Crossover Rewards and the evolution of loyalty programs

This past week saw perhaps one of the most significant announcements in the evolution of loyalty programs in recent years: Crossover Rewards from Delta and Starwood. The two have teamed up to change the way hotels and airlines work together to reward their most loyal customers, and the implications could be quite far-reaching across the industry. Airline and hotel programs have partnered before, but none to this depth of integration.

Crossover Rewards is focused on the elite members in each program, the type of customers which the programs work hard to attract. From time to time hotels have offered trial elite status promos to airline elites. That can build a short-term bump in customer base but it doesn’t seem to have the long-term effects that the hotels are looking for. The new Crossover Rewards program is built to be a long-term solution, not a flash-in-the-pan change to the numbers.

For elite members in either program the main bonus is getting to earn both hotel and airline points for activity on either of the partners. The only thing close to this historically was Hilton‘s Double Dip program and that meant earning airline points in lieu of extra hotel points, though it is also available to everyone rather than just to elites. Crossover Rewards allow for elites to earn points in both programs without sacrificing earning on either side; that’s a pretty significant step forward.

For top elites in both programs – Platinum elite on the SPG side and Platinum and Diamond Medallion on the Delta side – the benefits are even more significant. Rather than a one-time status gift which the customer must maintain through "natural" qualification activity the Crossover Reward program will be granting an elite-light level of benefits. For Delta Platinum and Diamond Medallion members Starwood will offer many of the same benefits as the SPG gold tier, including priority check-in, complimentary room upgrades (no suites) and free internet. For SPG Platinum members Delta will offer many of the same benefits available to Silver Medallions, including one free checked bag, priority check-in and priority boarding. It is not a full elite status – no bonus elite points or priority service other than on the day of travel – but it is definitely more than what everyone else gets. And, more significantly, the benefits are valid so long as the partnership survives, not just for a trial period.

Finally, it is worth noting that the earning rates for points on the Crossover Rewards partner are based on spend. While this is normal in the hotel loyalty world it is decidedly not in the legacy airline loyalty programs. For SPG elites the earning will be one Starpoint per dollar spend on the base fare, excluding taxes, fees and surcharges. It is not much of a surprise that Delta has the ability to track this data; they recently announced intentions to put similar metrics on elite qualification in coming years. For Delta Medallions the earning will be based on room rate only at Starwood hotels; ancillary spend will not earn SkyMiles. While not groundbreaking overall, this approach is definitely another move in the direction of tying elite benefits to revenue. No surprise that Delta is on board with that given their recent announcements regarding similar plans for 2015 Medallion qualification.

Perhaps the most impressive thing to come from this change is that there doesn’t actually appear to be anyone who will lose with the changes. Starwood has committed to prioritizing their own elites over the Delta Medallions for room upgrades and there will be no competition for Delta upgrades as that isn’t one of the benefits. Earning crossover points doesn’t cost customers earning opportunities in the main program; it is purely additive. And the other benefits – waived fees for various services and priority access – doesn’t really cost anyone else anything.

The two companies would seem to have almost nothing but upside from the changes, too. Yes, they will forgo some revenue on the ancillary fees side of the ledger. And there will be some costs to handle the points earning. But the partnership opens up a strong marketing avenue to top travelers without significantly diluting the benefits for their existing elite customer base.

This may prove to be an enhancement which is actually beneficial to both customers and companies. There are far too few of those happening these days.