Should hotels refuse to join a club which would have them?

Alex Sogno , CEO, Global Asset Solutions , discusses the role of loyalty programmes in the luxury sector and whether it’s a badge of honour not to be a member.

The current battleground for the big hotel chains is not pipelines, but loyalty members. Marriott may be the leader in terms of portfolio, but the size of its loyalty programme, Marriott Bonvoy , is being challenged by Hilton Honors .

Skift reported on a tightening race, where Hilton had seen 110% growth over the past five years, against Marriott’s 60%, causing the publication to forecast that Hilton was on track to overtake its rival by the end of 2024.

Analysts on the recent Marriott Q1 earnings call raised the issue, with Anthony Capuano , President & CEO, responding: “Size is important, of course. Engagement to me is a much more important facet of the programme and the work that we are doing to drive that engagement through our large, powerful and growing credit card portfolio, through the breadth of experiences that we offer our members, those are the powerful drivers of engagement with our members.”

We await the end of the year to see who ends up on top and what that might mean for their standing in the sector. Loyalty members are what drive future success for the global brand stables, as they are able to tell a story of future stays. Having a lot of hotels open will, it is hoped, attract guests, but owners and investors are increasingly looking to the number of loyal members to assess how many will stay in their future hotel should they join the system. A present and future tale of the hotel sector, it is hoped.

For the owner, these programmes offer large numbers of members, but there remains some debate over how loyal they are. Many of us are members of multiple programmes, gathering points all over the world, but how many of us are driven by location rather than programme? At the top end of the programmes, where the frequent travellers reside, there are rewards to be found in the thousands of points accrued, but for the masses, programmes are often too complex and the points required too high to create a real reason to book.

Moreover, as those programmes expand and include more point-generation departments in the hotel (such as F&B or Other Revenue), they are an additional cost for the owner. In an effort to reward their customers, the operators offer more points to increase the revenue POR, which the owner pays in the end. However, the guest might have used those outlets without giving him/her the additional points.

Those points are an additional revenue for the Operator. Just think about all the points paid by the owners, that the guests have not used either because they are not qualified (do not have enough points) or because they have just forgotten. Have you ever seen an Operator refunding the owner for the points not deemed? Should the Owners start requesting the said refund?

But what of the past, a time without loyalty programmes, but loyalty in its purest state? The hotels which commanded such loyalty were and are, all exclusively in our sector; luxury. They offer exceptional stays which don’t need any jogging of the memory to recall, which, we hope, would encourage guests to return if they were heading that way again, the lure of points not required.

The reality of the role of the luxury hotel within a loyal programme is that it is more subtle than merely joining the hordes. When Marriott announced that it was buying the Elegant Hotels Group in the Caribbean in 2019, it was clear that it was doing this to feed its loyalty programme, to offer somewhere members would be excited to redeem their points. Then-president & CEO Arne Sorenson said the acquisition would provide “more choices on the breathtaking island of Barbados for our 133 million Marriott Bonvoy members”.

This was also true of Marriott’s recent MGM deal. A loyalty programme needs to be carefully curated; witness the group’s partnership with Taylor Swift's Eras tour.

For hotels, particularly in the resort segment, owners have expressed concerns their role as the reward in some schemes - not specifically Marriott - has led to low ADRs and low guest spending. They are the prize, but lose out on being the winner.

Luxury hotels know that they play an important role in a loyalty programme and this has been reflected in the rise of soft brands, which have expanded almost weekly over the past few years and offer a flexibility which has not been extended to the other chain scales.

Many luxury hotels choose to become part of such a brand, where, apart from a subtle plaque someone on the building, there is no outward sign that the property is part of a collective. This way, they can access distribution without losing their individuality.

But for the truly iconic hotels, should they echo Groucho Marx and “refuse to join any club that would have me”?

Luxury hotels are, more and more, becoming a consumer product. They are not a bed for the night - not matter how spectacular - they are now part of a lifestyle. Guests want to stay somewhere which either reflects them or who they aspire to be and, in this, a hotel stay is a more ephemeral version of a Louis Vuitton handbag.

When you buy a Louis Vuitton handbag, it comes with a dust bag and a unique stamp with a place and date code so that you know it’s the real thing and not something acquired under a palm tree from a seller who runs off into the distance when the police show up. It does not come with membership of a loyalty programme.

In the world of luxury retail, 10 bags, coats or pairs of shoes does not get you one free. If hotels want to place themselves in the same bracket as theses desired items, should they be knocking back the rewards programme and leaning on their loyalty?