Where travel brands go wrong with loyalty

Loyalty has long helped brands drive engagement but not everything is plain sailing in the travel loyalty world.

The landscape is shifting with younger generations demanding something different from programs and companies reassessing what's working. At the end of last year, for example, Morning Consult reported that travelers aren’t totally satisfied with programs as they exist. And in 2023, McKinsey reported that an airline’s loyalty program's capability to convince travelers to choose their airline over another, was declining.

So, where are travel brands going wrong when it comes to loyalty? Mark Ross-Smith, CEO of Loyalty Status Co., and Robert Wesley, CEO of MeProtocol, weighed in on how brands can improve loyalty strategies during a studio interview at Phocuswright Europe in Barcelona.

Ross-Smith believes a focus on status could be the key to improved results when it comes to loyalty.

“In airlines and hotels, there's been a lot of focus on points and miles for a long time, and rightly so, because it's the bedrock of financial stability,” Ross-Smith said, referencing credit card points. “What has been left out in the cold is the status side. I'm not just saying that because that's what we do, but it's actually true.”

Status, he said, can drive 20 to 30% of revenue. So, if a team of 50 is focused on points and miles and a team of two is focused on status, there’s an imbalance.

“I think if brands focus more on the status side, which [includes] its top customers, they spend more and more often,” Ross-Smith said. “They're called the right type of money. It's high margin money.”

More focus on status tiers could draw younger generations into those tiers, he said, building out a long term play for lifelong customers. “I see some easy wins, really … everyone in the ecosystem, sort of playing on that.”

He suggested travel companies of all types look to airlines to learn about how to use status as a driver for loyalty.

Wesley said brands are missing out on opportunities to prioritize consumers.

“There's been, over time, this degradation of a customer-centric approach to loyalty, and especially on the reward side, which is what we deal with,” Wesley said. “So it's about arbitrage … how do we drive value to the actual customer there? And it's not arbitrage … how do we get them [travelers] engaged? Are they going to be loyal to our brand, especially in an industry where there's very low switching cost? You need to be able to engender some type of loyalty through a different mechanism there.”

Wesley believes a fundamental rethink is required regarding the position of the customer in the loyalty equation.

“When you're in an industry for so long and rewards have been around for such a long time, you become extremely biased to today how it is, because that's how it always shall be,” he said. “But the reality is, if you're not adjusting over time, then someone's going to cut you out eventually.”

During the wide-ranging discussion, Wesley and Ross-Smith also touched on the use of blockchain in loyalty, how artificial intelligence plays into loyalty’s evolution, the importance of personalization and more.

Watch or listen to the conversation with senior reporter Morgan Hines in the PhocusWire studio below: