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Hotel Loyalty Programs: Loyalty Not Required

September 13, 2013
URL: http://www.entrepreneur.com/article/227711

A recent stay at the Omni New Haven Hotel at Yale in Connecticut could cost $189 before taxes with a $9.95 charge for Internet access and $4 for coffee from the restaurant. Or, for the clued-in traveler, that room charge could include Internet, complimentary coffee and a newspaper, a wake-up knock on the door and bottled water at turndown. The difference between the two? Joining Omni's free Select Guest loyalty program.

Now more than ever it pays to belong to a hotel loyalty program. A spate of hotels aims to make loyalty programs more valuable to customers more quickly -- immediately, in some cases -- with little extras such as coffee and the morning news (Omni Resorts & Hotels), free WiFi (InterContinental Hotels Group), free WiFi and health club admission (Fairmont Hotels & Resorts) and room upgrades (Small Luxury Hotels of the World). Those most loyal and most regular will reap the most rewards, but even the occasional traveler can play the field, holding memberships at dozens of hotel companies, and still get valuable perks.

Not playing the loyalty game is, "the same as throwing money in the trash can," says Brian Kelly, a former Wall Street recruiter who turned his points-maximizing road warrior experience into a business as The Points Guy, founder of thepointsguy.com. "Most programs are free so by not joining you're leaving money on the table."

Hotels insist they are making membership more transparent with instant gratification. "Right from the start, complimentary WiFi and health club access offer significant cost savings that guests can quickly grasp versus complicated points calculations or more ingrained service benefits," said Sharon Cohen, executive director of loyalty marketing at Fairmont. "This is especially important today as consumers are faced with multiple loyalty program offers and need to be able to understand right away where the value lies."

Smaller players such as Fairmont and Omni may feel compelled to offer instant rewards to get the attention of business travelers, though when it comes to perks like WiFi, even the larger players are capitulating to consumer demand; InterContinental newly instituted free WiFi this month to its higher membership tiers with universal access to all members beginning in 2014. Still, most major programs from operators such as Marriott and Starwood require a threshold of 10 or so nights to get extras such as room upgrades and late check-outs.

"Smaller brands know they have to compete against the Marriotts because they have such entrenched loyalty," said Kelly. "Big perks don't come until you spend a lot."

Incremental freebies are the bait by which hotels aim to cultivate loyal customers. A recent study by market research consultancy Mintel found 47 percent of customers were more motivated to join a loyalty program if it offered instant rewards, rather than strictly accrual points.

As a result, perhaps, travelers are flocking to loyalty programs. Between 2007 and 2012 membership in loyal programs grew by 50 percent, according to Market Metrix, a hotel consultancy. Now more than 40 percent of all guests are members in one or more frequent stay programs. Motivated by rewards, members are more brand-loyal than nonmembers. According to Jonathan Barsky, chief research officer of Market Matrix, members are more likely to pay more for a room, recommend a hotel, and are less price-sensitive than non-members.

The data hotels gather on customers offers them the opportunity to target repeat travelers with custom offers. Program managers can track where loyalists stay and how often, sending incentives if the gap between stays yawns. They can note whether you want the New York Times or USA Today at your door, and even what kind of pillow you like.

"A newspaper is a lot cheaper than breakfast," said Brian Kelly, noting the soft side of this marketing plan: to get customers to say nice things about them, especially in the age of Twitter. "I think a lot of hotels got away from that and now they're back working at word of mouth."