One of the biggest problems facing both the hospitality and airline industry’s loyalty programs are the high cost of maintaining the the programs. As a result, airlines have been forced to adjust their programs to more positively impact program profitability. Changes made by Delta Airlines to their SkyMiles Program in 2015 are an example how the airline industry is trying to change their business model to be more profitable, by moving to a demand based structure for redemption. The same trend can be seen in hotel programs, where point revaluation is common place and almost an annual occurrence.
A study by Deloitte paints a grim picture for the hospitality industry. Deloitte states that the same mechanisms that are used to entice loyalty behavior are the same devices that encourage consumers to switch brands. There is a lack of differentiation, and hotels are at risk of being lost in a “sea of sameness” in regards to other hotel loyalty programs.
The problem is compounded by generational changes in the workforce. The Pew Research Center predicted that Millennials will overtake Baby Boomers as the largest percentage of the U.S. workforce, this year (2015). In 2014, millennials spent 20% more on travel than other generations, and is predicted to continue this trend. According to Forbes, Millennials are more connected, more social, and are passionate about values of companies with which they do business.
Clearly a change is needed to the traditional points based programs to maintain a high level of guest loyalty in the hospitality industry, by balancing economic benefits with other social benefits , and layering in marketing tactics such as Customer Relationship Management.
Current research lacks an understanding in what specific drivers and motivators are essential to building and creating loyalty in the hospitality industry, specifically as it pertains to the Millennial generation. This study explores the relationship between economic, social, experiential, and technological benefits in Millennials. Additionally, the research will look at how immediate rewards vs. long term rewards affect attitudes towards loyalty programs.
In order to answer these questions and gain a better understanding, a survey was launched. Participants were recruited from social media channels that included LinkedIn, Facebook, and Twitter. In addition, college students were also recruited via email.
Three questions were designed to categorize participants into age groups, gender, and identify the primary purpose of travelling. The remaining questions were used to understand attitudes towards the five main constructs, as well as a question dedicated towards the structure of a traditional loyalty program. In total 73 participants responded. Table 1 shows the population distribution among the age groups, gender, and purpose of travel.
|Age Group||18-34||35-50||Over 50|
Table 2 shows the overall results of the survey. The questions have been grouped into one of the five constructs mentioned in the research: Economic, Experience, Social, Technology, and Immediate Rewards. An addition question was dedicated to a more traditional hotel loyalty program structure of earning free nights based on stay behavior, displayed as “Points” in Table 2.
There are two columns for each age group, with one representing the mean of the results, and the second representing the overall percentage of respondents who were in the top two scores (a score of 4 or 5) for that particular question.
|Age Group||18-34||35-50||Over 50|
|Construct||Question||Mean||Top 2||Mean||Top 2||Mean||Top 2|
|Economic Benefit||When choosing accommodations, how likely are you to use a site like Expedia or Travelocity to compare prices?||3.67||60.0%||4.41||92.2%||3.86||71.4%|
|When traveling for leisure, how important is price when choosing accommodations?||4.54||100.0%||4.35||90.2%||4.14||85.7%|
|Exclusive rates or discounts for participation in a loyalty program||3.46||53.3%||3.82||70.6%||3.57||71.4%|
|Experiential Benefit||When in a restaurant, how important are local food and craft beverage choices?||4.26||80.0%||3.96||76.5%||3.57||71.4%|
|When staying at a hotel, how likely are you to use services such as massage in the spa?||2.20||6.7%||2.10||17.7%||2.00||14.3%|
|How likely is it that your past experience in a hotel will influence your decision to stay at the same location in the future?||4.33||86.7%||4.63||94.1%||4.43||100.0%|
|Spa discounts after one stay||3.00||40.0%||2.36||26.0%||2.43||42.9%|
|Social Benefits||How likely are you to seek the opinions of friends and family when making important purchasing decisions such as buying a new car?||3.67||66.7%||3.65||62.8%||4.43||100.0%|
|When you travel, how likely are you to share your experience about your accommodations through social media like Instagram, Snapchat, or Facebook?||2.80||33.3%||3.12||39.2%||2.43||28.6%|
|How important are the opinions of friends and family when considering where to stay when you travel?||3.00||46.7%||3.33||49.0%||3.71||85.7%|
|When you have a poor experience at a restaurant, how likely are you to share this on a review site like Yelp or TripAdvisor?||2.13||20.0%||2.63||21.6%||1.71||14.3%|
|Ability to find social media friends staying in the same hotel||1.73||13.3%||1.52||4.0%||2.29||14.3%|
|Technology Benefits||When traveling to a hotel, how important is online check-in?||2.53||33.3%||2.51||15.7%||3.14||28.6%|
|If the given the choice, how likely would you be to use an app on your smartphone to check in and out of a hotel room?||3.80||73.3%||3.44||56.0%||3.43||71.4%|
|During a hotel stay, how likely would you be to use an app on your smartphone to order room service or contact hotel staff for any in room needs?||3.40||53.3%||3.20||47.1%||2.71||42.9%|
|Let’s say you own an Apple Watch, how likely would you be to use an Apple Watch as a room key?||3.53||60.0%||3.61||56.9%||2.43||42.9%|
|If the given the choice, how likely would you be to use an app on your smartphone to control room lighting and temperature?||3.53||66.7%||2.88||39.2%||2.57||42.9%|
|When choosing a hotel, how important are hotel amenities like high speed Wi-Fi and HD TVs that have Netflix?||3.80||66.7%||4.10||82.4%||3.86||71.4%|
|Phone app that unlocks your door and/or controls room temperature||3.00||33.3%||2.63||25.5%||2.57||28.6%|
|Immediate Reward||Free drink or appetizer after one stay||2.93||26.7%||3.02||39.2%||3.57||71.4%|
|As part of a hotel loyalty program, would you prefer to earn rewards during your stay (like a free drink at the bar), or earn points that can be redeemed for rewards later?||1.60||53.3%||1.43||45.1%||71.4%|
|If you were part of a hotel loyalty program, would you prefer to receive a reward immediately (free drink, free appetizer in the hotel) or would you prefer to bank points for an eventual larger free gift such as a free stay?||1.53||60.0%||1.43||43.1%||71.4%|
|Points||Free night after 5 stays||4.06||66.7%||4.22||90.2%||3.86||71.4%|
The findings show the importance of some constructs that could be added to a hotel loyalty program. Clearly, the standard award of a free night is still an aspect that resonates with potential hotel guests. The findings also illustrate the importance of economic benefits like discounts as well as the importance of the overall experience. In addition, the findings also support the importance of certain technological aspects such as online check-in and hi speed Wi-Fi. The hypothesis around the importance of social components were not supported by the research.
There are several managerial implications to the study. First, the core component of an award night as part of a loyalty program was ranked very highly amongst all age groups. Any revisions to loyalty programs should still include some aspect of an award night. Secondly the economic benefits were also ranked very highly, implying that discounts or member exclusive rates in conjunction with an award night after a certain number of stays could be effective. Future loyalty programs geared towards Millennials should also look heavily at how to incorporate technology into the offering. Features like premium Wi-Fi, Apple Watch capabilities, and using an app to check-in appear to offer high value and could help augment the overall loyalty offering.