How travel brands can boost their “loyalty dividend”

Travel has some of the longest-standing, largest and most historically successful loyalty programs of any industry. So much so, in fact, that travel’s points-based rewards have been the gold standard other sectors have looked to emulate as they built out their own customer loyalty strategies.

But the past couple of years have left travel loyalty programs looking a little shakier than they once did. While the industry’s recovery from pandemic disruption is encouraging (some forecasts project a return to 2019 levels by 2024), changes in who is traveling - and how often - are challenging tried-and-tested loyalty strategies.

Consider that leisure represented a huge 80% of global travel spend in 2021. And recent research from Accenture shows that, even with rising travel costs, over half of consumers plan to maintain or increase their spend on leisure travel in the next year.

Business travel is also coming back in the post-COVID economy. But, given their experience of the past two years, growing numbers of business travelers might limit their travel frequency, combine business with leisure trips (bleisure) or switch to digital nomadism.

Time for a loyalty upgrade

This has implications for loyalty. Historically, business was the only segment that traveled enough to qualify for high-status loyalty rewards, and the high-volume business “road warrior” was the bedrock of points-based programs. The likelihood is that fewer travelers will be able to rack up loyalty points for perks in future. 

Loyalty strategies are therefore in urgent need of an upgrade. The good news is that there are several ways to increase the “loyalty dividend” - an objective measure of the perceived value of a program to customers relative to the cost to the business of providing it.

Growing the loyalty dividend begins by understanding which rewards today’s travelers really value. And some recent qualitative research from Accenture sheds light on this question. Three insights in particular stand out.

The power of now

The first highlights the growing importance of “right now” in loyalty rewards. Unlike traditional business travelers who patiently built up rewards over time, leisure travelers expect to be able to gain and use their rewards immediately. 

Travel companies can respond by enabling a “real-time” earn and redeem model. This treats loyalty points more like a form of currency, with customers able to see how much they’ve earned and spend their points as and when they choose.

That includes spending on smaller moment-by-moment “microburn” purchases, such as a drink at the bar or upgrading to a better seat or room. 

Savvy companies can also consider building in gamification to increase engagement. Banyan Tree Group’s digital scavenger hunt at its Laguna Phuket resort shows how gamification can improve customer experience and boost ancillary revenue. 

Guests used their mobile devices to search for digital objects (NFTs, i.e., non-fungible tokens) and win exclusive prizes while learning about the resort’s services. The scavenger hunt was designed to be engaging, easy and economical to deploy. By linking this kind of gamified experience with loyalty, travel companies can add value for travelers, as well as increase brand awareness and drive sales.

Flexibility my way

Today’s travelers expect reward programs to reflect their changing needs across different situations and stages of a trip. That includes greater choice, flexibility and autonomy, with programs that allow members to choose benefits that are most relevant in the moment, based on the unique needs of each journey. Hilton is offering Honors benefits that you can choose per stay and per brand, which is a first step in personalizing benefits and being able to make the choice in the moment.

One way to do this is to broaden the number of redemption partnerships that travelers can make use of - including partners outside the traditional travel ecosystem. This “earn anywhere, redeem anywhere” concept provides more options for spending points on rewards that make day-to-day travel just that little bit easier.

Alongside this, travel companies should ensure they’re using data from loyalty programs to guide both the strategy and the execution - everything from which partnerships to enter, to which benefits to offer, to creating a well-designed personalized user experience that avoids “option overload.”

Tried and true

The third key insight is that much travel brand loyalty is driven by reliable, consistent, convenient experiences and by reassuring customers that their expectations will be met. In the end, this trumps both price and transactional value.

Travel companies should therefore focus on being “the hero” of the travel experience, making customers feel valued and providing rapid human-centered customer service—especially when challenges arise - understanding how this impacts the broader loyalty strategy.

It’s also important to consider which customers are willing to pay a premium, whether to avoid stress or enjoy a better trip. For example, several airlines are offering to buy memberships for lounge access.

Time to recapture the pioneer spirit

Recent years have shown travel companies adapting to disruption with impressive flexibility and responsiveness. This same spirit of innovation now needs to be applied to loyalty programs. 

By continuously reassessing how those programs understand, reflect and respond to changing customer needs, preferences, passions and purpose, travel companies can keep their loyalty strategies relevant, valuable and profitable. 

That’s how to make loyalty rewards more rewarding - for the business as well as for customers.