Posted by Ric Garrido

Hotel loyalty members are far from loyal is the conclusion from a new survey by Deloitte. Loyalty members distribute as much as 50% of their hotel stay spend with their non-preferred brands.

The Deloitte report “A Restoration in Hotel Loyalty: Developing a blueprint for reinventing loyalty programsis one of the more interesting takeaways I have from the Americas Lodging Investment Summit (ALIS) 2013 at the JW Marriott@LA Live this week. The report suggests hotel loyalty programs are broken based on the propensity of customers to change hotel brands for many of their hotel stays each year.

Adam Weissenberg, vice chairman of Deloitte, presented the loyalty report summary on a panel at ALIS.

My preliminary assessment of the Deloitte survey and report of hotel frequent travelers indicates there is a distinct division between high frequency loyal business travelers and travelers who seek out hotels more for leisure and value. Not surprising to me is the advice to redefine hotel loyalty programs with a personalization focus to reward high revenue travelers. Think of SPG’s 50 nights for suite upgrade certificates and 75 nights for higher points earning bonus instituted in 2012. Stay 100 nights at Starwood Hotels and get your own VIP Concierge.

Hotel loyalty programs may be changing for the frequent leisure traveler gaming the transparent system to earn loads of free nights and upgrades. Social media has reduced the opaqueness of hotel loyalty programs for social media users and technology may allow hotel loyalty programs to reinstitute opaqueness and differentiation. Or at least provide the best rewards to their most profitable guests. Personalization of rewards based on customer profile data mining may see hotel loyalty programs becoming more like casino loyalty programs. Free drinks are so much harder to come by these days when playing penny slots.

What Type of Frequent Traveler are You?

Deloitte grouped frequent traveler hotel guests into four types. [My comments are bracketed to indicate they are not part of the Deloitte report.]

The Proficient Traveler – Gen X and Baby Boomers pressed for time.

  • Average 10 nights per month in hotels.
  • Average nightly spend $210.
  • $26,000 average annual hotel spend.
  • Majority of stays luxury or upscale brands.
  • Desire free wifi
  • 58% of hotel spend is with preferred brand
  • 42% of hotel spend with other brands.
  • 24% of customers at risk of changing brand loyalty.
  • Proficient travelers rank hotel loyalty program higher than other three travel types.

The Newbie Traveler – Millennials driven by experiences; social and tech-savvy.

  • Average 8 nights per month in hotels.
  • Average nightly spend $200.
  • $20,000 average annual hotel spend.
  • Majority of stays luxury or upscale brands.
  • Want their needs understood and to feel hotel ‘values me’.
  • 49% of hotel spend is with preferred brand.
  • 51% of hotel spend with other brands.
  • 25% of customers at risk of changing brand loyalty.

The Moderate Traveler – Gen X and Baby Boomers. Patient. [Does the ‘patient’ descriptor indicate a traveler who is not an asshole when the elite loyalty line at the counter is not being serviced?] 

  • Average 6 nights per month in hotels.
  • Average nightly spend $170.
  • $12,000 average annual hotel spend.
  • upscale or moderately priced hotels
  • seeks value for money
  • free parking
  • free wifi
  • 49% of hotel spend is with preferred brand.
  • 51% of hotel spend with other brands.
  • 36% of customers at risk of changing brand loyalty.

[Obviously the free parking aspect excludes mostly luxury hotel stays for this group.]

The Mature Leisure Traveler – Baby Boomers and Seniors who go with the flow, pressure free.

    • Average 5 nights per month in hotels.
    • Average nightly spend $150.
    • $8,000 average annual hotel spend.
    • moderately priced hotels or stay with friends and family
    • seeks value for money
    • staff attitude [Does this preclude staying at some of those hip lifestyle brands?]
    • 51% of hotel spend is with preferred brand.
    • 43% of customers at risk of changing brand loyalty.

I think I fit mostly in the Moderate Traveler group. But my average nightly hotel spend is more like $80 to 100 per night for upscale and upper upscale hotels. I use hotel loyalty programs to travel frequently with big savings. I am in the traveler demographic hotel loyalty programs seek to reduce when they discuss moving beyond points.

Which traveler profile group do you identify with most?

 

Redefining loyalty

Redefining loyalty programs is likely geared for limiting the advantages and benefits received by savvy frequent travelers like me and most of you reading this blog.

Hotels these days don’t want you to just ‘like’ them. Hotel brands want you to display emotional commitment with an online presence beyond the hotel walls that spreads brand ‘love’ across social media to family, friends, and the masses. I tend to see that in plenty of travel blogger posts these days.

Restoring hotel loyalty is focused on using data mining to build comprehensive customer profiles. Hotel brands want to foster emotional loyalty that creates and retains high revenue customers. Differentiating hotel loyalty program offers to encourage loyalty from the kind of customers the hotel brand wants to retain is what I read into the report.

Reinventing hotel loyalty programs with an objective to create a relationship-based commitment that is demonstrated by a larger share of spend with the preferred hotel brand is the objective.

Is this starting to sound like marriage? 

Just like a marriage, the more time you have spent together, the more detailed understanding partners realize about each other.

In the near future I may walk into my hotel room to find the room temperature at 69 F, the curtains open, the ice bucket filled and the minibar with a six pack of Stella Artois.

And if you really want to show me the love, please waive the hotel parking fee (or let me pay that with points at a good value exchange rate).

You can read the full Deloitte report here A Restoration in Hotel Loyalty: Developing a blueprint for reinventing loyalty programs.

JW Marriott Chicago 165

JW Marriott Chicago asked me to fill out a survey prior to arrival for a sponsored press trip in May 2012. I was pleasantly surprised to see an ice bucket of Stella Artois beer when I walked into the room.

Is this the future trend for hotel loyalty program recognition?

Ric Garrido, writer and owner of Loyalty Traveler, shares news and views on hotels, hotel loyalty programs and vacation destinations for frequent guests. You can follow Loyalty Traveler on Twitter and Facebook and RSS feed.

11 Responses

  1. Do the “Hotel spend” numbers seem to have an extra zero?

  2. Nights per month x 12 x Average nighly spend seem to equals annual spends OK.

    I would say no groups with average nightly stays less then $150 seems high to me.

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  4. Leave it to Deloitte to really screw things up :)

    (not a surprise)

    I am a frequent hotel user who totally does not fit in any of their descriptions (and I know a lot of business travelers like me. Really) :

    •Average 12 nights per month in hotels.
    •Average nightly spend $100.
    •$15,000 average annual hotel spend.
    •Majority of stays high amenities hotel type appropriate for business (think Homewood Suites or Hampton Inn).
    •Must have free wifi and free warm breakfast, free parking, parking close to the hotel door
    •90% of hotel spend is with preferred brand
    •10% of hotel spend with other brands.

    Comment by IflyfromABE on January 24th, 2013 at 5:12 pm
  5. In response to previous comments, these are frequent high revenue travelers, they have cut out the lower spenders, since those customers are not of interest.

    I guess I fit into the first category, I am specifically spreading most my stays about evenly across 2 chains this year, due to the lack of any real benefit of hitting 100+ nights at my primary brand.

  6. @Geoff – That extra zero comment is funny to me.

    I confess that I was shocked to see the amount of spend mentioned for the traveler profile attributes.

    $26,000. Seriously? And $8,000 for mature travelers who mostly don’t even sign up for loyalty programs?

    I’ll say ‘Efficient Traveler’ is my fifth traveler type missing from the Deloitte report.

    Diamond, Platinum, and Gold in three major hotel loyalty programs for $3,600 per year with 60 annual hotel nights, 75% upscale to luxury segments with 25% midscale hotels to maximize price-value for hotel loyalty points and free nights promotions.

    I know it happens!

    That is my version of monetary efficiency.

  7. @IflyfromABE – You are the target demographic for the best hotel loyalty benefits. I hope your preferred hotel loyalty program tracks you down through your comment here on my blog and gives you the best hotel loyalty year of your life.

  8. All the changes over the last year or so in airline and hotel loyalty programs have the goal of rewarding “high revenue” customers. SPG’s recent cash and point devaluation in context with last years changes (like more points for 75 night plats) do exactly that. Of course they wouldn’t do them exactly simultaneously, but what’s 7 months. These companies do need to be careful they don’t alienate their regular customers though who make up the other 95% or so.

  9. Those of us who use points wisely are no doubt amused by these average spend figures. I’m a baby boomer who just spent 14 nights at luxury resorts in Scottsdale and Tuscon. The room charges, including tax, were just a tad more than $1,500.

  10. I’m not sure they really agree with your comment “Redefining loyalty programs is likely geared for limiting the advantages and benefits received by savvy frequent travelers like me and most of you reading this blog.”

    In their summary, they mention: “Be forgiving; don’t penalize behavior that loyalty programs encourage” On page 23 of their blueprint, they don’t expand much on this, but it seems like they are saying to not punish travelers for staying other places also. An interesting way to approach this would be to give partial elite night credit for stays elsewhere – send in your year-end statements and they could credit you with 25% of the nights. It would give them more data on who are the frequent travelers they want to target and it might give those travelers enough status that they are treated well when staying with you and so are encouraged to stay with you more – or at least more than those chains who don’t recognize them as that frequent of travelers.

    They also say “Predictable travelers help hotels to smooth their occupancy rates which benefits operational efficiency.” I think the savvy travelers fit this also.

    Also, it is interesting how most customers don’t want to be engaged by the hotel via social media. I don’t really see hotels listening to this. There is more push (probably by young employees[Newbies?] who like social media) on social media. I think the low numbers for how often they were engaged (last slide) by social media is more indicative of the customer’s choice, not the hotels.

    It seems like they may have missed an important point on how often folks have added on personal leisure time to a business trip. Since 52.3% of the respondents were 100% leisure, that 58.6% that never added on personal leisure time were the 52.3% that didn’t take a business trip and 6.3% that took business (and possibly separate personal) trips. That changes none from being the most popular option(by far) to being the 3rd most popular option.

    Points(earning, redeeming, value) seems to be the most important part of a hotel loyalty program for folks, yet they (and somewhat you) seem to think the “making me feel important” is the important part. Okay, to Newbies, it seems to be also.

    Seeing that it was a web survey and 52.3% of respondents traveled 100% for leisure, 83% haven’t downloaded a smartphone app, I was wondering how applicable their results are. Though the segments they identify only include 893 of the 4000 surveyed. And it seems like they decided these are the ones that the loyalty programs are really targeting and are doing more in depth analysis based on that.

    It also seems like they wrote the report based a lot on their beliefs, not actual analysis. “We believe that preferred brand location availability and corporate travel policies have a minor impact on brand switching. Over 90 percent of high frequency travelers’ preferred brands are part of a major hotel brand family with extensive footprints.” These high frequency travelers are the ones staying 16+ a month at a hotel. Even with an extensive footprint, they won’t always have a location near where that high frequency traveler wants to stay, so out of 96+ stays per 6 months, it doesn’t surprise me that 65.4% of those travelers actually stayed at a different brand in those 6 months. Hotels should be concerned when something so obvious escapes those who want you to pay them money to advise them. To me it shows a lack of understanding of the industry. It isn’t like cell phones where you normally only have one provider. It’s more like the type of food you eat. You may prefer pizza and Mexican food(two preferred “brands” which you’ll notice they don’t allow for/like), but also eat Chinese or Italian food depending on the mood. You might stay at Marriott for business, but stay at B&Bs when your spouse goes with you on a leisure trip. On page 16, they acknowledge that complete loyalty isn’t going to happen, then they base their estimates on complete loyalty. Unprofessional! They could have used the loyalty numbers they’ve already gathered for the travelers to estimate what it would mean to switch from

    On page 14, they say “Proficient travelers are most interested in location and comfort”. How very true. My girlfriend, when traveling to Portland, stayed at her a hotel in her 4th most frequent loyalty program because they are on the same block as the office she was visiting. Price and brand loyalty would have to work hard to overcome that. Throw in an airport shuttle…

    On their nice chart on page 12 of satisfaction versus importance of an attribute, they show as improvement opportunities lower importance attributes with low satisfaction. I think the ones to concentrate on are the higher importance attributes with lower satisfaction like K – staff attitude and J – deliver on promise.

    Which leads me to the point that this seems more like a sales piece than a real analysis. It tells hotels that their programs aren’t working like the hotels want, but that they can do better. Just send us money. Kinda like late night infomercials, only slicker.

    I do like some of their suggestions. The more personalized experiences/welcome amenities is interesting. Though a lot of hotels have consistency problems delivering the basics. Going above and beyond would take lots more training. And happy personnel(Four Seasons attitude). Or lots of IT infrastructure – an RFID reader scans what you are carrying, determines who you are and prompts the clerk with your name and preferences… Easier if you are in the luxury market. Harder in the economy market.

  11. Great analysis Charles.

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