A rise in loyalty point redemption is sparking hotel brand companies to leverage strategies that drive greater brand loyalty among untapped traveler segments.
One such segment is the less-frequent traveler, said Gilbert Arredondo, senior vice president of revenue strategy at third-party management company Remington Hotels.
He said the road warrior or power traveler, who books 50 or more overnight hotel stays per year, is already especially brand-loyal, but there’s untapped potential to capture those who travel and book less frequently.
Remington manages hotels affiliated with Marriott International, Hilton, Hyatt Hotels Corp., IHG Hotels & Resorts, and Wyndham Hotels & Resorts brands.
"You've always had the power traveler who's going to stay 50-, 60-plus nights a year in a hotel room. Those aren't going away. I think [brands are thinking] how can we tap into the person who travels once a month, couple times a quarter, who probably generates 20-30 room nights a year but doesn't qualify for anything but they're still valuable," he said. "If we can tap into those and make those folks a little bit loyal, maybe they then move up to the next [status] or if not, is there something we can do to make sure they're always loyal to us?”
Arredondo said there was an uptick during the pandemic of travelers booking a couple of overnight leisure stays a few times a year. He’s noticed that many hotel brand loyalty programs have reduced the number of nights needed to obtain status.
Marriott, for example, requires 10 overnight stays in a calendar year to reach Marriott Bonvoy Silver Elite status. IHG significantly dropped its threshold to reach its first two status levels, Arredondo said.
"If you think about that, that's three or four trips a year for a few nights, you become silver. It doesn't per se get you a lot; it gets you a couple of perks but, hey, you hit the first threshold," he said. "I think people like that."
Nearly all brands have also rolled out the ability to combine cash and loyalty points. Arredondo expects that trend to continue as many travelers accrued points during the pandemic but might not yet have enough to redeem for a reward.
"If you have saved up 20,000 points over the course of a couple years through your travels with Marriott hotels, and you want to go to New York City and stay a couple nights [but] you don't have enough points, you can technically take your 20,000, give it to Marriott and they'll tell you the difference for the stay and cash," he said. "I think you'll see more and more of that. IHG was kind of the pioneer on that, and Hilton and Marriott have really pushed that."
Michael Herr, regional revenue manager at third-party management company McKibbon Hospitality, said the brands continue to evolve their loyalty programs from an engagement standpoint. Brands are looking to be more tech-savvy and offer new features on their mobile apps, he said.
McKibbon Hospitality manages hotels under brands including Hilton, Kimpton, Hyatt, Marriott and Sonesta.
Guests “now have the availability to choose the room that you want, the floor that you stay on and to get a key pushed to your phone all before you step foot into the property,” Herr said. “Not that we want to limit that guest interaction, but the engagement is still taking place in providing them the option through their loyalty programs to have this benefit. I think [this] is where the brands are taking it from the traveler’s preferences.”
Andrew Jordan, chief marketing officer at global third-party management company Aimbridge, said in an email interview that hotel brands, like many other companies, are looking for ways to appeal to customers and strengthen brand loyalty as demographics shift.
“As we work with all the brands, we see frequent guest programs evolving to resonate with post-pandemic travelers and as consumer preferences change. The biggest shift post-pandemic may be the work environment — remote and flexible — which has implications for how to optimize hotel stays. And bleisure is here to stay,” he said.
Are Younger Generations Keener to Loyalty Programs?
As baby boomers retire and their travel shifts from business trips to predominantly leisure, millennials and Gen Z are moving much more rapidly into the business travel space, Herr said.
“What we’re seeing is they’re searching for an experience or a location more than the brand itself,” he said. “But I think the brands have also grasped onto this. AC Hotels, Moxy, the new Spark by Hilton is giving them opportunities to fulfill that need for the experience with these sub-lifestyle brands that [the brands have] all been working on the past several years. We’re definitely seeing that it is a younger generation booking into these lifestyle brands.”
Arredondo said the younger generations seem to like rewards programs: “I just don’t think they’re as loyal, unless it’s a specific brand they truly like.”
“What I think you probably have is a younger generation with more breadth of reward programs. … There was a study done years ago: 50% of Bonvoy members were also Hilton Honors members and vice versa. Once, again, you have that window of travelers that probably stay at both; they’re not power users,” he said. “My guess is now you probably have folks who have four, five, six brand [loyalty programs]. I think the younger generations like collecting the rewards and probably are a bigger proponent of it and they probably have memberships everywhere. But the question is, can they accumulate it enough to make it worth their while? And that’s where I think it gets a little bit trickier nowadays.”
Ultimately, the biggest way to drive brand loyalty is by providing products people need, “and I think that’s why we continue to see the sub-brands come out,” Arredondo said.
“I really do think the brands are trying to segment the lifestyle of the travelers even more so the traveler can’t say, ‘Well there’s not really a hotel that fits what I want.’ The brands are saying, ‘We’ve carved out this new brand and this is how it’s different from this brand,’” he said.
Rise in Point Redemption
Arredondo said Remington doesn’t have internal data on how many times a traveler redeems points for non-hotel stays. However, it has found that hotel stays redeemed from loyalty points are up to pre-pandemic levels.
“People were redeeming points that they either had saved up through the pandemic … or they had credit card points that they continued to accumulate even though they weren’t personally traveling as much. We’ve seen those points stays increase tremendously in the latter half of ’21 and ’22,” he said. “We’re talking 30% to 40% up to 2019 levels.”
Much of this increase comes from the brands offering extra incentives for travelers during the pandemic, he added.
“Coming out of the pandemic in the latter half of 2021 and 2022, especially in the first half of 2022, occupancies are still relatively muted to 2019,” he said. “I’m sure people came out of the pandemic and probably got some pretty good deals while redeeming points where it probably would have cost significantly more prior to the pandemic to stay at x, y, z hotel in x, y, z city.”
Arredondo said a majority of brands focus redemption points on rooms, though there are also offerings such as gift cards and products in exchange for points.
Higher-Demand Weekends Result in More Reward Redemption
Herr said guests traveling for business, which has most notably picked up in the past few months, aren’t exchanging points for breakfast or upgrades as much as they historically have.
“We feel that they’re holding on to those points to execute a leisure stay down the road with their family. That’s where we’re seeing a bulk of these point redemption room nights coming in on our side — big events, sporting events, college graduations, concerts in different markets,” he said. “They’re utilizing that benefit, where maybe historically they wouldn’t have minded paying whatever the going retail rate was.”
On an average weekend when there's not an event generating demand, typically less than 10% of a hotel's business mix is reward redemption. On a busier weekend that’s generating more activity, reward redemptions take up between 20-30% of the bookings, he added.
“The brands do a good job of tracking [what hotel] is a high-redemption location and [what] is not, so you do get different benefits on the hotel side from exchanging those points. That way they keep everybody in a fair competitive space,” he said. “If you just end up being the property that absorbs the majority of those reward room nights because you’re a better property or you have a better location, they do compensate you at different levels to make sure that they’re offsetting the normal reimbursement.”
New Programs in the Mix
Hotel brand My Place Hotels launched its loyalty program, Stay Rewarded, in 2019. Despite debuting ahead of a pandemic when travel demand significantly pulled back, Irene Roberts, vice president of brand loyalty, said in an email interview that Stay Rewarded has consistently grown.
“Our loyalty base continues to stay, earn and redeem at an increasing rate. I’m not sure that our intent has been to compete with other loyalty programs. Our hotels compete within their markets and our industry, and Stay Rewarded is a value-add for our hotels and our guests alike,” she said.
Roberts said strategy development for the loyalty program was “relatively simple and founded on the question: How do we learn more about guests so we can best serve them? In the process, we engaged our largest demographics to ask them what was important, how they felt rewarded and how we could keep them feeling that way.”
Roberts’ team realized customers value control and independence. Thus, the value provided through the program needed to be unencumbered, she said.
“Points for cash just made sense. Our Stay Rewarded members like to know that they can spend their earned value wherever they want on whatever they want,” she said.
Hotel operators within the My Place Hotels system and their teams are the most prominent figures in the loyalty relationship, Roberts said.
“Beyond fundamentally maintaining quality, consistency and guest experience focus within the hotels, we have empowered and rewarded our hotel teams through Stay Rewarded. That approach continues to quite literally pay them dividends,” she added.
As travelers are more vocal about their expectations and experiences than ever before, Roberts said her team sees this as an opportunity for Stay Rewarded to consistently engage in conversation, listen, learn and adapt.
“Without a loyalty program, communications would be more transactional. But, with Stay Rewarded, we welcome our guests, build relationships with them and understand how to best serve them,” she said.