The Changing Face of Loyalty in the Travel Industry

A deep dive into the existential crisis of travel loyalty programs -- and what brands should do to take action on it.?

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The concept of loyalty within the travel industry is experiencing a dramatic transformation. Traditionally viewed through the lens of repeat sales, engagement and referrals — essentially, transactions — the definition of loyalty is evolving. This change reflects a deeper understanding of what consumers actually want out of travel loyalty programs, moving beyond the straightforward accumulation of points or rewards.

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In a sit-down discussion on the future of travel loyalty programs, Ravindra Bhagwanani at Global Flight , puts it best:

?“What’s also important in this whole process of loyalty is not to lose sight of the basic principles. And for me, the basics are in psychology. Being loyal is a natural human characteristic. And loyalty programs are based on that principle.”

This perspective brings to light the intrinsic human desire for connection and recognition, suggesting that successful loyalty programs must tap into these fundamental needs to foster genuine loyalty.? It also speaks to the highly individualized nature of travel: when we travel, every decision we make is a personal one, and consumers value brands that demonstrate a real commitment to personalized travel experiences.

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At Legends , we maintain that the emerging landscape of travel loyalty calls for a more nuanced approach, one that balances the traditional metrics of success with a more profound understanding of the human elements that power data personalization.

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Join us as we take a closer look at the discrepancy between brand loyalty and human loyalty - and its implications in the travel industry.?

What Loyalty Means to Brands vs. Consumers

There is a major discrepancy between what loyalty means to brands and what it means to consumers.?

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For brands, loyalty has been largely transactional:

• Engagement: Frequent interactions with the brand, whether through purchases or online engagement.
• Repeat Sales: Consistent choosing of the brand over competitors.
• Referrals: Recommendations to friends and family, expanding the brand's reach.
• Transactions: The bottom line — the more $$ a customer spends, the more 'loyal' they are considered.?

However, this perspective misses the essence of loyalty as understood by consumers. To a person loyalty is about:

• Consistency: Experiencing the same high-quality service and receiving consistent care at every interaction.
• Reliability: They show up when you need them the most.?
• Customer-Centric: The confidence that someone is not trying to convince you to buy something but that they're focused on understanding who you are and how they can make your life better.
• Community - The assurance of being part of a welcoming community where your safety + wellbeing are prioritized.?

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In short, for consumers, loyalty is about showing up, never being let down, and fostering a genuine connection — far beyond the transactional nature businesses often prioritize.?

Loyalty Misalignment and Its Implications

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This misalignment between brand and consumer perceptions of loyalty has led to the dilution of traditional loyalty metrics in travel, such as points, rewards, and social status (e.g., Silver Medallion). These elements have become so commonplace that they no longer differentiate one brand from another, making it challenging for consumers to remain loyal to a single brand.?

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The proliferation of options and the complexity of loyalty systems have made it nearly impossible for consumers to accrue meaningful benefits consistently from one brand, leading to a devaluation of points and a general disinterest in status levels.

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Most individuals don’t even know which “elite” status they belong to and, more crucially, they don’t care. This creates a paradox in which, at the surface level, everyone has elite status - but almost no one is reaping tangible benefits from it.?

The Current State of Loyalty Programs

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In remarking about the state of loyalty programs at the Skift Global Forum, Peter Kern of Expedia wisely observed: “the vast majority of customers will not earn enough to get real value.” The market's focus on high-tier rewards, often only attainable by those spending upwards of $100,000, neglects a significant portion of the demographic that spends the majority of their discretionary income on experiences rather than accumulating points.?

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This oversight highlights a broader issue: loyalty programs are designed with the frequent business traveler in mind, disregarding the evolving consumer landscape where experiences are valued over transactions.

Let’s look at the differences in benefits between a modest spender and a high roller within travel loyalty programs. While Persona A, who spends between $10,000 to $30,000 annually on travel, receives minimal benefits and experiences basic recognition from loyalty programs, Persona B, spending over $100,000, enjoys a wide range of rewards, personalized experiences, and superior customer service. ?

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This discrepancy underscores the market's current focus on rewarding high spenders, often overlooking the significant segment of travelers who, despite their lower spend, seek meaningful loyalty benefits and personalized experiences.

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What’s bigger: it overlooks the emerging demographic of young people who travel widely and spend the majority of their discretionary money on experiences.?

The State Of Loyalty: A Call for Change

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The travel industry stands at a crossroads, needing to re-evaluate and re-design loyalty programs to resonate with the emerging demographic of experience-seekers. This demographic, often overlooked, is where the true potential for growth and loyalty lies.

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Brands must shift their focus from mere transactions to creating unique, memorable experiences that reflect an understanding of what loyalty truly means to customers.?

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To foster genuine loyalty, travel brands need to embrace a more personalized approach, recognizing that true loyalty comes from making every customer feel special and valued, not just those at the top tier of spending. It's about personalizing the experience, recognizing the individual beyond the transactions, and building a community that loyal customers want to be a part of.

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Moving forward, the future of loyalty in travel hinges on the industry's ability to adapt to these changing dynamics. By aligning more closely with consumer expectations and fostering genuine connections, travel brands can create loyalty programs that are not only rewarding but truly sustainable for long term growth.?

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?? Hyper-personalization: The Brainy Insights estimates that the hyper personalization market will reach USD 74.82 Billion by 2033. The market is projected to grow at a CAGR of 14.75% through 2033, with a focus on personalized experiences.?

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? 2023 Legends Holding Inc. All rights reserved. Content by Shaina Shiwarski. This newsletter is intended for informational purposes only and may not be reproduced, distributed, or transmitted in any form or by any means without the prior written permission of the publisher.