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What happens when a brand has nothing special to offer but loyalty rewards?

Wednesday, June 1, 2016
By Raul Leal

Imagine a hospitality world where there are no points programs? Who would be the hospitality leader if the point programs vanish? Although many consumers for a time would continue to follow their current “favorite” (we will revisit that word in a bit), over time they would probably gravitate to whomever has managed to capture their hearts, minds and imaginations similar to many independent hotels around the world and now Airbnb, and then a clear favorite would emerge.

TheKnow

Virgin Hotels’ preferences program, The Know, delivers surprise and delight right to your chamber.

The mass loyalty programs started off with the right intentions. “Reward your best customers for their loyalty” was the primary goal. While there are many definitions for loyalty i.e. faithfulness, devotion etc. not one of them implies that loyalty is bought. The proliferation today of loyalty programs seems more aimed at making sure that competitors don’t steal your existing base of business than aimed at rewarding truly loyal customers and not just the masses. Once the internet became a powerful distribution mechanism and in essence created the OTA phenomenon, the landscape of loyalty was changed forever because the consumer was given something they never had before, an opportunity to really look at other options and most importantly the great disruptor, choice. As an owner of lifestyle and branded hotels myself, I have done the analysis many times on the return basis for many of these loyalty programs and the associated fees, including marketing fees that are tacked on today by the major brands. The brands continue to pile on benefits at the expense of the owner with no clear return on investment and a lack of transparency relative to resource allocation and actual productivity.

The cookie cutter hotels of the past will succeed, but only in markets where there are no other options

The consumer today has spoken clearly. The cookie cutter hotels of the past will succeed, but only in markets where there are no other options and during high compression scenarios. The brands have awakened to the idea that a different type of product is needed to appease a new generation of customers that essentially are torn between points and experience depending on whether they are on business or pleasure. At a time when the lines between both are blurred, the brands response has been to rollout product offerings that differentiate themselves through design with no clear point of view on other levels. These new products are still encumbered by their loyalty programs so essentially making them a mass consumer offering and losing site of why boutique and lifestyle hotels if done right are special to begin with. Once these hotels get lumped in with the rest of the portfolio that special “je ne sais quoi” they were trying to achieve is gone before they open.

Back to the word “favorite” which implies “most loved”. If brands today are to continue to evolve they must begin to seek to transform themselves into products that are not coerced or influenced by points programs and room rate discounts but rather truly loved by their consumers similar to companies outside our industry like Apple and Virgin. Demand in our business can be induced by simply choosing not to be one of the masses and creating a product that is special and different and evolves organically because the consumer wants it. The basis for these type of products today is very clear:

Consumers want companies with purpose and that contribute to the world
Consumers want to be able to work and play at the same time
Consumers want a product that works.
Consumers and teammates want a hotel that allows them to be themselves
Consumers want technology on their terms not ours.

At Virgin Hotels we are creating a product that cuts across generational barriers and appeals to all without being everything to everyone. Virgins consumers are more like “raving fans” than customers because they know that brand will make them smile but also deliver. One of the benefits of being under the umbrella of a “Love brand” like Virgin is that we create our own demand without the advent of expensive marketing and loyalty programs that impact our financial statements.

Get in “The Know” – Virgin Hotel’s preferences program caters to everything from floor preference to bacon.

When selecting a brand for your hotel consider the dynamics taking place in today’s consumer world and the shifts in distribution technology. While the bigger brands may have you believe that more is better, at the end of the day the consumer will decide if your offering exhibits the characteristics that will make them followers and not just customers.