In order for traditional loyalty programs to remain successful, they need to recognize and react to the recent change within the customer profile of the Travel and Leisure Sector. the hotel factory defines the 5 current key defining points of loyalty programs and outlines what is necessary for future success of these programs which include adapting to meet the needs of the millennial generation.

In recent years, the customer profile of the Travel & Leisure sector has modified its behavior when buying, reserving, and locating deals. As traditional loyalty programs mature, it is necessary that they generate value for the customer.

There are many sectors in which various loyalty programs have been implemented: the creation of “Frequent flyer” programs by airlines, supermarket chains that have credit cards offering discounts or redeemable points, etc. The success of these efforts is being questioned by many studies as well as by the companies themselves.

When we talk about loyalty programs, there are several concepts that come to mind: cards, awards, gold, platinum and discounts. Many of these terms show that most loyalty programs are the same, based on discounts, and in many cases promotes interchangeability between brands.

At The Hotel Factory, we have identified some of the key factors to successfully define the objectives of loyalty programs:

1. Customer loyalty is an effective long-term strategy. True loyalty is a goal that is reached after aligning culture, leadership, people, and work methodologies to customer satisfaction. This is done by creating value, something that is easier said than done.

2. The most loyal customers are not always the most profitable. The cost of acquisition might be lower depending on the type of transaction, sector or company but not depending on the loyalty of the customer. This is why each business ought to design a different loyalty program and define their distinct objectives.

3. The real objective of loyalty programs is loyalty, and not to match a competitor’s offer. This confusion often creates undifferentiated programs with little creativity and provides little value to the client, causing the already mentioned “interchangeability between brands”.

4. The impact of loyalty programs on profitability is unknown. Some reasons for this lack may be because companies do not measure the amount of customers leaving their business, the real monetary value of losing a client, nor the monetary value of a loyal customer.

5. Customer loyalty is not a matter of “bribes”. A large majority of today’s loyalty programs are actually reward programs, and their effect on loyalty is questionable. When a customer is loyal to a business for rational reasons, such as price promotions, it is very easy to leave for the competition when they offer better conditions. As Pablo Gago, the commercial director of Room Mate confirms, “In our company we apply marketing strategies of love, so that the client is in love with my brand. We can try to sell more using a thousand and one strategies but the client will be loyal if he is having fun.”

Finally, loyalty programs have not adapted to the new customer profiles in the Travel & Leisure sector, such as the Millennials. All hotels try to attract this segment to their hotels. If we analyze the principle characteristics that define these customers, we will see that almost no hotel loyalty programs are focused on meeting their needs.

Millennials are:

• Digital. 92% of Millennials who book through an OTA do not belong to a loyalty program.

• Multiscreen and multidevice. There is a scarcity of loyalty programs that are accessible across multiple channels and devices.

• Addicted to apps. There are still many hotel companies that do not have an exclusive app for their loyalty program.

• Social. Few hotel companies include a social component to their customer experience.

• Critical and demanding. According to the Quarterly Digital Intelligence Briefing: 2014 Digital Trends, 20% of companies said that the customer experience will be a great opportunity. Business is not only services and products, but are also relationships and shopping experiences. These are almost as important as the product itself.

• Require customization. Most loyalty programs are undifferentiated and the benefits are the same for everyone.

We can now say that the key to loyalty programs lies in clearly defining the objectives, in order to keep them from becoming “price thieves” or only as a discount generator. The real purpose of these programs is to generate lasting relationships with the customer.