Hotel Loyalty Programs: A Complete Guide for Hoteliers

Hoteliers are facing intense competition from around the world. The only possible way to keep themselves in customer's minds is through hotel loyalty programs.

The main intention behind launching such reward programs is to convince customers to choose you over thousands of other hotels. The other reason can be to build long-lasting relationships with them.

Usually, hoteliers struggle to choose which type of loyalty program exceeds their guest's expectations. That differs from guest to guest. For some guests, value-based rewards matter the most while others become satisfied with exclusive discounts or a free night's stay.

In this guide, we’ll take a closer look at what a hotel loyalty program is, its types along with the associated benefits.

What is the Hotel Loyalty Programs?

A hotel loyalty program aka the rewards program is a marketing strategy hoteliers use to attract and retain clients. These programs come at no cost and guests can receive their benefits in the form of offers, rewards, or any other incentive that the hotel offers.

These loyalty programs differ from hotel to hotel. Some hotels offer discounts on room rates, and food and beverage options. While other hotels use a point-based system allowing a guest to redeem points on their next visit.

Guests can redeem these points to get a discount on their next room stay or receive a benefit in other ancillary services.

Introducing these loyalty-based programs enables hotels to drive more repeat bookings, enhance guest experience, earn more revenue, and gain a competitive advantage. 

The concept of hotel Loyalty programs was started by 4 premium hotel chains including Mariott, Hilton Worldwide, Starwood Hotels & resorts, and IHG. 

Of all the transactions you have had with your hotel guests, you need to take extra steps to stand out so that guests choose you over others. That’s where loyalty programs make a big DIFFERENCE.

What are the types of loyalty programs in the hospitality industry?

There are various types of hotel loyalty programs that can come up with -

1. Point-based system

The most common type of loyalty program is the Point-based system.

Here, hoteliers reward points to guests on every booking they make. Once guests receive the maximum number of credits, they can redeem those points and use them at the time of their next booking.

As a hotelier, you can offer points to guests when they book directly through your website (say 10 points) for reserving a room at Bed & Breakfast.

For a point-based system, guests make a transaction first and then receive points later.

2. Instant rewards

Another type of hotel loyalty program is Instant rewards. As the hotel industry is becoming hyper-competitive, hoteliers can convert their repeat guests into loyal ones by offering instant rewards.

Guests feel highly satisfied when they can redeem points instantly and get rewards such as room upgrades, complimentary breakfast, free wi-fi, or discount vouchers for their next stay.

Generally, hoteliers use this marketing tactic to drive more revenue such as tempting guests to leave a review on TripAdvisor and get 10% off for their members. 

3. Partnership reward system

Hoteliers partner with local vendors or restaurants to create a speciality program and provide additional benefits to guests. 

These reward programs can be either free or paid. It's a 2-way win for both parties – local vendors and hotel.

For instance –A hotel can recommend discounts on dinner at a 5-star restaurant or spa booking.

4. Value-based loyalty program

Unlike other loyalty schemes, value-based programs add an experience to the guest's life. 

The intention behind launching these schemes is to build a closer relationship with guests. 

Value-based rewards don’t make the customers feel good, but they also offer a frictionless stay experience.

An example of value-based rewards can be when a hotel offers free VIP tickets to watch local shows or arranges 2 free drinks at a lobby bar.  

These tiny things enhance the guest’s experience so much that they’re willing to spend more on additional services than they were offered earlier. 

How to Create the Best Loyalty Programs for Your Hotel?

Here’s the step-by-step guide to creating the best hotel loyalty programs in 2024

1. Define what loyalty stands for you

While each brand or hotel is different, so too does the definition of loyalty hold different meanings for different hotels.

For that reason, you need to be strategic about your hotel goals and think about what loyalty means to you.

How will you turn your frequent visitors into loyal guests?

Map out everything in the beginning, along with the specific dates as to when those points/rewards will expire.

Think about how you would love to make your guests feel special. Is it through free rewards like room stays or welcome drinks, offering different tiers of rewards, or using a value-based reward system to differentiate your services?

2. Personalization

In the hotel industry, personalization stays at the heart of loyalty programs. Hoteliers can send customized gifts or surprise guests with items that match their interests.

Every client has different tastes and preferences, and they expect different rewards. As a hotelier, you want to launch different rewards for different customer segments.

That's where personalization comes into the picture. You wouldn't expect a leisure traveler and a business traveler to behave similarly.

A study from McKinsey states nearly 71% of customers want personalized experiences. If personalization doesn’t happen, 76% of customers feel frustrated.

A family visiting your hotel might expect you to offer a discount to the nearest cinema, theater, or theme park, while professional travelers are looking to redeem points for a cappuccino at the nearest coffee bar.

3. Adopt a tiered loyalty program

A tiered-based loyalty program is important to keep guests aspirational and motivate them to move up to different levels. This way, they continue to spend more to reach the highest tier.

Hotels can introduce different tiers of loyalty programs, starting with the basic tier that offers free Wi-Fi or a welcome drink.

When a guest moves to the highest tier, the hotelier can offer a complimentary room upgrade or premium lounge access.

You can even divide the clients into various categories depending on the length of their stay or how frequently they visit your hotel.

For Instance – Guests who frequently visit your hotel fall under GOLD members, while guests who travel less often but for longer tenures can be categorized under the SILVER category. The more points guests have, the more rewards they are likely to achieve.

4. Take feedback from guests

Once you set the reward policy, it doesn't mean that you should stop doing market research. Send post-stay surveys to guests and ask for feedback from them regarding their experience.

Talk to your guests personally and learn about what rewards they would expect. Then, add those favourite perks as part of your hotel loyalty programs.

Also Read - Importance of Guest Feedback for Hotels

How Do Hotel Rewards Programs Benefit Guests?

Loyalty programs in hotels provide value to guests because they're sticky in a way that once customers become part of such a program, they become more loyal to that brand.

Loyalty brings more revenue for a hotel brand. PWC surveyed travelers globally and found that 69% of business travelers and 59% of leisure travelers intend to spend more on their stay ($10-$50) at a hotel brand.

But increasing hotel revenue is just one part. These reward programs offer other benefits for guests as well.

1. Enhance guest experience

A hotel rewards program enhances guest experience because each time guests book a stay, they receive a financial reward, making them more likely to book again and spend more time at your hotel.

The higher the guest loyalty, the higher the revenue it brings for a hotelier.

2. Increases your guest retention rate

Modern guests want personalized experiences. The better the guest's experience, the more likely the hotel is to retain the guest.

Even data backs this statement up. A study from Harvard Business Review states that guest retention is highly valuable these days. 

If your current customers aren't happy, then you need to spend time and effort acquiring new ones.

So, why not retain them by offering enticing rewards?

3. Cost-effective

When offering loyalty programs to guests, you can expect them to increase their in-stay spending. As a result, regular guests make repeat bookings for your hotel business.

This means your marketing and sales department doesn't need to spend extra cash on acquiring new guests. It's expected that a loyal guest is more likely to book directly on your website; they don't have to juggle between various OTAs.

Similarly, it saves you costs in the long run as you don't have to pay hefty commissions to OTAs for bookings made directly.

4. Know your guests

Another benefit of using loyalty programs in hotels is to know your guests inside out. A rewards program provides you with valuable guest insights at your fingertips.

Once you know about guests' preferences and history, you can target the perfect fit for your property.

For example – If you find that most of your guests are corporate travelers, you can create customizable offers that suit them. This might include spa services or airport shuttle services.

Wrapping up

As you know, today’s travelers value experiences over products, and so entice them by introducing the best hotel loyalty programs.

For every guest, loyalty is meant differently.

Some hotels consider it in the form of free rewards or offering discounts on existing services. While others consider loyalty programs as a part of enhancing the guest’s experience.

While creating a loyalty program in hotels, consider creating a personalized reward program and iterate it accordingly by taking regular feedback from guests. Most importantly, tailor these programs to your guest profiles (business or leisure travelers).