Satisfaction Trends: Companies update loyalty programs, increase effectiveness

Categories: Building Guest Loyalty; Trends
As published in: Hotel & Motel Management
Date: June 19 , 2006
Author: Jonathan Barsky, Lenny Nash

Some guests will go to great lengths to stay at a hotel that contributes to their member benefits while other programs are less effective in their mission to persuade guests and change behavior.


One of the measures we use to evaluate the success of a brand's loyalty program is called loyalty program effectiveness. This critical measure identifies the amount of influence a loyalty program exerts in hotel selection. Some guests will go to great lengths to stay at a hotel that contributes to their member benefits while other programs are less effective in their mission to persuade guests and change behavior.

In 2002, 32 percent of guests said that the loyalty program was a key factor in deciding where to stay. That number has grown steadily to 34 percent in 2005. The most effective program in the industry, and the most improved, is Hilton Hotels Corp.'s Hilton HHonors, which has seen effectiveness grow from 34 percent in 2002 to 39 percent in 2005. Marriott International (Marriott Rewards) has the next highest effectiveness level at 38 percent. Cendant Hotel Group's program has seen the largest decline (7 percent) over the same period.

Change in Loyalty Program Effectiveness: 2002-2005
Name 2002 2003 2004 2005
Cendant 27% 28% 19% 20%
Choice 28% 31% 31% 32%
Hilton 34% 35% 36% 39%
Hyatt 29% 27% 23% 23%
InterContinental 33% 32% 31% 32%
Marriott 37% 37% 37% 38%
Starwood 29% 29% 31% 29%
Industry 32% 33% 34% 34%

Results based on average performance of all brands within each company.
Source: Market Metrix

 

Interestingly, as shown in the accompanying chart, the top 10 brand programs are all part of just three hotel companies: Hilton, Marriott and Choice Hotels International (Choice Privileges). Homewood Suites ranked first in program effectiveness with 40.5 percent. This indicates that 40.5 percent of Homewood Suites loyalty-club members said their membership was very important in selecting where to stay. Hilton Garden Inn was second and Fairfield Inn by Marriott was third.

Hilton, Marriott and Choice are improving their loyalty program effectiveness though a combination of rewards (points, miles and merchandise) and recognition (identifying needs, making sure guests are called by name, delivering personalized services).

Loyalty program efectiveness: Impact on hotel selection

For example, Hilton Hotels allows its HHonors VIPs to have a choice of points or standard upgrades. Hilton can note frequent guests' preferences via OnQ technology for the guests' next stay no matter which Hilton brand they choose.

Marriott Rewards members can enter their preferences online—foam vs. feather pillows, high floor or low, newspaper choice—and have them communicated to eight Marriott brands globally.

Choice Hotels' rewards program provides free local calls, free incoming faxes and extended check-out.

Here are some innovative approaches that other hotel brands are employing to increase the value of membership and differentiate their brands.

  • Starwood Hotels & Resorts Worldwide recently introduced a "surprise and delight" program that randomly issues its gold and platinum members event tickets for such attractions as the PGA Tour or Major League Baseball game.
  • InterContinental Hotels Group offers its members a program called "Any Hotel, Anywhere" that allows points to be redeemed for an American Express prepaid lodging card ($100-$250). The cards are accepted at more than 500,00 hotels worldwide—even those not belonging to InterContinental.
  • Last fall, as a special promotion to its members, InterContinental Hotels Group gave its gold and platinum Priority Club Rewards members an opportunity to redeem loyalty points to see the rock group U2 during its recent tour.
  • Perhaps the most innovative approach is offered by Jameson Inns. Repeat guests earn credit towards the purchase of Jameson Inn stock equal to 10 percent of their room rate. You have to stay at a participating hotel for at least three nights in order to start accumulating credits.

These new approaches not only are designed to make existing customers more loyal, but also will attract new guests who will help companies endure the next economic downturn.

Jonathan Barsky and Lenny Nash work for Market Metrix LLC (MarketMetrix.com), a firm that provides customer and employee programs for the hospitality industry. For more information, call (800) 239-7515.