Guest Column - March/April 2011

Make It Even Better

A Look at Loyalty Programs in the Travel Industry

By Dana LaSalvia, CRP

Frequent flyer miles remain one of the most recognized ways to measure customer loyalty. The influence of these early points-based programs has spread far beyond the airlines, shaping the industry into what it is today.

A Quick Look Back

Loyalty programs are nothing new in the travel industry. In fact, airlines were among the first businesses to introduce customer loyalty programs more than 30 years ago, with the debut of American Airlines loyalty-based marketing program in 1981, the first of the modern era.

The then-revolutionary idea to reward frequent fliers with miles to be redeemed for free travel changed the industry, and the way hospitality companies marketed themselves.

This untapped opportunity to incentivize consumers and build brand ambassadors in the process was profitable for the companies and exciting for customers. Realizing the opportunity that came with encouraging consumers to use a company exclusively by simply recognizing their patronage and rewarding them for their loyalty, other travel providers were quick to get on board with similar programs.

Within the hotel sector, Holiday Inn was among the first to launch its own loyalty program in 1983, followed by Marriott with its Honored Guest Awards program later the same year. However, for years hospitality companies steered these powerful programs without much concern for consumer-desire. It wasn't until 1999 that Starwood Preferred Guest made headlines with a breakthrough policy of no blackout dates, meaning members could redeem free nights virtually anytime, anywhere.

A Bumpy Road

The early allegiance travelers felt toward brands has been eroded with the increased competition in the travel industry, historic challenges in the economy, and a dramatic shift in both business and leisure travel. Through these changes, we've come to better understand the power of consumer choice and the need to alter loyalty programs as a result.

According to recent research from consulting firm Frost & Sullivan, seven out of 10 loyalty card owners have more than one loyalty card. The problem with the exponential growth of loyalty card and loyalty program adoption is that surprisingly few consumers know what is covered by their membership cards, thereby missing out on earning hundreds, even thousands of points. Blame it on poor communication by the companies or the sheer numbers of brands, say the experts.