By Brian Steele
There’s a new generation of travelers using points for much more than hotel stays. In order to keep their loyalty programs engaging, brands would be wise to take notice of two key movements affecting their consumers: liquid currency and generational shifts.
Liquid currency refers to the ability to spend loyalty points in a retail setting, as if it was actual money. This is a growing trend that can help hotel brands increase on-property spend outside of the portfolio. Some hotels may see value in having their points be totally liquid and spendable at any point of sale (La Quinta has already adopted this approach), but it’s reasonable to expect most companies will find value in a less liquid approach by enabling points to be spent only within their own brand experience. This could include guests redeeming points at an on-property restaurant, spa treatment, or gift shop.
As consumers demand more flexibility and less friction in their loyalty program experiences, a hotel’s point currency must be flexible enough to offer value that represents the member’s current life stage and needs. Not everyone is enticed by an extra night’s stay in exchange for their loyalty, or they might have other high-priority needs that aren’t travel related.
By enabling points to be used whenever, wherever, and for whatever the customer chooses, you are meeting them where they are, leaving a lasting impact on loyalty. When a customer redeems points for a room night, you can see a clear path to that experience reinforcing brand loyalty. However, the more liquid your currency, the harder it will be to make that connection. If a consumer spends their hotel loyalty points on gas or groceries, the positive impact on brand loyalty might be significantly reduced.
Hospitality companies who excel at implementing strategy on this trend will strike a balance between both, placing an emphasis on redeeming points for experiences within the brand itself, while keeping in mind what a consumer’s needs might be during travel.
Most core hotel loyalty models were developed by boomers in the highlight of their careers, and are designed to meet many generationally driven values and desires. The inevitable shift in the number of people engaged in loyalty programs at various stages of life will require new design and engagement strategies to stay relevant and effective.
But beyond the typical ‘must engage millennials’ mantra generally spoken, the looming "Silver Tsunami" could potentially create a more specific challenge to hospitality loyalty program managers. Many lifelong business travelers who have banked their points, dreaming of the big travel adventures they can embark upon once they enter retirement will find themselves turning their dreams into reality. Their years of intentional loyalty will have reached the earn climax, and the transition to burn will begin.
The shift in age demographics will have a mathematical impact on product demand and program liability. An increase in retiree usage of points for room stays could generate an imbalance, which loyalty models in industries outside of hospitality may not so directly experience.
As this shift from the workforce occurs, it has potential to upset the financial balance of the books. If new demand for the boomers once booming business travel loyalty is not replaced by a new generation of paying travelers, more business may be going out than coming in. Additionally, a shift in demand of point usage for rooms compared to paid stays driven from brand loyalty, may cause tension among property ownership looking to maximize long-term ROI.
For brands that have a regular high occupancy rate and a strong or growing revenue-per-available-room, an increase in demand for lower value room stays could compete with occupancy capacity available at higher rate room nights. Other brands may have a counter experience if their occupancy rates are running lower than desired. Owners of these properties may appreciate the added compensated business from the point spend for the increased demand in room nights.
Bottom line, this shift is coming quickly and business owners of hospitality loyalty programs need to quickly look head, predict behaviors, and keep flexible levers at their disposal to constantly adjust to the new demands.