Loyalty Programs in Travel and Hospitality Sector and Key Role of E-CRM

The travel sector offers quite a few loyalty programs – some of which are quite well-known, and successful as well. Within this sector, the sub-vertical that definitively takes the lead in loyalty program adoption and innovation is the Airlines sector.

Airlines were among the first businesses to introduce loyalty programs to their customers. Frequent-flyer programs date back to early 1980s when American Airlines started the now iconic American Advantage (AAdvantage) program. Through the Sabre computer reservations system, American Airlines had amassed a database of around 150,000 of its best customers.

SOME THE INDUSTRY’S BEST CONTEMPORARY LOYALTY PROGRAMS

The Star Alliance Network is a partnership where frequent flyers can accumulate and redeem miles on the following airlines: United Airlines; Lufthansa; Air Canada; SAS; British Midland; Varig; ANA; Singapore Airlines; Austrian Airlines; Thai Airways; Air New Zealand; and Mexicana.

VARIG’s Smiles Program is the most popular frequent flyer loyalty program in Latin America. With Smiles, passengers can earn miles on every VARIG flight, as well as regional, domestic and international flights on Rio Sul, Nordeste, Pluna, South African Airways, Spanair, Alitalia and participating airlines of the Star Alliance. Miles earned can be exchanged for free tickets, upgrades and other benefits.

US Airways offers its members greater privileges through additional offers by its Dividend Miles program on travel on US Airways and its partners. The features differ for its three membership types – Silver Preferred, Gold Preferred and Chairman’s Preferred.

SECTION TWO: HOSPITALITY LOYALTY
INTRODUCTION

In the days of inception, the hospitality industry offered loyalty programs together with the travel industry. With time, as the airlines stated their own Frequent Flier Programs, the hospitality industry launched independent frequent guest programs as well. Holiday Inn was amongst the first to launch its own loyalty program, in January 1983 followed by Marriott with its Honored Guest Awards program in the same year.

SOME THE INDUSTRY’S BEST CONTEMPORARY LOYALTY PROGRAMS

The recent launch of “Any hotel, Any where” card by the InterContinental Hotels Group (IHG), the world’s largest and most global hotel company, is one of the best initiatives in the context of new age loyalty programs in the hospitality industry. IHG has recently added a new feature to its customer loyalty program: Priority Club Rewards.

Starwood Preferred Guest is another of the best loyalty programs in the Industry. The program made headlines when it launched in 1999 with a breakthrough policy of no blackout dates and no capacity controls, meaning members can redeem free nights anytime, anywhere.

Park Hospitality, part of Minneapolis-based Carlson Hospitality Worldwide, consists of Park Plaza and Park Inn hotels in North America. The hospitality group primarily offers services to a range of guests in suburban and leisure destinations. Park Rewards, part of the Gold Points Rewards guest loyalty program, is based on a point system awarding 10 points for each U.S. dollar spent on accommodations at Park Plaza and Park Inn hotels in North America.

Radisson Hotels and Resorts’ channel-based Relationship Building Loyalty Program, called ‘Look To Book’, has been very successful as well. Radisson is the only hotel company to offer a patented on-line loyalty program for travel agents, which allows them to automatically earn points towards valuable merchandise and incentive awards in return for booking Radisson hotels.

Hyatt offers a global loyalty program – Hyatt Gold Passport. Hyatt Gold passport offers features like earning points towards free nights with no blackout dates, selecting in-hotel services and special offers, beginning with the very first stay. The benefits offered are based on the type of membership the guest holds. The three memberships offered by Hyatt Gold Passport are Gold, Platinum and Silver, based on the frequency/ number of visits.

Hospitality industry in developing economies such as in India are not left behind either The Welcom Award program recognises the needs of a business traveller and through its strategic alliances with travel partners, endeavors to build rewarding relationships.

SECTION THREE: COMMON PROBLEMS WITH LOYALTY PROGRAMS, AND THEIR MITIGATION BEST-PRACTICES

While the consumer awareness of loyalty programs as well as the business priority accorded to them are both growing in tandem, the effectiveness of such programs, and the consequent ROI that a business generates out of them continue to be significant challenges. Here below are a few key areas that deserve focused attention of enterprises that are implementing or running such programs:

“7 out of 10 loyalty card owners own more than one loyalty card,” avers a recent Frost & Sullivan research. The problem out of this rampant loyalty card and loyalty program proliferation, researchers say, is that surprisingly few consumers know which hotels are covered by their frequent-stay cards, thereby missing out on earning hundreds, even thousands, of points. Blame it on poor communication by the companies or the sheer numbers of brands, say the experts.

Traditionally, customer relationship management focus in hospitality has always began and ended in one phrase: “customer satisfaction.” The presumption is very simple: Customers will appreciate good service so much that they would not go to your competitor. In other words: Customer satisfaction plus quality of services equals customer loyalty.

The truth is that customer satisfaction does not always equal customer loyalty.

Research shows:
• 40% of satisfied customers switch hotels without hesitation (Forum Corp.)
• 65% to 85% of customers who choose a new hotel claim to be satisfied and very satisfied with the
former one (Harvard Business Review)
• 85% of customers claim to be satisfied, yet willing to switch to other hotels (University of Texas).

These are compelling numbers, clearly indicating that even for the best-of-class service provider hotels there is a crying need for focused and ongoing relationship building and relationship deepening exercises with their key clientele.

Electronic customer relationship management (e-CRM), in the context of the exploding Internet distribution and marketing in hospitality, is a business strategy supported by Web technologies allowing hoteliers to engage customers in strong, personalized and mutually beneficial interactive relationships, increase conversions and sell more efficiently.

This means that almost every time an Internet user lands on a hotel Web site a branding interaction occurs, thereby creating either an opportunity, or a threat, for the hotel. This branding interaction can be positive (brandbuilding) or negative (brand-eroding).

A. Customer Knowledge

Knowing your Web site visitors is an extremely important consideration when conceptualizing and designing your hotel Web site and your e-CRM strategy.

The 2004 RUSH Report shows:

• 56% of all visitors on hotel branded Web sites are leisure travelers and 32% are business travelers. Approximately 3% of hotel Web site visitors are involved in meeting or event planning.
• 34% of all visitors on hotel branded Web sites seek information about the hotel, while 30% of the visitors come to make or change a reservation.
• Business travelers look for directions and high speed Internet.
• Meeting planners look for function room floor plans and capacity charts.

The benefits:
• Identifies your most valuable customers with best lifetime value perspective (20:80 principle)
• Allows guest-centric data mining: Guest history, guest profiles, past bookings, preferences, etc.
• Enables informed decisions in real time
• Allows fast response times
• Offers real-time guest lifetime value
• Delivers business insight to executives, marketers, sales

B. Personalization
Personalizing the customer experience on the hotel Web site is a powerful conversion and retention tool. Customizing your interaction with your most valuable customers (those 20% who generate 80% of your business) will provide significant long-term rewards.
Personalization at the property level should start by:
• Identifying all “electronic touch points” with your customers (hotel guests, meeting planners, travel professionals, etc.) and creating an action plan.
• Personalize all electronic communications with your customers. Adopt a policy on how to address your guests via e-mail (first name only, Mr./Mrs. plus last name, etc.).

C. Customer Support

It is important to understand that customer service is only one aspect of e-CRM and is primarily a reactive function aiming to improve performance and efficiency, while e-CRM as a whole is a proactive long-term strategy.

Customer support in the Internet age relies on a wide range of tools and techniques. Here are some to consider:
• Web Self-Service Tools: Intelligent service channel management and natural language search engines; directing customer requests to most appropriate support information and services; FAQs; “Ask the experts” self-service chat rooms; interactive maps, directions and business locators.
• Live Service Tools: Push-to-talk functionality and real-time interaction with live agent; instant messaging and chat-room type assistance; Voice-over-Internet Protocols applications; and automation to pre-screen live support (selective approach).
• E-Mail Service Tools: Inbound e-mail management; and automated e-mail response systems capable of automating 80%-90% of e-mail volume with 98% accuracy, dramatically improving service and reducing support staff by up to 40%.