Loyalty programs have been a part of the hospitality game for decades. And for as long as they have been around, they’ve been the subject of much debate. Like any strategy in hospitality, some consider loyalty programs an essential part of their business and others have found them to be nothing but a liability. What it comes down to is discovering the right solution for your business. With new technology and evolving guest expectations, rewards programs come in all shapes and sizes. You just need to find the right fit.
Here’s a quick guide highlighting the benefits of a loyalty program and the various options available to hoteliers:
When implemented well, a loyalty program can do a lot for your property. Offering benefits for continued patronage builds an emotional commitment that makes a guest less likely to book somewhere else and more likely to act as a brand ambassador in-person and online.
Loyalty programs are also a great way to incentivize direct bookings, thereby improving profit margins. In fact, a recent study conducted by the School of Hotel and Tourism Management found that a hotel’s spending on these types of programs was associated with better performance and improved overall gross operating profits. They ultimately concluded that there is “strong and scientific justification regarding the investment budget on loyalty programs.”
How it works >> Points-based systems are the more traditional option available. These loyalty programs award points for purchases made at the property, from room nights to products and services, which can then be redeemed for discounted services and other perks at a later date.
Tips for success >> The biggest headaches that guests have had with traditional loyalty programs came from complicated rules and annoying restrictions. To run a successful program, member points should never expire, and be easy to redeem. Avoid placing restrictions on and setting black-out periods for reservations made with rewards. It’s also a good idea to offer a variety of options for points redemption. Having scaled options (from little things like a complimentary beverage to large rewards like a free night’s stay) will make all members feel like they have a chance to benefit from the program.
In addition to creating more flexibility in the points-redemption process, you may also wish to include more options for earning points in the first place. Offering rewards for engagement on social media and online reviews can be an excellent way to generate valuable UGC (user generated content), and members will appreciate the opportunity to score points in other ways.
How it works >> Instant rewards is a much newer concept in the world of loyalty programs. Many travelers today (particularly Millennials), are looking for immediate value. The idea of a free stay in the distant future just isn’t compelling enough to sign up now. For this reason, many hotel brands that cater heavily to a younger cohort have adopted models that forgo traditional rewards for smaller perks (like free wifi, room service vouchers, or a complimentary beverage) that can be earned through immediate actions taken (like booking direct, sharing on social media, or signing up for the rewards program). Members get the instant gratification they’re looking for and don’t have to worry about earning points and navigating the redemption process.
Tips for success >> Like anything else in business, you need to analyze the numbers to ensure you’re creating a model that benefits your business. You need to know how much an action (like booking direct or posting a positive review) saves or makes your business and then choose an appropriate reward within that margin.
How it works >> For many independent hotels, running your own rewards program isn’t particularly feasible. With just one property, it can be difficult for members to accrue enough points for it to be meaningful. This is where partnership programs come in. Companies like VOILA and Stash Rewards allow independent hotels to sign up and benefit from a shared loyalty program. Members benefit from more property options worldwide, and your hotel will gain access to a much larger pool of (already incentivized) customers.
Tips for success >> All partnership programs are different, so make sure you know what you’re signing up for. If they take a commission for all bookings made using the program, you need to know that it’s going to be worth it. You’ll want to look into the demographic that the program caters to, the number of members, and the traffic the website receives. Be sure to read lots of reviews⏤paying particular attention to those from properties similar to your own.
A loyalty program can help your business build a dedicated base of returning guests and maximize direct bookings. Consider implementing one at your property today.