How important are travel rewards programs and quick rewards in fostering strong customer relationships?
By Andy Owen-Jones, Co founder and CEO of BD
In a world where first-party data rules supreme, for travel companies loyalty and reward programs are the monarchs.
There’s a myriad of options available to travelers – from the best hotel rewards program which gives you quick rewards, to the best airline rewards program that might partner with banks or stores to give you extra ways to boost your air miles.
Despite the digital transformation of the travel industry, loyalty programs haven’t altered too much from their early days. Airmiles are rewarded based on how far you fly. Hotel points are given based on how much you spend – whether it’s paying a higher room rate for a better room category or additional spend on spa treatments, dining or events.
Post pandemic travel rewards programs
In today’s post pandemic world, what will the best travel rewards programs look like? Research suggests that effective loyalty programs can be up to four times more valuable than brands themselves in the travel and hospitality sector. The report states “To be successful is to know your customers, what they want and need by listening to them.”
As travel returns after Covid, millions around the world are busy planning and booking their holidays and business travel. KPMG advises brand loyalty programs that “an emotional connection is no longer a nice-to-have, it’s a need-to-have.”
With a glut of online visitors, each planning a trip specific to them, how can digital travel companies listen to the large volume of online visitors, let alone respond in real time and to each individual? How can companies differentiate quickly and in a meaningful way to their loyalty program members? That’s where technology plays a key role, helping craft travel loyalty programs which are rewarding for both the business and the traveler.
The importance of travel rewards programs
Done well, travel rewards programs can benefit both the customer and the company. For customers, recognition is key: we all want – and expect – to be treated as a person, not a number. Especially when sharing data, customers expect their preferences to be actioned and a level of awareness about who they are.
Loyalty is not about price, it’s about value – feeling valued as a customer and earning value as a business. But every potential customer’s idea of what is valuable differs from the next person’s. As such, companies need to take a truly personalised approach to drive sign ups for their loyalty program, showing that they understand their customers and are aligned with what’s important to them as individuals.
Technology helps companies react in real time to each and every digital visitor, presenting relevant information and products to people to support their uniqueness. For more on this topic, take a look at our blog post about how one of our travel clients is minimizing churn on their website.
What do customers think of travel loyalty programs?
Back in 2018, Google’s analysts called for the travel industry to rethink loyalty programs, writing: “Loyalty has become synonymous with points, freebies, and member discounts. Those benefits drive massive loyalty sign-ups, but the problem is, those same people may also be signing up with…your competitors.” Frequent travelers are familiar with how loyalty programs work, signing up to multiple schemes to ensure they’re earning something every time they travel.
Points based programs do not automatically translate to brand loyalty: Google’s report found loyalty programs motivate less than half of the high-value travelers (46%) to book, with customer service (60%) top of their considerations when choosing a travel provider. For this top spending group of travelers, the service a company provides “across all touchpoints, is more memorable than the points you can offer.”
KPMG discovered a similar sentiment, with “points and rewards less likely to earn loyalty than corporate transparency and honesty.” However they also found that “customer loyalty is alive and well, but digital disruption and new generational influences show that the nature of loyalty is changing.”
What are the best airline reward programs?
Airline reward programs are some of the most popular – and valuable – travel rewards schemes, chiefly because of the data they hold about their members. In fact, during the pandemic, American Airlines – itself valued at around $6 billion as a company – estimated the value of its AAdvantage rewards program to be $24 billion.
Most of the big names in the skies are part of one of two key airline industry alliances. Star Alliance, founded in 1997, has 26 members including United Airlines, Lufthansa, Thai Airways and Singapore Airlines. Its main competitor – Oneworld (founded 1999) – has 14 members including American Airlines, British Airways, Cathay Pacific and Qantas.
Already a member of Oneworld, Qatar rebranded its Privilege Club ‘currency’ from Q-Miles to Avios – in line with British Airways, Iberia, Vueling and Aer Lingus – in March 2022, a move seen by industry commentators as mysterious, but “it may be because they are a major investor in IAG which owns British Airways, Iberia and Vueling…who all use Avios. It’s a popular points currency that has already been tested by millions of travellers – this may have been attractive for an airline looking to revamp its loyalty programme.”
For consumers, the alliances are positioned as making it easier to earn points (by flying with partner airlines where your ‘home’ airline is not available. However, the best airline reward programs are more innovative, seeping into daily life on the ground with partnerships to help travellers top up their balances when they shop.
Not all large global airlines are members of these two schemes, with the likes of Emirates and Etihad holding firm with individual loyalty programs of their own (albeit usually with ‘soft’ links through codeshare partnerships with alliance airlines). These programs are amongst some of the industry’s most innovative, helping their loyal customers boost reward point balances quickly through partnerships with banks, car rental companies, hotels and retail and lifestyle brands.
The future of travel rewards programs
Technology is moving fast in most aspects of our lives, and when participating in a travel rewards program, some companies are utilising blockchain for brand loyalty points like FlyCoin’s rewards program, or even NFTs for rewards programs like Travala.
But for many customers, the future is simpler than those high-tech solutions. The holistic approach taken by airline travel rewards programs outlined above – partnering with like-minded brands from other retail sectors – is what KPMG refers to as essential for the future of loyalty programs.
But travel reward programs need to run even deeper than that to maximize their appeal. KPMG noted for major brands and retailers to have successful loyalty programs post pandemic, “they will want to be offering, directly or indirectly, privilege loyalty programs with personalized and customized offers.”
We have explored how airlines can better listen to their global audience and convert bookers to members of their airline reward program. By using technology to engage with customers on a personal, one-to-one basis, companies can form lasting bonds.
Whatever the future holds for travel loyalty programs, rewarding customers with something they view as valuable – whether a product, service or experience – needs to be central.