Most travel loyalty programs typically have point accrual and redemption as their core functionality.
Membership in travel loyalty programs have other privileges as well, but it’s impossible to divorce these programs from the earning and burning of points or miles.
And for many travelers and loyalty members, that’s just fine.
But the next generation of consumers – young Millennials and Generation Z – don’t want one-size-fits-all rewards.
They want to be recognized as individuals and they want rewards that are relevant to their needs and to their travel journey.
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They want experiences, not just platinum status. And if they’re committed enough to be loyal to a travel brand, they also want that brand to be equally committed to understanding their preferences and desires.
If travel brands can improve their ability to offer different types of rewards to different customer segments – while simultaneously offering rewards that have high conversion rates and margins – they can both better engage with the growing base of Gen Z customers and increase their revenue and profitability.
However, to understand the reward types that will resonate with this influential generation of consumers,travel brands must recognize the sway that experiences hold over their motivations and behaviors.
It’s all about experiences, not just stuff
Plenty of research has been conducted into what motivates Millennials and Gen Z consumers, from what they like to eat to when and how they’ll buy a house.
When it comes to travel, Gen Zers and Millennials will take about three leisure trips a year, and when they do, they prioritize experiences.
Gen Z travelers are more likely to leverage their estimated $143 billion spending power on experiences - and this is a continued growth trend.
An Eventbrite study backs this up, finding that 78% of millennials choosing experiences over “stuff.”
We conduct our own research through user tests – small surveys of travel website visitors that give us insight into their behaviors and tendencies.
Gen Z and Millennial consumers expect brand loyalty to come not only with regular, predictable rewards, but reciprocal loyalty from the brand itself.
Craig Brennan - SwitchFly
In a March 2019 user test, we found that Millennial and Gen Z travelers (ages 18-35) are more likely to share a picture of an experience they’re having rather than something they’ve purchased (even food) by a margin of 85% to 15%.
Whether the growing preference for experiences is attributable to performative Instagram culture or social media-driven FOMO (Fear Of Missing Out), it’s impossible to say definitively.
Whatever is driving the underlying desire for experiences, travel brands are in a unique position to deliver and capitalize on it, because travel is an experience itself.
According to our most recent data, 95% of younger consumers say getting points to redeem on cashback or travel is the aspect of loyalty that most appeals to them.
This means there’s still a place for points and miles vs. discounts on purchases or convenience perks.
But travel brands – more easily than brands in any other industry or sector – can further optimize their loyalty programs to accommodate experienced-based rewards, giving them an advantage in connecting with this valuable traveler cohort.
A great example is Marriott Bonvoy’s new “Moments” program, which encourages members to use their points on event packages, such as glamping at Coachella or VIP access to the 2019 NFL Draft.
By implementing dynamic loyalty strategies like Marriott is doing, travel brands can more effectively engage a younger traveler segment than traditional points-based or free-hotel night programs alone might be able to.
Data matters too
Experiences aren’t the only defining characteristic of this younger generation’s travel preferences. There’s a broader shift in the way these consumers define and perceive loyalty.
Gen Z and Millennial consumers expect brand loyalty to come not only with regular, predictable rewards, but reciprocal loyalty from the brand itself.
They expect to be treated differently than a new customer, through personalization, customized offers and tailored content – and they’re willing to meet travel brands halfway to get this treatment.
Millennials and Gen Z consumers – as digital natives and the first social media generations – are also open to having data about their behavior collected in exchange for more personalized rewards and brand engagements.
They’re willing to share personal information to get access to experiences that are tailored and meaningful to them.
This data can be harnessed to facilitate even more personalization in a kind of virtuous marketing cycle, but it can also inform larger business decisions, including the curation and presentation of inventory to offer customers a selection of travel products and services just for them.
Providing value for new(ish) travelers
Gen Z travelers, if they’re loyalty program members at all, typically have lower points balances than older member segments.
This means the traditional concierge-level perks may not be available to them, making personalized rewards even more attractive and more effective at customer retention.
If travel brands can improve their ability to offer different types of rewards to different customer segments they can both better engage with the growing base of Gen Z customers and increase their revenue and profitability.
Craig Brennan - SwitchFly
It also means travel brands that offer “points + cash” redemption options or points redeemable for experiences (which usually require fewer points than flights or room nights) can create real value for Gen Z travelers, which will also increase their affinity with the travel brand.
With this new generation of travelers ascendant, travel brands’ approach to loyalty needs to evolve beyond points and miles.
Instead, they should focus on dynamic loyalty solutions that enhance their brand’s experience while giving Millennials and Gen Z travelers exactly what they want: personalized experiences.
From the travel brand’s perspective, this can help reduce the cost of customer acquisition while ensuring their brands are top-of-mind in the search and book phase.
As travel brands rethink their loyalty strategies, they also need to understand that data facilitates personalization by providing their customers’ values and habits.
By offering tailored rewards based on travelers’ preferences, expanding traditional miles and points rewards structures to include experience-based rewards, and providing easier access to travel experiences through “points + cash” redemption, travel brands can create a connection with the Gen Z consumers that will soon be the most numerous segment of the population with the most disposable income.
And the travel brands that can establish a relationship with these travelers through effective loyalty strategies will be able to capture more of their travel dollars as we enter the rapidly approaching new decade.