Is it worth independent hotels having a loyalty program?

Is it worth independent hotels having a loyalty program?

Loyalty programs for small independent hotels are a cost-effective way of driving direct bookings and increasing the lifetime value of guests. Data from Expedia Group’s 2023 Traveler Value Index shows that 53% of travellers enrolled in loyalty programs say that it is now more important to stay with providers where they are a member than it was pre-pandemic. 52% of consumers value discounted pricing from their travel loyalty programs. All of this data points to a tangible opportunity for hotels to optimise their pricing strategies with offers that will attract high-value travellers over and over again. 

With the likes of continuing to compete more aggressively with independent hotels wirth reward programs like Genius, it's a no-brainer as an independent hotelier to consider the benefits of your own loyalty program.

According to a Deloitte Hotel Customer Loyalty survey, “to turn your customers into enthusiastic, even passionate brand devotees, you need to understand the patterns in how different travellers view and use rewards. You have to use that insight to craft a program that stands above the ordinary and the expected.”

It has been the norm for business travellers to gravitate towards hotels offering a decent loyalty program. While this is still true, Skift Research released last year showed that between 2020 and 2021, the rate of leisure travellers who were loyalty members of a hotel they stayed in during their most recent trip went from 43% to 47% (the rate of business travellers remained stable at 64%).

According to Skift, hotel loyalty program members contribute between 30% and 60% of room revenue and tend to pay higher average daily room rates (ADR) than non-members.

An Accenture study found that 29% of customers wish that the rewards on offer in loyalty programs they took part in were more interesting.

Try to approach your loyalty program with an open mind and a dash of creativity. 

To help you get started, here are a few key factors of a successful loyalty program.

Finding a successful partner to work with

A CRM provider can help you get started with a loyalty program. 

CRM software options range from large ones like Salesforce to hospitality industry-specific ones like Revinate.

Partnering with a CRM provider to create your own loyalty scheme offers the advantage of creating a unique offering. A good hotel CRM is an invaluable tool when you’re driving direct bookings as it can create a loyalty program that’s personally fine-tuned to your guests.

What your loyalty program should offer

Traditionally, points and perks are what nearly all large chains base their reward programs on. Key factors in their success include return on spend, unusual uses for hotel points, flexibility in redemption, and perks for membership.

However, immediate and uniquely valuable offerings offer a great deal more value to guests than long-term points programs - and this is especially true for independents.

Using an instant gratification loyalty model, hotels enjoy increased booking conversion of 43% on average via a low-cost channel

If guests can’t redeem points at a large number of properties across the globe, how much do they really matter?

According to a survey by Maritz Loyalty Marketing, 70% of customers abandon loyalty programs because it takes too long to gain enough points

As an independent hotel, try to focus more on developing a program with a ‘punch’ that will reel  more travellers in. If you have a strong handle on what your guests like, work that in to your rewards.

Would they like a box of truffles and a bottle of wine on arrival? Or maybe it's simple perks like free wifi, priority check-in and complimentary room upgrades.

Use communication and value to engage guests 

Communicate clearly and frequently with your loyalty program members. Highlight exactly how your program works and what perks they are eligible to receive. Make the redemption process as easy as possible.

Communicating well and frequently will help to keep guests interested in your property, and will remind them of your unique features and why they became members. This is one area where a CRM is an extremely valuable asset.

Read our blog on how email marketing can help to increase your conversions

Your hotel needs a memorable loyalty program. Marketing it to your customers in an engaging, fun or clever way will help. 

Avoid the expected and aim for the extraordinary

One legitimate worry lurking in hoteliers mind is commoditization. It’s hard to have a unique loyalty program for your guests with a competitor set ready to mirror any successful feature.

As programs become more similar, they become less powerful.

Focus on your points of differentiation. What makes your hotel itself unique? 

Loyalty programs are a long term commitment for your hotel – if you don’t follow through, neither will your guests.

Set goals for your loyalty program

What do you hope to gain from your program? Is your program focused on customer acquisition or increasing spend among your existing guests?

To measure these, look at incremental revenue and contribution from the program pre- and post-launch. 

What if your goals are to increase repeat bookings or to encourage direct bookings to avoid paying commission fees to OTAs?

They are extremely valid reasons to create a loyalty program - often they overlap and go hand in hand.

Make sure you’re not confusing your goals. Have a neatly developed, revenue-focused strategy to measure your success.

The tiered analysis system

Cornell’s study offers a tiered approach: matching the level of evaluation to the firm’s size and available data. That means whether you have a 10 or a 500 bedroom property, you can use it. 

This is a scalable way to look at your loyalty program. Take the data in manageable chunks and figure out what meets your goals and what doesn't.

  • The simplest option for hotels to monitor their program is customer surveys. Hotels can use customer surveys to find out how their guests feel about the program. Alternatively, they may rely on social media to monitor consumers’ assessment of the program and any changes to that sentiment. This lets you understand what your guests feel the pros are, the cons, if the program is doing enough, and get ideas for improvement.
  • A more sophisticated approach is to look at customer attitudes, signup rates, and look at the data in terms of enrollments, points redemption activity and revenue. Hotels can evaluate program effectiveness at every level and maintain a regularly updated management dashboard for their program.
  • At the most advanced level, hotels can 'optimize their programs based on a comprehensive set of attitudinal, behavioural, and revenue data.'

The amount of time and effort hotels put into analysing their loyalty programs depends on the resources they have to put into it. It also depends how dedicated they are to evaluating the program.

We recommend putting as much effort as possible into understanding how your loyalty program affects your revenue and your guests. Knowledge from accurate data is the only reliable way to grow profitability.

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