REPORT FROM THE U.S.—Hotel brand loyalty programs are evolving at a fast pace and several factors will determine how successful loyalty program growth rates will be in 2012. Major companies like InterContinental Hotels Group and Starwood Hotels & Resorts Worldwide are revamping the way they distribute and redeem reward points, and hoteliers at the property level must work with the brands to capitalize.
Folding Room Key into the mix
The new Roomkey.com booking site is expected to produce a nice side-benefit for the hotel brands involved: increase membership and usage in the hotel giants’ rewards programs.
The joint venture between Choice Hotels International, Hilton Worldwide, Hyatt Hotels Corporation, Marriott International, Best Western International, Wyndham Hotel Group and IHG, is designed to allow guests to book directly on the participating hotels’ websites.
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| Gregory Brown, VP of loyalty, promotion and relationship, Choice Hotels International |
“Rooms sold via OTAs are not eligible for Choice Privileges points. In contrast, rooms sold on Rommkey.com are eligible for Choice Privileges points. I believe Roomkey.com could be a new source of loyalty program membership for us,” said Gregory Brown, VP of loyalty, promotion and relationship marketing for Choice. Last year, the Choice Privileges program added 2 million members to reach 14 million worldwide, and Brown expects to add more via the Roomkey.com metasearch engine. “One of the shortcomings of an OTA for the consumer is that they have an obligation to their shareholders to do what is in their best interest, which may not be in the consumer’s best interest. Hotel loyalty programs deliver significant value to member guests, and thus are an important consideration for consumers,” Brown said.
Roomkey.com will “enhance the customer’s buying experience and the loyalty of our customers,” said Robert Morse, senior director of corporate revenue strategy for White Lodging, which owns and operates Marriott, Hyatt, IHG, and Starwood properties, along with other branded hotels. “They will receive their loyalty points and be able to look at other hotels in the market—it gives them the opportunity to see properties that they may not have noticed before. The content is real-time: the hotel chains’ websites are updated more frequently than the OTAs are,” Morse said.
Meeting reimbursement quotas
Meanwhile, property revenue managers and GMs are boosting the profitability of the rewards programs operated by the chains. To meet the brands’ rewards reimbursement thresholds (reimbursements are based on the hotel’s occupancy and average daily rate), some properties are increasing their use of bookings from OTAs to boost occupancy at times when that is needed most, such as the end of the month to meet a monthly quota or threshold.
“Some brands—including ours—willhave volume incentives on reward night reimbursements. The more free nights you take in, they will pay a higher incentive for the reimbursement,” said Don Berg, VP of loyalty programs and partnerships for IHG.
While guestrooms booked through OTAs can help fill hotels, they are booked at lower average daily rates and hotels are not necessarily able to get OTA business whenever they would like. “There are not a lot of hotels that can just open up the OTA spigot and fill the hotel up, besides in some in destination markets,” Berg said.
IHG executives have not experienced that many of the hotels are hurriedly boosting occupancy at the end of a month through OTAs, as is reported in the industry. “That is more anecdotal – we have heard that. Instead, hotels are managing their inventories more effectively with the economy recovering. They are less reliant on OTAs,” Berg said.
Some hotel chain executives say that increasing the flow of rooms through OTAs will not deliver the kind of margins that significantly impact loyalty program reimbursements. “This room unloading phenomenon looks like a lot of work that likely drives smaller and smaller marginal profits the further it goes. When you are dumping rooms at low rates—particularly through OTAs—you make less money on that,” Brown said.
Shirley Rayhon, GM of Days Inn & Suites, Jekyll Island, Georgia, said she agrees. “As a brand and an individual property, we are trying to push our clientele to book directly with the hotel or our brand and not through the OTAs, which increases our revenue,” Rayhon said.
Raising redemption levels
Because the U.S. economy is improving, many brands have raised their reward redemption levels, according to Don Berg, VP of loyalty programs and partnerships for IHG. “We are seeing more redemptions and higher prices [rates] across every loyalty program. As occupancy and rates increase, you have to do that in order to maintain the financial integrity of the program,” Berg said.
While IHG has raised reimbursement thresholds at around 25% of its hotels in recent months, it also dropped the threshold at 20% of its hotels, Berg explained. Some hotel brands categorize the hotels involved in the loyalty program as part of “bands,” which include economy, midscale, upscale and luxury properties in the same groups or bands, according to Berg. IHG executives believe it makes more sense to categorize the rewards reimbursement rates by brand.
“We have our point pricing arranged by brands—two or three different pricing levels per brand,” Berg said.
However, some hotels do not benefit from the brands’ formulas because they are located in a struggling economic area or their occupancy has declined for other reasons. For example, at Rayhon’s Days Inn & Suites, the property is reimbursed at 70% of its ADR by the Wyndham Rewards program when its occupancy is 89% or less. If its occupancy is 90% or greater, the property is reimbursed at 110% of that night’s ADR.
“We have definitely been at a disadvantage this past year due to major construction factors on Jekyll Island and a decrease in major conventions. We are located right next to the Island convention center that was torn down and rebuilt over the last year and a half,” Rayhon said.
At the same time, Rayhon has high praise for the Wyndham Rewards program and said the property is able to obtain more free night stays than some other hotels because it is a destination property.