So we have members that come to our hotels for meetings, and then they become Dis-loyalty members for their free barista drink … maybe they start with F&B, but then they stay with us for travel.

It’s a perfect example of what experiences mean for your guests. Ennismore is doing things differently by creating a unique loyalty program that exposes guests to their entire portfolio while adding value to their stay.

You can’t get the same value-add by reaching 500 loyalty points. The incentive is missing. The incentive comes from an experience-focused loyalty program that is data-driven and tailor-made to each guest. It’s why 63% of executives are waking up to the fact that their loyalty programs need to change.

The future of loyalty programs

Creating a loyalty program is just as much a business pursuit as anything else in your hotel. And just like any business initiative, you need to make decisions based on data. And to get an overall view of guests’ total spend, you need technology that can collect data from across the guest journey and synthesize it into guest profiles that give you a 360-degree view of guest behavior.

You need a Customer Data Platform, or CDP.

A CDP centralizes guest data so that you can analyze what is meaningful to your guests and design a loyalty program with their preferences in mind. With robust guest data at your fingertips, you can personalize the guest experience from pre-arrival to post-stay. Guests will notice, especially if you reward them for returning.

Loyalty programs are part of the journey to fortify your brand identity. They are just as much a part of the guest journey as other touchpoints, like booking and check-in. As you build a loyalty program around experiences, be sure to infuse an experience emphasis in your marketing messaging as well, whether that’s via email or even over the phone. Bookers will love to know that your hotel isn’t all about points and that you’ll reward them with something they’re interested in.

Looking for practical tips on building a relevant, revenue-generating loyalty program with your guest data? Stay tuned for our next installment in the Hospitality Net Thematics series on data and business intelligence.

About Revinate

Revinate empowers hoteliers to directly connect with their guests.

Our Guest Data Platform and communication solutions unlock revenue for hoteliers and put them in control of the full guest experience — initial research, booking, check-in, throughout the stay, and even after check out — all via the communication channels that guests prefer, whether it's voice, text, email, or web.

More than 12,000 hotels globally bank on Revinate to drive direct revenue and deliver delightful guest experiences.

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