Not all points mean prizes: Why investors should look beyond loyalty programme numbers

The criteria for choosing a brand or operator have evolved through time, led by the ability to deliver whatever would please the guest most. That could be luxurious suites, the ability to book the local Michelin-starred restaurant or offering a home-from-home to entertain friends and family.

For as long as people have travelled, marketing beds effectively has been at the heart of profitable businesses and when customer acquisition moved online, owners were faced with increased opportunity, alongside increased cost.

The response from the operators was the loyalty programme. Borrowed from the airline industry and, now that traction has been gained, deployed effectively. Owners are drawn to the ability to fill beds at a lower cost than the OTAs and guests, particularly the frequent travellers, are attracted to the potential to convert points into free stays.

Loyalty programmes are at the beginning of any operator pitch and are often the deciding factor. Knowing that your 30-bed boutique luxury hotel will have access to an expansive database of members is more than reassuring, it can feel close to a guarantee of maximum occupancy.

For the guest, a loyalty programme is mandatory. Not only airlines, but credit cards, the weekly shop, that latte, every transaction comes with a reward or discount programme attached. It has become part of the purchasing experience and consumers are rigorous in assessing which scheme offers the best returns.

Owners and investors must be the same. Every large hotel company has a programme and the bigger ones extend to hundreds of millions of members, reaching many times more than the populations of the world’s largest cities.

Consider too how those members are spread across the operator’s portfolio. You are likely to be one property out of thousands around the world. You may be one property out of 10s in just one city. What appears to be a rich store of demand may be spread very thin.

I believe that investors need to focus on high-density loyalty programmes, where a high number of engaged members are spread across an exclusive collection of properties, increasing the chance of a stay. When presented with a loyalty programme, it should be clear how often the guests in the top tier of the membership programme stay, as these are the guests who deliver the majority of a property’s profits. These guests represent true loyalty and are also those who can deliver the most valuable asset of all: a personal recommendation to their friends and family. Active membership is key: the older the programme, the more likely it is that many members have moved on to new pastures.

We know that the guest’s desires are always evolving. Today’s guest wants to be a member of a loyalty programme and we want to ensure that their loyalty is properly rewarded.