The rise is global travel over the last year boosted hotel occupancy at the five public hotel companies—Choice, Hilton, Hyatt, Mariott and Wyndham—by five per cent, but loyalty program members accounted for half of direct hotel bookings, or 2.5 per cent, according to a recent report from real estate broker and advisor firm CBRE.
These popular programs saw membership rise 11 per cent year-over-year (YOY) in 2023, as they became increasingly tied to credit-card usage, rather than room stays, the report noted. “Growth in these loyalty programs—how fast they've been acquiring new members—is being done through partnerships with co-branded credit cards,” said Rachael Rothman, a coauthor of the report who heads Hotels Research & Data Analytics at CBRE.
She noted that pre-COVID loyalty programs only benefited travelers who accumulated more than 60 room nights a year, but today hotels see a smaller percentage of guests staying that frequently because they have more ways than ever before to earn points.
A major reason for the increase in membership is that loyalty credit-card partners enable members to accumulate more points quicker through spending on everyday purchases, introductory point bonuses, and multiple points for travel purchases when booking travel through the card. For example, the Capital One Venture Rewards Credit Card offers 75,000 introductory points and three -to five-times as many points for travel expenditures, such as hotel stays and flights, and the Chase Sapphire Preferred® Card provides 60,000 introductory points and one – to five times as many points for flights, hotel stays and dining purchases.
As a result, loyalty redemptions increased 11 per cent YOY to a record $1.1 billion due to a mix of increased travel and redemptions, higher ADR (average daily rate), and an increase in points needed to earn a free night. Loyalty rewards can be redeemed for everything from free breakfasts, hotel room nights, upgrades, early check-ins or late check-outs and Wifi to gift cards and merchandise to car rentals, event tickets and local experiences.
Teri Agosta, general manager of Signia by Hilton Atlanta emphasized the benefits of these programs for both guests and hotels. "At Signia by Hilton Atlanta and throughout my Hilton career, I've seen firsthand the incredible value that Hilton’s award-winning loyalty program, Hilton Honors,” she said, noting that this program provides guests a variety of free hotel amenities and services, but also allows guests to use points to get greater value for less.
Agosta explained that Hilton Honors has a flexible-payment slider option that allows members to use points for discounts on hotel amenities, as well as amenities and experiences with local Hilton partners worldwide. For example, Hilton Honors Experiences Platform enables guests to use points for discounts on local experience fees and services, such Lyft.
The Hilton Honors app also enables guests to book hotel stays, select a preferred room, check in and checkout, and unlock their room door with a Digital Key from a smartphone. It also provides access to Connected Room, new technology that allows Hilton Honors members to control the lights and TV from a mobile device via the app or TV remote.
Plus, Agosta noted that frequent stays at Hilton hotels moves guests through Hilton Honors tiers to Gold and Diamond, which provides additional benefits, such as more points toward bonus stays, room upgrades, and a daily food and beverage credit for use at a hotel’s many dining options.
Besides increased occupancy, Agosta suggested that the program is an invaluable resource for improving guest hotel experiences and generating return business. “Hilton Honors allows us to understand and cater to our guests' preferences better, offer even more personalized services, and showcase why it matters where guests stay,” she noted. “At Signia by Hilton Atlanta, we're committed to ensuring that every guest feels valued and receives the highest level of hospitality, and Hilton Honors is a significant part of how we achieve that,” Agosta added.
Rothman concurred, suggesting that branding partnerships give hotel companies and their partners access to customer data, providing very rich data to mine when launching targeted marketing strategies, especially in view of AI’s impact on data analytics. “And again, this helps to keep your guests sort of within that loyalty system, earning and redeeming points within the same system,” she added.
Program fees assessed to hotel operators, however, have increased along with loyalty program membership, rising by 14.3 per cent in 2023, more than the 9.4 per cent total growth in hotel revenue. But the cost is still modest at $3.59 per night, Rothman pointed out. “If you're only paying, call it $3.50 a night, and it's contributing half of your room nights, that’s a fairly small amount to pay,” she contended.
She also suggested that growth in the number of branded hotels is being driven in large part by loyalty programs and the power of distribution, along with brand recognition. Another CBRE report noted that from 2013 to 2023, six branded hotel companies, which includes the five previously mentioned plus IHG, increased their brand count by nearly 70 per cent, which increased their CAGR (compound annual growth) by approximately 6 per cent. The bulk of this growth was in luxury and upper and upscale brands, which nearly doubled and increased CAGR by 7.3 per cent between 2018 and September 2023.
The success of loyalty programs to increasing occupancy and guest loyalty isn’t lost on independent, small and boutique hotels, which have created loyalty programs of their own or partnerships with hotel and credit-care brands. A Forbes report noted, for example, that the World of Hyatt rewards program has partners with Small Luxury Hotels of the World—mostly located abroad, which includes 110 properties where guests can redeem their Hyatt points.
Preferred Hotels & Resorts, the world's largest independent hotel brand, with five hotel collections that include 700 properties accepts points earned on American Express Platinum or Business Platinum cards via American Express Fine Hotels and Resorts to pay for rooms and includes daily breakfast for two and room upgrades when available, late checkouts, and $100 or more in credits for amenities, like dining and spa services. But Preferred Hotels’ own rewards program iPrefer also provides a tiered rewards system, where guests can redeem points for amenity certificates, special member rates, room upgrades, late checkouts, and flights on many international airlines.
About 300 independent hotels globally participate in the Voila Hotel Rewards program, which includes three tier levels that provide guests a variety of complimentary and discounted services and amenities depending on the tier level and points earned. Additionally, Stash Hotel Rewards, which serves more than 200 independent hotels in the United States and Caribbean, redeems guest points for free nights.
But not all loyalty rewards programs are created equal, with significant differences in both award values and program promotions. According to a NerdWallet report, of the branded hotels, Wyndham (12 per cent) and the Hyatt (11.5 per cent) offer the greatest points per dollar spent values, providing $12 or $11.50 in points for every $100 spent, while Choice (10 per cent) provides $10; IGH, Marriott and Radisson (8 per cent) $8 per $100 spend; and Hyatt Honors (5 per cent) just $5 for every $100 spent.
iPrefer provides 10 – 15 points for each dollar spent (depending on the tier); Voila 0.75 – 1.0 cents toward award nights, with1,000 initial points for registering; and Stash members earn five points per dollar spent, an additional three points when booking through Stashrewards.com at Stash-Approved Hotels or one point when booking other hotels.
Rothman suggested, however, that the concept of using travel awards programs to drive customer loyalty is in the early stages of its potential. As the hotel industry matures, unit growth slows, and costs and competition increase, driving higher same-store sales will become an all-important avenue for increasing returns on investment, she said.
Just as travel and financial stakeholders converged to drive customer loyalty and higher same-store sales, Rothman said, “Hotel brands and owners will need to expand services to existing customers or attract new customers beyond traditional business and leisure travelers and engage them beyond their typical peak travel years—early 30s to late 50s.
As a result, she expects hospitality companies to expand partnerships to other businesses to retain customer loyalty throughout members life cycles and events, suggesting that they might partner with residential real estate companies to create trusted and amenitized living options in student housing, co-living, senior housing, and vacation home communities.
“For guests, these partnerships can enhance trust, given the backing of large, globally recognized brands, and increase geographic and contract-length flexibility, “ Rothman added, noting that this also would provide travelers with opportunities to earn and use points in all phases of life, as well as for travel.