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The Value of Tiered Hotel Loyalty Programs

The Value of Tiered Hotel Loyalty Programs

Hotel loyalty programs are in a state of flux as consumer habits sway away from traditional rewards points and latch on to programs that tout personal experiences. But Bram Hechtkopf, vice president of business development and marketing for Kobie Marketing, says tiered loyalty programs create ways for hotels to utilize guest data and deploy more targeted outreach efforts that build long-term customer commitment.

“Recent data does show that hotel guests aren’t as loyal to specific brands as they once were,” says Hechtkopf. “Travelers, however, are still interested in loyalty programs, with hotel brands having one of the largest membership growth rates in recent years. The difference today is that guests are seeking rewards that somehow impact their travel experiences and create emotional connections with the brand.”

Tiered loyalty programs group guests into segments based on a variety of behaviors, such as the customer’s level of engagement, types of purchases, and the amount a customer spends. The groupings help hotel brands visualize where guests are throughout their purchasing lifecycles.

Although big spenders are typically viewed as higher-value guests, Hechtkopf explains that hotels shouldn’t ignore those that tend to spend less. “Guest value is a variable term, determined by many factors,” he says. “Because guests have such varied spending habits and behaviors, it’s important that loyalty programs include specific program initiatives (like tiering) that speak to these different groups. Customers at all levels have brand worth, and tiering helps measure their incremental value, improving brand ROI and driving a positive guest experience.”

Hechtkopf says tiered loyalty is already a strategy employed by many brands. He cites MGM Resorts’ M life program as being particularly successful. Bellagio Las Vegas guests are separated into three loyalty tiers—Gold, Platinum, and Pearl status. Each membership level offers guests greater rewards, including backstage passes and the novelty of being able to select the Bellagio fountain show songs. Although an aggregate of dollars spent and number of stays per year are the dominant factors contributing to tiered loyalty status advancement in the program, guests can also advance through social media engagement.

“What really set hotels apart are loyalty programs that broaden their offerings beyond points for a discounted room,” says Hechtkopf. “That includes on-site dining options, access to regional tourist attractions, in-room amenities, and increasingly, the ability to share earned points with other hotel or airline loyalty programs.”

To implement a tiered loyalty program, hotels need to research what their guests are looking for and ask existing loyalty guests if a tiered program is something they would find valuable. Hotels should also consider the cost to implement such programs and whether switching to a tiered structure will make economic sense for the company. Hechtkopf also explains that C-suite buy-in is essential for success. “It helps the rest of the staff when their superiors are engaged in the program they’re helping promote,” he says.

Hotels affiliated with big-brand programs can also use tiering to create property-level loyalty through a heightened level of customer service. When a program member checks into the property, the status of that member is known. By using the customer’s profile, a hotel can offer additional perks for being loyal to not only the brand, but also that property in particular. The perk might be as simple as greeting customers by name at check in or offering them preferred room locations.

As guest behaviors continue to evolve, Hechtkopf believes tiered loyalty programs will maintain a leg-up on traditional rewards initiatives because they tend to keep members engaged.

“Loyalty programs have the potential to become stale quickly,” he says. “Tiering adds a level of excitement and gamification to an existing program, as members aspire to greater rewards and more exclusive status. It’s a way for hotels to combat disengagement and to gain better insights into what their guests want.”

Photo Credit: Couple on Business Trip via Bigstock

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