Hotel loyalty programs continue to reshape the travel landscape, becoming indispensable tools for driving occupancy and building customer loyalty. Despite a slowdown in certain growth metrics, these programs significantly contribute to overall occupancy, particularly during challenging economic times or seasonal dips. Let’s delve into how loyalty programs are evolving and their impact on the hotel industry.
The Rise of Loyalty Memberships
In 2023, hotel loyalty memberships surged by 11%, even outpacing the 5% global room count growth among the five major public hotel brands—Marriott, Hilton, Hyatt, Wyndham, and Choice. This growth translated into a 2.5 percentage point increase in hotel occupancy attributable to loyalty member bookings, reinforcing the importance of these programs.
Interestingly, loyalty programs are shifting from targeting frequent travelers to appealing to a broader audience. Membership growth is now more closely tied to credit cards and affiliate programs than exclusively to frequent stays.
Key Metrics at a Glance
- Loyalty Member Occupancy: Members contributed to 51% of total occupancy in 2023, up from prior years.
- Point Redemption: Loyalty point redemption revenues hit a record $1.1 billion in 2023, a 11% year-over-year increase.
- Membership Liability: Loyalty program liability per member stood at $18.86 at the end of 2023—87% of pre-pandemic levels—suggesting more points are being redeemed or accrued at slower rates.
- Membership Per Room: The average number of loyalty members per hotel room rose to 128, reflecting a 6.4% increase.
Impact on Hotel Revenue
Loyalty programs are pivotal for maintaining occupancy and revenue stability:
- Increased Revenues: Hotels saw a 14.3% rise in loyalty program fees, driven by higher room rates, increased occupancy, and loyalty program costs.
- Support During Downturns: With loyalty point liabilities exceeding pre-pandemic levels, these programs are well-positioned to sustain room demand during economic slowdowns.
- Filling Seasonal Gaps: Broader membership bases help fill seasonal lulls, enhancing revenue consistency.
Redefining the Member Profile
The profile of a loyalty program member is evolving:
- Shift from Heavy Users: The share of members staying 30+ nights annually is declining.
- Diverse Travel Patterns: While average nights stayed per member are lower than in 2016, the broader membership base ensures consistent demand.
This shift demonstrates that loyalty programs are no longer just for frequent travelers—they cater to a wide range of customers who contribute to occupancy during both high and low seasons.
The Big Picture: Benefits for Hotels
Hotel owners benefit significantly from loyalty programs despite rising costs:
- Increased brand loyalty boosts occupancy and ancillary revenue.
- Access to loyalty member bases and favorable brand affiliations offer financial incentives like mezzanine loans and flexible management terms.
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