Industry reports
Editor highlights

The Murky Future of Travel Loyalty Programs

  • Currently 0/5 Stars.
  • 1
  • 2
  • 3
  • 4
  • 5
0 review
The first modern frequent flyer program was created at Texas International Airlines in 1979. (Photo: Hsi-Pei Liao)
The first modern frequent flyer program was created at Texas International Airlines in 1979. (Photo: Hsi-Pei Liao)

BUSINESS

  • Business executives believe loyalty programs important to success
  • Loyalty program trend: offer hotel bookings at airlines/websites under private-label partnerships
  • Next generation reward programs must offer unique, desirable and attainable reward options

Thanks to loyalty programs, experienced travelers enjoy a lot of benefits that include free night stays, rental car upgrades, waived baggage fees and free airline tickets, the biggest perk of all.

Frequent flyer programs are largely established by now. The first frequent flyer program was created in 1979 at Texas International Airlines. Delta and British Airways soon followed, while hotels have been secondary to airlines in adopting the programs.

Hotel spending now accounts for significant part of overall trip budgets, with more travelers hunting for hotel frequent-stay programs to earn free nights. The simplicity and ease of cashing-in points for hotel rooms versus flights is a major advantage for hotel programs.

2 Billion Loyalty Programs in 13 Segments

Today, a recent count found here were almost two billion individual programs in 13 different segments, according to Colloquy1. Yet a survey found almost one-third of consumers feel that program participation holds “little or no value.” Another 37% believed individual rewards held even less value. This presents a loyalty paradox.

So, what is the future of these programs? Businessmen, given the choice, would like them to continue. Well over 66% of marketing decision makers say they are vital to success, according to a study by GI Insight.

“For B2B companies, the relationships established with loyal clients will often lead to more clients, and repeat business is the foundation upon which growth is built. These are commonly accepted beliefs of business and are the rationale behind loyalty programs,” writes Denis Hure and Jill Goldworn in The First Club, which says it is the only digital rewards platform “currently available in 12 languages that offers instant, branded rewards.”

One trend in loyalty programs is travel agents providing hotel bookings at the airlines/websites under private-label partnerships. Expedia, for example, has a partnership with AirAsia and South African Airways.

Expedia Rewards Program

A spend-based concept, the Expedia Rewards Program offers members points for money spent on hotel rooms, vehicle rentals, airline tickets and other services that can be purchased on Expedia Websites. The points are over and above those that can be gained through other loyalty programs run by hotel chains, airlines and credit card companies.

The points rewarded through Expedia's program can only be used toward travel. Compare this with credit card and airline loyalty programs where users earn points on shopping, dining, and paying bills along with travel, which lets them collect sufficient reward points quickly to redeem against something significant.

Though Expedia's loyalty program is beneficial for frequent flyers, it is aimed at travel agents and business clients who can collect enough points to be used only for travel.

Now that the boom of loyalty programs sees billions of memberships in the US and more around the world, the "one-size-fits-all" loyalty program will no longer suffice. Consumers have more choice and more control, which puts pressure on program creators to offer the most worthwhile and coveted rewards if the program is to succeed and encourage repeat business, consultants say.

Next Generation Reward Programs

“The next generation of reward programs must offer unique, desirable and, importantly, attainable reward options. In order to increase the participation rate of business loyalty programs, they must offer lower-level redemption offers, encourage earlier engagement in the loyalty program and increase revenues over time,” says Loylogic, a company that builds and runs loyalty programs.

Other trends cited by consultants:

  • Companies will continue to look for ways to differentiate their loyalty programs, while balancing program revenue and costs to achieve favorable economics.
  • Recent loyalty programs will trend toward lifestyle and personal interests.
  • Established loyalty programs will evolve to focus on high-potential and high-value customers.
  • Loyalty programs are expected to have a more holistic view of customers, focusing on “relationship rewards.”
  • Some form of instant point redemption at merchant partners will start to become more common.
  • The growth of coalition programs; while coalition programs have proved to be very successful around the world (such as Air Miles in Canada), this model has had considerable difficulty making head way here in the US. Why? The market is more fragmented and more resources are required to get programs up and running.

How soon will all this evolve? “It has been slow. But with that said, future economic, demographic and legal landscapes could accelerate company attention to customer retention and the concept of coalition and ‘relationship rewards,’” according to The First Club.

Key Statistics – Travel Loyalty Program Leaders

  • There are almost two billion loyalty programs in 13 different segments, according to Colloquy1.
  • Well over two-thirds of marketing decision makers say loyalty programs are vital to their success, according to GI Insight.
  • While 75% of travellers are satisfied they can use their points or miles on what they want and when they want, 22% would like more redemption options and 3% indicate they can never use their points or miles on reward options that appeal to them, according to Loylogic.

By David Wilkening for
David Wilkening is a former newspaperman who worked in Chicago, Detroit and Orlando. He now specializes in travel and real-estate business writing.

Share this news with a friend or colleague

Share

Follow

Browse our categories

Browse our archives

ReportLinker is a professional search engine that provides an easy access to 1,2 million market research reports and industry statistics published by 200,000 authoritative sources.