This article originally appeared on hetras.com and was written by Agnes Stockburger. Minor edits have been made by Net Affinity – the original article can be read here.

One of the earliest loyalty programs on record dates back to 1793. That’s 223 years ago. We’ve been doing this song and dance for a long, long time. The burning question is: is loyalty still relevant?

In this fast-paced, technologically-driven world where the best deals are a click away, does customer loyalty still exist or has the paradigm shifted?

For this three-part series, hetras had a chat to three industry leaders to get some answers. Net Affinity has also had a look at loyalty for independent hotels in particular. Here’s our guide on best practices, how small hotels can find success with loyalty programs, and the pros and cons of creating your own versus outsourcing it.

Is it Time to Rethink Loyalty?

Loyalty is a hot topic among hotels — particularly boutique and independent hotels. Some believe that loyalty programs work, others that they work with a few tweaks, while others still see them as relics of a bygone era: expensive, nostalgic, and no longer relevant.

One thing is certain: direct business comes at a lower CPA that most other business, and it hinges on loyalty. Securing loyalty is the way to beat out the OTAs and other competition. The theory goes: if a customer is loyal to you, they won’t cast their eyes further afield. The practice is a little messier. There are two main reasons for this:

  • Technology and the environment
  • Millennials

Technology and the Environment

The immediacy and accessibility of the internet has changed everything. A number of recent studies have found that consumers are now researching and booking in micro moments and on smart devices, rather than in solid, dedicated time slots.

Potential customers have instant access to price and venue comparison sites, photos and reviews. This is where most of the decision process happens.

“Every day a regular person has almost unlimited options for choosing one single product. That makes it hard for programs to survive,” says Antonio Hoyos, revenue manager and head of the reservations department at Infinito Hotel and Pampa Hostels.

Guests can quickly and easily determine where they can get the best price and the best overall deal. They no longer rely or count on loyalty programs to make that happen. There is also competition offline. Just about every service and product provider — not just hotels — has some kind of loyalty scheme. Credit card companies, hotel chains, airlines, OTAs and various conglomerates offer rewards to returning customers.

“Savvy travelers of today don’t just participate in one loyalty program but in many. Therefore, the value of a loyalty member in any one program is being diluted,” says Christian Boerger, corporate director of revenue management and distribution at Pacific Hospitality Group.

“An OTA gives a very large range of options, already within a program. If a person uses a hotel program, their options are cast down to one,” Hoyos adds.

Yikes! So how do you approach loyalty in an environment in which guests can Google their best options and easily compare offers from a big pool of choices? The answer lies in addressing what is truly valued in today’s world. In an environment of endless options, what’s missing is a fixed, limited, concise clarity. Guests need less, not more, noise. How does that work in the context of loyalty programs? Boerger says the key is:

  • The ability to differentiate one’s product and services from those of the competition
  • Avoidance of any kind of commoditization, both as it relates to a product/service and price
  • The ability to make it as easy as possible for the customer to recognize the value provided
  • Acquiring valuable, likeminded customers

In simple terms: stop competing on price — that’s a hard (if not impossible) battle to win — and start competing on value and experience.

Millennials

Young travellers are the other piece of the conundrum. Things were humming along just fine, guests were storing up points on their hotel loyalty cards, coming back for seconds and thirds – and then came the millennials. Or rather, then came a new era of travel, and younger travellers have been the fastest to adapt and demand further change.

Marketing to millennials is a different beast than selling to any other generation. Millennials aren’t tied to any particular place or brand in the way their predecessors are (although more and more are also coming ‘untethered’). This is a clarion call for change to traditional loyalty programs, when you consider that they play a significant role not only in their own travel, but also in how other generations book.

According to travel data company, Adara, 87% of millennial respondents research for and provide booking assistance to their friends and family. They are influential, and obviously becoming a larger and larger segment of traveller as time marches on. The oldest millennials are now 35, after all.

Luckily, to say that millennials have no loyalty is simplifying things too much. It’s not that millennials don’t have loyalty; it’s just that they are loyal in different ways and for different reasons. The key to securing their return business hinges on understanding them and their process.

Angelika Viebahn, director of revenue and distribution at Ameron Hotels, says millennial travelers are loyal to their community and check what’s in or out based on that. When it comes to loyalty programs, she says, millennials often don’t participate because they can get better offers online.

“They no longer see a reason for having it,” she says.

Hoyos agrees, saying that while previous generations felt comfortable with traditional loyalty programs, liked the recognition and knew they’d have special attention and benefits, millennials do not. “[Loyalty] programs have to evolve alongside our client’s behavior and needs,” he adds.

What are those needs? Boerger notes that millennials seem to focus more on convenience, location and experience as opposed to collecting points for only one specific program.

“Fun and personalization play a way higher role than they did for Baby Boomers,” he says, “There is also a difference in terms of expected benefits; while a road warrior would expect to carry his physical membership card with him at all times, check-in at his red-carpeted check-in desk and stay on an executive floor; millennials might look more for effective pre-arrival messaging, online check-in, keyless entry, exclusive club access or late check-outs.”

Your cheat sheet to reaching millennial travelers

  • Reevaluate and refresh existing approaches to loyalty
  • Note what millennial guests gravitate to in general
  • Note what millennial guests value at your hotel
  • Keep abreast of what’s “in” and can be included in your offer
  • Focus on creating a guest journey or experience rather than just a stay
  • Consider whether you can include any add-ons that might add to a millennial traveler’s experience (such as developing relationships with local restaurants or tour groups)
  • Consider your presence on and engagement with social media

Conclusion

Loyalty has changed – the debate of perks vs points alone proves that – but it’s still a hugely valuable commodity. Don’t throw it away, or pretend that guests who book your ‘loyalty rate’ on an OTA are the same as those who book it on your hotel website.

Independent and boutique hotels have unique flexibility and opportunities to build creative experiences for their loyal clientele. What can your hotel do?