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Are travel and hospitality brands getting the most out of their loyalty programs?

There's no secret formula to quickly building brand engagement and generating lasting value out of your customers. However, if there's one component that companies often overlook in fostering a fully realized customer experience, it's loyalty and rewards programs. Customer loyalty programs are much more than mere mechanisms for doling out discounts, points and promotions; they are tailored brand interactions that enrich the customer journey.

With Forrester Research indicating that only 55 percent of brands effectively personalize their rewards programs, there's plenty of room for growth and improvement. If travel and hospitality brands want to position themselves to excel in the digital age, they will need to reshape their customer loyalty programs to provide the very best experience possible.

Where does customer loyalty stack up in travel and hospitality?

In the travel and hospitality industries, an uptick in customer loyalty metrics has a profound effect on a brand's profitability and bottom line. It's often said that replacing a lost customer is anywhere from five to 25 times more expensive than simply retaining them to begin with. But also consider that consumers tend to be more closely tied to specific airlines, travel groups and hotel chains than they might otherwise be for other services.

The ever-present popularity of rewards points -- and airlines and hotel brands' close partnerships with credit card companies -- certainly plays a role in brand attachment rates in this space, but that doesn't tell the whole story.

Airline and hotel customers have routinely shown that they will value experiential benefits over cost savings -- whether service upgrades, complimentary perks (like free Wi-Fi) or exclusive membership offers. Experience matters. For instance, a 2016 PricewaterhouseCoopers study found that 40 percent of business travelers choose rewards programs based on the availability of personalized services.

Other studies have discovered similar findings; most recently, rDialogue research revealed that:

  • 67 percent of travel loyalty program users want to enjoy brand experiences that are exclusive to rewards members.

  • 77 percent believe time-saving and usability benefits are "extremely important" for rewards programs.

  • 56 percent of consumers believe it is "very/extremely important" to have a seamless brand experience, supported by the latest technology.

Brands that deliver on those experiential benefits and are able to cultivate stronger attachment rates will build up a more lucrative base of customers. Both business and leisure travelers have shown that they are willing to spend more money to stay at their preferred hotel brand. According to PwC, on average, business travelers will pay $27 more than other options to make a reservation at the hotel chain of their choice.

What's standing in the way of loyalty program success?

Rewards programs can be tricky to navigate precisely because users' expectations increase, and ill-prepared brands will find it extremely difficult to consistently meet those expectations -- if they do at all. rDialogue touched upon this issue, noting that Amazon Prime members, for instance, are three times more likely to expect a personalized experience than non-Prime users. Loyalty program members aren't just your most valuable customers -- they're your most demanding.

Rewards programs need to reliably provide a seamless customer experience across multiple platforms, including mobile, online and social media. Anything less will frustrate loyalty program members and create friction between them and your brand. Customer identity management solutions help remove such barriers to engagement by providing a 360-degree view of the customer at every touchpoint. No matter where they go, you will always retain a complete picture of who your customers are, what preferences they have and how to best offer up the kind of experiential and personalized benefits they crave.

Another major roadblock facing travel and hospitality loyalty programs is the issue of security. To make good on the promise of a tailored brand experience for every single customer, companies need access to user data. Unfortunately, in light of the many data breaches that have captured headlines over the past few years, consumer trust is not very high in this department.

Our own research shows that 15 percent of consumers do not have a favorable impression of the hospitality industry's ability to protect their personal data. Travel companies fared a bit better, but there is still a lot of work to be done to address these concerns and pave the way for truly personalized customer experiences.

Trust is a critical component to customer loyalty, and travel and hospitality companies will need to demonstrate their commitment to data security and privacy best practices in order to scale this particular obstacle. Working only with vendors and solution providers that hold highly regarded security certifications and comply with leading data privacy regulations is a great start. Those include PCI DSS, GDPR, ISO 27001:2013 and SOC 2 Type II, among many others.

More so than some other industries, rewards programs play an essential role in the travel and hospitality sector. Getting ahead is about far more than slashing prices and offering discounts. Establishing trust, cultivating customer loyalty and providing a wholly unique personalized experience through rewards programs will help companies create lasting relationships with their most valuable clientele.