Loyalty schemes have evolved well beyond simple points-based programs. Recent research has revealed that effective loyalty programs are becoming more and more important to the success of hotels in direct bookings, as well as their overall revenue growth. Let’s examine the key insights and trends that will shape the future of hotel rewards programs.
The Revenue Impact Modern Loyalty Programs
The numbers speak volumes. According to H2C Global Study, 2024, the largest hotel chains can generate 60% of total revenue via loyalty programs. This significant figure highlights the crucial role loyalty programs have in driving direct bookings as well as sustainable revenue growth. However, this isn’t just about large chains – properties of all sizes are finding success with right-sized loyalty solutions that match their specific needs and guest expectations.
The shift from traditional points systems to more nuanced approaches that focus on the experience is particularly fascinating. Recent research by EyeForTravel & Fornova shows that loyalty members are not only more likely to book, but also spend more per stay. This makes them an invaluable asset for revenue growth. Oracle’s data from OPERA cloud confirms this. It shows that properties with fully-integrated loyalty systems have significantly higher booking frequency and guest satisfaction levels.
Altexsoft research shows that direct bookings via loyalty programs can help hotels avoid OTA fees, which range between 15-30%. The importance of optimizing direct channels has increased in recent years, as the digital landscape has changed. Mirai reported that European hotels saw a 36% drop in direct bookings because of new regulations on digital markets.
Understanding the Modern Guest
The loyal guest of today defies categorization. EyeForTravel’s and Fornova’s analyses provide additional context on evolving guest behavior and expectations.
- Younger travelers engage with loyalty programs at a high level and respond well to mobile experiences.
- Students are highly price sensitive and responsive to promotions.
- Business travelers value consistency and recognition throughout their stay, and they also prioritize predictable benefits and seamless experiences.
- Asian travelers are more likely to prefer competitive pricing and technology integration than their European or American counterparts
- Members of loyalty programs spend on average more per stay than non-members and have higher booking frequency.
- There is only a 3% overlap between the major hotel groups’ loyalty programs and those of OTAs, indicating distinct segments.
The diversity of loyalty behaviors requires a segmented, sophisticated approach to the design and implementation of loyalty programs. This segmentation was evident in the 80 Days report during the COVID-19 Pandemic when direct bookings increased by 17%. Travelers were looking for trusted brands.
Loyalty Dynamics in Different Regions
Geographical differences are crucial to the effectiveness of loyalty programs. According to research conducted by the International Hellenic University of Athens, European markets exhibit distinct patterns.
- Direct booking rates are influenced by rate parity regulations
- Mobile booking usage varies by region. In some cases, it can be up to 40% greater.
- The structure of loyalty programs is affected by the local preferences for payment methods, cancellation policies and local preferences.
- The perceived value of loyalty rewards is affected by cultural differences
In addition, the recent introduction of the Digital Markets Act(DMA) has brought new challenges and created opportunities. Mirai’s research shows that, although the DMA caused a drop of 30% in direct bookings at first, it has spurred innovation within loyalty programs.
The Psychology of Loyalty
The University of Toronto has introduced the concept of psychological ownership in the hotel industry. This study reveals that those guests who have a strong sense of connection and control over their hotel stay show stronger loyalty than those who simply feel satisfied.
These are some of the factors that contribute to this sense of ownership.
- Control over the stay elements (room choice, pillow type and mini bar content, etc.).
- Personal Investment in Experience
- The story of the property and its offerings will be deeply ingrained in your memory.
- Knowledge of the history and unique features of the hotel
The study shows how psychological ownership can increase loyalty, even when satisfaction levels plateau. It suggests that hotels should focus their efforts on creating experiences which foster this sense ownership along with traditional satisfaction metrics.
Exploration of Subscription Models
Recently, the hospitality industry has seen a rise in subscription-based loyalty programs. Sabre Hospitality research highlights the benefits of subscription-based rewards.
- Regular guests receive special member rates
- Local members can enjoy hotel amenities
- Special packages for frequent travellers
- Non-resident amenities (e.g. gym memberships, swimming pool access)
Subscriptions not only provide a reliable source of revenue, but also allow for deeper relationships with guests through regular engagement. Skift’s latest analysis shows that this model is particularly successful with branded hotels. These hotels now capture 38% of bookings via direct channels.
Technology’s role in loyalty evolution
Technology integration is key to the success of modern loyalty programmes. Oracle OPERA Cloud shows that properties with fully-integrated loyalty systems have significantly higher booking frequency and guest satisfaction rates. This integration:
- Real-time preferences tracking across properties
- Communication personalized at each touchpoint
- Redeem your reward in a seamless manner
- Personalization enhanced by zero and first-party data collection
- Integrating cybersecurity measures to protect guests data
Ireckonu’s report on 2024 technology trends states that personalization will be required at all stages of the guest experience, rather than being a differentiator. A robust technological infrastructure is therefore essential for success in the future. The report highlights a number of critical technological components hotels must take into consideration:
Data Security and Privacy
Hoteliers must protect guest data as cyber security is a priority. Hotels should partner with technology companies that adhere to ISO 2022:27001 standards, and comply with the evolving privacy regulations like GDPR. It is especially important as loyalty programs are collecting and using increasingly detailed data about guest preferences.
Communication Channels of the Future
Modern loyalty programs need to adapt to the new communication preferences of Millennials and Gen Z travellers, who prefer instant messaging via WhatsApp or SMS. AI-powered bots can provide quick answers while still allowing human interaction for more complex issues.
Middleware Solutions
As hotels continue to grow and add more loyalty options, the integration of systems becomes more complicated. Modern middleware, like property management systems (PMS), is essential to connect disparate systems and ensure consistent guest experiences throughout properties. This technology allows for real-time data exchange in both directions without the need to integrate each system.
Loyalty: The Future of Loyalty
There are several trends that will be important to watch in 2025 and beyond:
Hyper-Personalization
In the future, loyalty will be based on ultra-personalized rewards and experiences. Altexsoft stresses that simple loyalty benefits can have a significant impact on direct booking rates when they are properly implemented and communicated.
Seamless Integration
The integration of successful programs across all touchpoints will be seamless, from the booking process to post-stay engagement. H2C Global Study highlights the fact that mobile IBE as a percentage of total IBE revenues increased by 7% by 2023. This emphasizes the importance mobile-first strategies.
Value-Based Recognition & Discounting
The focus of programs will be on recognising guest value, which includes amenity use and engagement with the hotel. This approach is consistent with University of Toronto research on the psychological impact of ownership on loyalty.
How to Make Loyalty Work in Your Property
The key to a successful loyalty program, whether you are a boutique or a part of a large chain, is finding the perfect balance between technology, personalization and value proposition. Altexsoft research highlights that even simple rewards, when properly communicated and implemented, can impact direct booking rates.
Practical Implementation Strategies
The eZee Absolute study highlights several key elements of successful loyalty programs.
Mobile-First Approach
- Ensure responsive design across all devices
- Book mobile bookings with ease
- Integrate mobile payments seamlessly
Communication and content that are compelling
- Use detailed descriptions and high-quality images
- Update real-time availability
- Keep pricing consistent across channels
Value-Added Services & Discounts
- Offer secure, flexible payment options
- Support 24/7 through multiple channels
- Create exclusive packages for loyal customers
Measuring success and adapting
Oracle’s datasheet for OPERA Cloud loyalty states that successful loyalty programs must track key metrics, including:
- Book more often with loyal customers
- Comparisons of average spend per stay
- Program engagement rates
- Conversion rates for direct booking
- Customer lifetime value changes
The opportunity to grow through effective loyalty programmes has never been greater. Hotels that adjust their loyalty programs to meet the changing expectations of guests while leveraging technology solutions will be in a good position to capture and keep valuable direct bookings.
P3 Hotel Software has a product suite that is unique and covers the whole guest journey. Unlike fragmented solutions that require hotels to juggle multiple vendors, P3’s comprehensive system handles every touchpoint in the guest journey – from initial booking through post-stay engagement. This integrated approach maximizes direct bookings and ensures a consistent personalized experience which builds lasting loyalty. We invite you to contact us and learn more about how our unified platform will transform your hotel’s digital presence, while reducing the complexity associated with managing different technology providers.
