Feb 17 2010

Loyalty Program or Annoyance Program

USA Today has recently published two articles discussing hotel loyalty programs.  The first article discusses Hilton Hotel’s devaluation of their beloved customers loyalty points, and the second article discusses loyalty programs top complaints.  Neither article presents a pleasant picture for hotel loyalty programs.  One article focuses on taking away a benefit, a form of punishment, while the other article focuses on the loyalty program as an annoyance as opposed to a benefit. 

The author claims that “hotel chains are targeting their most loyal customers because they tend to travel more.”  Is this really the case?  There are several possibilities: (1) a consumer may travel a lot and join several hotel chains loyalty programs as reader, racer03 commented that he belongs to Hilton Diamond and Marriott Gold or (2) a consumer may travel a significant amount and belong to only one hotel chain.  I believe that most loyalty programs target the second type of consumer.  However, these loyalty programs are missing the true value of the first type of consumer who belongs to several loyalty programs.  If the loyalty program was truly effective, then members would not join multiple programs. 

InterContinental Hotels Group’s (IHG) Chief Marketing Officer for the Americas region, Eric Pearson, strongly believes in IHG’s loyalty program.  Pearson makes the assumption that “an average-level PCR [IHG’s loyalty program] member is twice as profitable as a non-member, and an elite-level member who stays more often is 12 times as profitable than an average member.”  The logic that high volume consumers are profitable is a misconception.  A strong inward cash flow does not equal a profit if there is an equally strong outward cash flow spent on  loyal consumers through perks, rewards,  and discounts.  In reality, an average consumer who may not create the most revenue, may be the most profitable.  

USA Today Articles:

Loyalty Programs: Study Reveals Top Complaints; Spam Tops List http://content.usatoday.com/communities/hotelcheckin/post/2010/02/marriott-rewards-hilton-hhonors-intercontinental-priority-club-rewards-choice-wyndham-loyalty/1

 Will Other Hotel Chains Follow Hilton in Devaluing Loyalty Points Next Year?http://content.usatoday.com/communities/hotelcheckin/post/2009/11/will-other-hotel-chains-follow-hilton-in-devaluing-loyalty-points-next-year/1