Hotel loyalty programs have come a long way since they were introduced a quarter century ago by Holiday Inn. Initially viewed as the ugly stepsister of airlines’ frequent-flier plans, they have shed their dowdy image, and points have become highly desirable.
What’s changed?The value of a free airline ticket—the ultimate reward offered by carrier loyalty plans—has not risen significantly, while reward-point qualifying seats have become troublesomely scarce. According to the Air Transport Association, the airline industry’s trade group, the round-trip fare (without tax) for a 2,200-mile domestic flight increased minimally, from $292 to $298 (2 percent), between 2001 and 2006. A report issued last year by the inspector general of the Department of Transportation found that the six U.S. airlines with the largest frequent-flier programs reduced average capacity by 11 percent in 2005, compared with 2000, which "along with deeply discounted fares, has raised load factors, resulting in fewer seats available for redeeming frequent-flier awards."
Meanwhile, from 2001 to 2006, hotel rates rose dramatically. According to PricewaterhouseCoopers, the average daily rate charged by U.S. hotels jumped from $83.96 in 2001 to $97.50 in 2006 (16 percent), while in New York City, it skyrocketed 34 percent, from $195.82 to $262.16. Thus, a free room in a destination like New York is worth far more than in the past, while the value of a free plane ticket—if one is even available—has not really changed.
"While airline programs may still be the primary focus of frequent travelers, hotel programs should be a closer second than they’ve ever been before," says Tim Winship, publisher of FrequentFlier.com, a Web site devoted to loyalty programs, and a former Hilton HHonors marketing manager.
One of the most significant changes in loyalty programs in recent years involves the expansion of many hotel brands. Starwood, for example, introduced its highly popular W brand in 1998, and it will add Aloft this year; Hyatt has added Hyatt Place and Hyatt Summerfield Suites to its portfolio. The growth of brands gives travelers more opportunities to accrue and redeem points. "Customers use hotels for different things," explains Steven E. Kent, lodgings analyst at Goldman Sachs. "On business, they might stay at a W, but they will splurge and stay at a St. Regis for vacation."
Although hotel companies have long offered travelers a variety of ways to accrue points and to spend them, they have recently added more ways to do both. Chains like Marriott and InterContinental award travelers points for shopping with select retailers; InterContinental also allows program members to redeem points for state-of-the-art merchandise like a Bose entertainment system or Canon digital camera equipment.
One of the newest ways to use points is to trade them in for one-of-a-kind experiences. Starwood recently auctioned off tickets to Justin Timberlake concerts, including VIP seating and sound-check access. And Hilton has teamed up with Signature Days, allowing program participants to be fighter pilots for a day or get private Pilates instruction.
Another twist: special amenities in lieu of free room nights: Fairmont’s President’s Club provides services ranging from free local phone calls and in-room high-speed Internet access, to room upgrades and dining certificates. Millennium & Copthorne Hotels is now phasing in a similar, invitation-only program.
Today, the buzzword among hotel companies, as it is throughout corporate America, is personalization. Not surprisingly, technology is key. The chains are constantly revamping their Web sites and fine-tuning their e-mail communications with members. Companies like Hilton have essentially stopped making system-wide offers to travelers, and are instead tailoring promotions to guests’ individual patterns and predilections. Marriott has created some of the most imaginative tech tools, like its "DreamRewards Tracker," which lets members electronically select and save toward rewards, monitoring how close they are to obtaining them. Winship says focus is paramount in getting the most out of participating in a program: "Try to channel your loyalty toward a single program. You'll earn the most rewards and will be more likely to reach elite status, which means room upgrades and elite-points bonuses." And read on for other recommendations and a guide to leading programs.