The future of loyalty marketing in hospitality

Other than the number of rooms booked, how much do hoteliers know about their guests? How much must they know by 2025 to not become a commodity?

It’s time for hotel operators to re-evaluate how well their ace in the hole—their loyalty program—is enabling every function of their business to deliver more value. Following are three predictions of how loyalty programs must evolve in hospitality.

A bed is not just a bed
Ask any traveler checking into a hotel after an exhausting business meeting, a white-knuckle flight or a surprise marriage proposal. The hotel is a dispensary of experiences. And few functions can effectively expose the elements of those experiences, and elevate them, as well as a loyalty program.

Yet like many hotels, most hotel loyalty programs are homogeneous. As the industry enters a future redefined by human-displacing technologies, much higher customer expectations and competitors such as Airbnb, this can be a devastating oversight.

This is the time, while the pandemic causes a lull in occupancy, for hotel operators to re-evaluate how their loyalty strategies can become the glue that binds every function in a customer-focused business together. During the next several years, the customer’s journey to the rented bed will be much different.

Three market transformations will alter loyalty. Here’s how to prepare, and what I predict:

1: An unavoidable migration to automated intelligent assistants.
The transformation: Guests will no longer rely on third parties such as booking.com or the hotel’s own website, but rather on their personal artificial intelligent assistants (AIAs) that will make recommendations based on provided preferences and behavioral activities. Alexa and the Google ecosystem of apps are already prevalent. Furthermore, AI-enabled management systems will be used in back-office functions, such as customer services and customer-acquisition channels.

How hotels can prepare: Shift budget from “human” costs to reward value for customers. Half of loyalty spending is invested in the humans who run the programs, technology and third-party services. We foresee 90% of the loyalty program administrative work performed by humans today can be automated with AI. This will enable a company to invest less in its loyalty operations and deliver more customer value,  generating higher program ROI.

2. The unavoidable need to improve the work of data.
The transformation: The reliance on AIAs and other artificial intelligence will underscore (and for some companies, exacerbate) the need to improve the data they capture, the methods they use for capturing it, and—most important—the infrastructures/methods to reliably extract accurate customer insights that improve engagement. Hotels will be found in API-enabled ecosystems and marketplaces beyond controlled channels, so open loyalty collaboration will become a must.

How hotels can prepare: Perform a thorough audit of the data capture and processing mechanisms to assess at what level they are performing and to unearth leaks and inconsistencies. More importantly, hoteliers can consider which additional insights would help improve conversion in two- to three-years’ time and find the sources of that data. Systems based on artificial intelligence require a great deal of clean data in order for the algorithms to reach 80% to 90% (let alone 99%) accuracy in optimizing outcomes. Yet I am not aware of any hotels that are using even 50% of their guest profile data.

3: The unavoidable requirement to partner with complementary brands.
The transformation: Many hotel loyalty programs rely only on their own frequency and purchase data to segment customers. They have no idea if a customer puts premium gas in the car, is earning points 1,000 miles from home (but not staying in one of their hotels), or buys one shirt for $200 as opposed to three shirts for $200. Fulsome data collection and insights from partners enables better segmentation, and then personalization—based on triggers that resonate. The most effective and efficient way to accelerate data benefits is by partnering with companies whose customer data complements that which the hotels gather directly.

How hotels can prepare: Many hotels have some partnerships, but little insightful data is shared. Few hotels have partners in fast-casual dining, retail, pharmacy, grocery or entertainment categories—where customers spend heavily. If they tap into the type of insights that can only be obtained from complementary brands, that data shared among partners (with the customer´s consent) compounds in strength, extracting nuanced details of what customers value. This, in turn, enables program operators to more accurately foresee service and promotional needs and preferences.

Boldly prepare for the future
Customer relationship management (CRM) is essential for a company dedicated to putting the customer at the center of its focus. But many of the old models on which hotel loyalty programs operate can’t keep up with that task in the current environment.

A well-functioning loyalty marketing strategy, built on the emerging process of wide-ranging data collection and analysis, will link all customer touchpoints and form the bedrock of a more profitable value proposition—for both guest and hotel—for years to come.

Modern SaaS platforms can be integrated as an extension of existing systems to prepare for this new world without replacing core systems. Investigating possibilities now and defining a roadmap will allow all stakeholders to sleep better as we enter this rapidly changing future and heightened competition. HB

Charles (Chuck) Ehredt is a lifelong entrepreneur and founder or co-founder of 12 companies, most recently the global loyalty currency management platform Currency Alliance, where he is CEO.

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