Hotel loyalty programs and their role in corporate travel programs
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Hotel loyalty programs claimed almost 289 million members in 2014, and a good share of these are likely to be business travelers. The GBTA Foundation recently asked 500 business travelers in North America if they were enrolled in the loyalty programs of nine major hotel chains. It found that 86% of those who are based in the United States, and 69% of those who are based in Canada, are enrolled in at least one chain’s program. This study examines the role hotel loyalty programs play in corporate travel. It is based on a survey of 221 U.S.-based Travel Managers. Below, you’ll find a summary of the study. For the complete study, please click here.
What Role Do They Play in Corporate Travel Programs?
A large majority of Travel Managers say their company’s employees are allowed to use hotel loyalty accounts when traveling for business, and keep loyalty points and rewards for their own personal use. About 8 out of 10 (78%) Travel Managers say their travel policy allows employees to use individual hotel loyalty accounts on business trips. Another one out of five (17%) say their policy does not address hotel loyalty programs.
However, even when travel policies do not address loyalty programs, travel programs appear to allow them in practice. When asked whether travelers can keep the points or rewards earned through business travel for their own personal use, Travel Managers almost universally say “yes.” They rarely say “no” or “does not apply.” This is largely true even of Travel Managers who say their policy does not address hotel loyalty programs. This implies that these programs allow travelers to earn points and rewards in the first place.
The widespread acceptance of hotel loyalty programs does not come as a surprise. What may be surprising, however, is that they are sometimes a consideration of Travel Managers. One-third (36%) of Travel Managers say they actively inform travelers about hotel loyalty programs. In addition, while one-third (34%) say loyalty programs are “not at all important” when it comes to contract negotiations with hotels, more than half (66%) say they play at least a “slightly important” role in negotiations. However, only 18% say they play a “very important” or “extremely important” role. Thus, loyalty programs are commonly a consideration of Travel Managers, though not usually a primary one. The question is why they are even a consideration at all, when the benefits go largely to travelers, and not companies.
Why Do Hotel Loyalty Programs Matter to Travel Managers?
As shown above, half of Travel Managers indicate loyalty programs play at least a “moderately” important role in their negotiations with hotels. These Travel Managers were asked to describe what role these programs play. They give a variety of responses. These were categorized into different themes. Most commonly mentioned are using loyalty programs to promote policy compliance, or drive greater volume to preferred hotels.
How Do Travelers Use Loyalty Programs and Why?
Travel Managers clearly believe loyalty programs are important to travelers. A 2013 GBTA Foundation survey found that 85% of U.S.-based Travel Managers believe loyalty cards (air/hotel/car) are “important” or “very important” to their travelers.
It is unclear, however, how loyalty programs influence the behavior of business travelers as two industry studies seem to have conflicting results. One survey of loyalty members (business and leisure), conducted by Cognizant and Retail Info Systems News, found that 67% of shoppers say hotel loyalty programs are influential when it comes to choosing hotels.v However, another survey of business and leisure travelers, conducted by Deloitte, found that loyalty programs are largely “undifferentiated” and have “little or no impact on travelers’ purchase decisions…” with travelers ranking loyalty programs 12 out of 26 attributes of their hotel experience.
As for why business travelers enroll in loyalty programs, one obvious reason is to earn points. As mentioned earlier, in the United States, companies almost universally allow business travelers to keep points for their own personal use.
Amenities may also play a role. A recent survey of high-frequency travelers (business and leisure), conducted by Deloitte, found that two-thirds of those who say they have a favorite loyalty program would stay in the program “even if they lose all points and status.” Among high-frequency millennial travelers, the rate is 75%. This likely suggests that travelers value the amenities that loyalty programs offer all members, even those without status.
However, with business travel specifically, this is complicated by the fact that some amenities availablethrough loyalty programs may already be included in preferred agreements. For instance, the most important amenity to business travelers is free Wi-Fi. A recent survey conducted by Hotels.com asked travelers to indicate which amenities are “deciding factors” when choosing a hotel. Half of business travelers indicate free Wi-Fi (49%), a much higher rate than the second most indicated amenity, free breakfast (14%). While several loyalty programs now offer free Wi-Fi, it may also be included in preferred agreements. In the current study, Travel Managers were asked if 17 different features or amenities were included in the majority of their preferred agreements with hotels. Most (80%) say complimentary basic Wi-Fi is included in a majority of their agreements. This may reduce the need to obtain it through loyalty programs. On the other hand, if business travelers want premium or high speed access, they generally will not get it for free without a loyalty membership. Only 36% of travel programs have this in a majority of their preferred agreements. In addition, many other amenities are not commonly included in preferred agreements. In total, twelve of the 17 features/amenities are not indicated as being included in a majority of preferred agreements by more than half of respondents. With some of these amenities, loyalty programs can fill the gap. These include room upgrades, late check-out, access to club level services, a welcome snack/gift, and complimentary beverages. It is not clear, however, how important these other amenities are to travelers, and whether travelers would go out-of-policy to get them.
HOTEL LOYALTY PROGRAMS AND TRAVEL POLICY COMPLIANCE
How Often Do Travelers Book Hotels Out-of-Policy, Why Do They Do It, and What Impact Does It Have?
Hotel bookings are commonly made out-of-policy. The CWT Travel Management Institute estimates, based on transaction data, that 50% of hotel bookings are made outside of preferred channels. This is much higher than the rate for other travel categories. In 2013, the GBTA Foundation estimated that out-of-policy decisions involving a hotel stay lead to an increased average cost of $232 per trip and $2,877 annually per out-of-policy traveler. By contrast, out-of-policy air/train and car rental reservations have a much smaller impact on a company’s bottom line. Many of these out-of-policy decisions are related to booking including choosing non-preferred hotels and using non-approved channels.
In the current study, respondents estimate that one-quarter (24%) of their organization’s hotel bookings are made out-of-policy. The figure varies by travel spend with medium (25%) and high spend (29%) companies reporting a higher share on average than low spend (18%) companies. However, these figures are substantially lower than the share estimated by the CWT Travel Management Institute. In the current study, when asked why travelers book hotels out-of-policy, Travel Managers indicate a variety of reasons. The most common are that travelers “think they’ll get better rates/deals” (73%), “have a preference for a particular non-preferred hotel brand/type” (52%), and “know they won’t get penalized for going out-of-policy” (43%). Of the people who indicate “other,” one-third (35%) mention convention/block rates and one out of 5 (19%) mention loyalty programs/points.
Travel Managers overwhelmingly feel out-of-policy hotel bookings have a negative impact on their ability to do their job. Almost all Travel Managers (95%) say out-of-policy domestic bookings have at least “a somewhat negative” impact on their ability to do their job. This includes two out of five (43%) who say it has a “very negative impact.” When it comes to international bookings, almost nine out of 10 (86%) say these have at least a “somewhat negative” impact including half (49%) who say they have a “very negative” impact.6
LOYALTY ACCOUNTS FOR CORPORATE TRAVEL PROGRAMS
Most loyalty programs reward individual travelers for staying at hotel chains. These can align with the goals of corporate travel programs: to promote compliance, improve traveler satisfaction, and extract value from hotel stays. While the primary goal of loyalty programs is to incentivize travelers to be brand loyal, continued partnership with Travel Managers should prevail.
One of the goals of this study was to gauge interest in (1) a corporate hotel loyalty program and (2) adding an incentive to individual programs that would encourage booking through authorized channels.
A large majority (77%) of Travel Managers are “somewhat interested” (33%) or “very interested” (43%) in a “corporate loyalty program” that “reward(s) companies through various discounts and perks.” Such programs already exist, but are not common. They would likely be used in conjunction with individual accounts.
A large majority (72%) are also “somewhat interested” (34%) or “very interested” (38%) in allowing travelers who belong to individual loyalty programs “to accrue points more quickly if they booked through a channel agreed upon by both (the travel manager) and the hotel.”
- Even though a large majority of organizations allow their employees to use hotel loyalty accounts when traveling for business and use their rewards for personal use, many do not address said loyalty programs with their travelers. Travel Managers are recommended to address these programs with their travelers as there are many benefits travel programs can obtain when their business travelers use hotel and other loyalty programs. Among the benefits Travel Managers can find are:
- Use as a perk for business travelers
- Amenities offered can complement preferred agreements with hotels
- When no preferred agreement is in place it can help the Travel Manager reduce travel costs as some amenities would still be covered (free internet connection, free breakfast among others)
- Hotel Loyalty Programs can help drive travelers to preferred hotels and stay in-policy when choosing their lodging
- Can drive traffic to specific hotel chains which could help with minimum volume requirements when in place.
- Loyalty programs may also inadvertently encourage booking through non-authorized channels. For instance, hotel chains are beginning to offer, or are planning to offer, free internet (basic Wi-Fi or premium/high-speed internet) to loyalty members who book through them directly. Travel Managers are largely aware of this trend and believe it will have a negative impact on their jobs if it continues. This does not have to be the case as a good number of travel programs integrate loyalty programs into their policies and use them to their advantage. Hotels and Travel Managers should work together to integrate loyalty programs into travel programs and communicate with travelers about the benefits and channels they should use to both stay in-policy and participate in said programs.
- A large majority (77%) of Travel Managers are “somewhat interested” (33%) or “very interested” (43%) in a “corporate loyalty program” that “reward(s) companies through various discounts and perks.” Such programs already exist, but are not common. As they become more common, corporate loyalty programs could potentially fill a gap for smaller companies who might not have preferred agreements or cover geographic areas where existing agreements aren’t in place and allow Travel Managers more control over such programs.