Why Hotel Loyalty Won’t Shed the Spotlight in 2017

by Mark Brandau, Director of Content | November 14, 2016

It certainly feels like 2016 has been the year of the loyalty program — which could also make it the year of direct bookings, of online travel agency innovation or of hotels preparing for a downturn in the industry cycle. But hotel loyalty will stay top of mind in 2017 and beyond.

More importantly, I think the discussions and strategies around hotel loyalty will continue to shift, because more properties and hotel companies are moving away from undifferentiated programs that just trade points for free room nights. Momentum is building for Personalized Loyalty Pricing, in which hotels put their customer data to use by producing unique, fenced rates for individual loyalty club members instead of applying a one-size-fits-all discount to a broad customer segment.

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As we head into next year, OTAs and big players in metasearch like Google will keep trying to break new ground in the services they offer to hotels and their guests. All of those efforts are aimed at adding market share in the bookings they capture from hotel guests. Your property’s primary tactic for fighting back is to drive direct bookings.

Fellow technology companies StayNTouch and SiteMinder have shared their thoughts on the effectiveness of cloud-based and mobile solutions for growing direct bookings and ancillary revenue. We at Duetto want to focus on Personalized Loyalty Pricing as another tool for this job, using the customer data gathered from and applied to a hotel’s entire tech stack.

Here are the five key benefits for adopting Personalized Loyalty Pricing:

1. Making customer data actionable

Most hotels already are trying to gather as much data as possible about their customers in order to serve them better. Perhaps a hotel is only able to track a guest’s frequency or most recent visits, but many can now see how much a guest spends across the entire property with each stay.

However your hotel collects its data, it has some way to determine which guests contribute the most to a property’s profitability. A loyalty program built upon Personalized Loyalty Pricing gives hotels a reason and a method for segmenting all that data into as many groups as they want, in order to reinvest more into the highest-value guests through more competitive room rates and ancillary offerings.

2. Driving more direct bookings

There are two ways individualized loyalty rates spur consumers to book direct with a hotel rather than begin their travel search on an OTA or Google. First, the rates would be more enticing than what’s offered publicly on an OTA (because rates are fenced, they don’t break rate parity agreements). Over time, guests migrate toward the channel that consistently offers the lowest rates, and in this case it would be the hotel’s brand.com site.

Second, the personalization makes each guest feel of high value to the hotel and deserving of special treatment. Consumers know when they’re getting a one-size-fits-all offer that doesn’t reflect their actual loyalty and spending to a hotel. If that’s all you’re giving to your loyalty club members, they’ll defect to another hotel when that brand’s cookie-cutter offer is more enticing than yours.

3. Reducing customer acquisition costs

It is nearly always more profitable for a hotel to market to its loyalty club members and fill rooms with those guests than it is to drive up occupancy with aggressive promotions with OTAs and paid search. If loyalty members are consistently coming to you directly, you don’t have to spend more money to “re-acquire” them on an OTA again.

Yes, consumers taking advantage of Personalized Loyalty Pricing will receive a price marked down from the transient rate for that booking date. But the strategy gives your hotel the ability to ensure that the discount is more favorable than a commission you would have paid to an OTA or in a PPC campaign with one of the metasearch players. It’s all part of an Open Pricing philosophy where the room rates you offer, even to loyalty members, account for every customer’s value to your property, as well as for the demand for any room type on any booking date.

4. Differentiating your loyalty program

Many of the hotel industry’s largest loyalty programs have grown rapidly in 2015 and 2016, but engagement with those programs is not keeping pace. Many of the members are lapsed users who belong to several different loyalty clubs. Also, many would just as soon book a room through an OTA, whether or not they’re getting points every time they book through a hotel’s loyalty club.

When every brand tries to entice sign-ups with the same ancillary freebies — Wi-Fi, parking, breakfast — all loyalty programs end up just as undifferentiated as before.

That’s because points miss the point. If members don’t have a time in sight when they’ve amassed enough points to redeem for free nights, they won’t stay engaged. But with Personalized Loyalty Pricing, they’re receiving instant gratification in the form of an individual offer that’s lower than any rate they can get from an OTA.

5. Fostering greater collaboration among hotel departments

The revenue management team will have to work with the sales and marketing department by necessity to pull off Personalized Loyalty Pricing. The revenue managers will need to know the market dynamics and the demand for each booking date, so they know the appropriate amount to reinvest in their loyalty club members depending on the day and how the hotel is filling up. That same information should inform the kind of promotions the sales staff puts out into the field.

All that pertinent customer data that helped the RM and sales teams do their jobs should be shared with the front desk and operations staff. Guests’ known preferences should be incorporated into their stay beyond the booking process. The least your staff can do is to say, “Welcome back,” when a loyalty club member shows up for a repeat stay.

Personalized Loyalty Pricing is but one of several ways hotels can grow their direct bookings and climb higher in the sales funnel to compete with OTAs and metasearch sites for market share. On Dec. 6, Duetto will participate with StayNTouch and SiteMinder in an exclusive webinar to discuss the three most important hotel technology trends affecting Revenue Strategy in 2017.

Click here to register for the webinar.

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Mark Brandau, Director of Content

Mark joined Duetto in January 2016 from market research firm Technomic, where he began his content marketing career after nearly a decade as a business-to-business journalist covering the restaurant industry. As assistant director of content, he helps steer the creation and promotion of all Duetto's content across its blog, video and social-media platforms, as well as sales collateral and internal communications.

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