The Sad State Of Airline & Hotel Loyalty Program Promotions

With the Iberia Plus promotion we’ve seen over the past few days (which has left a lot of us scratching our heads), it got me thinking about my general disappointment with the lack of creativity we see from loyalty programs nowadays, especially as it pertains to promotions. This applies largely to both airlines and hotels.

Here are some of my thoughts, in no particular order:

Promotions should accomplish one of two things

The way I view it, loyalty program promotions should accomplish one of two things:

  • Keep people loyal and prevent them from going to a competitor
  • Be lucrative enough so that they generate incremental business

Personally I question the merit of the first category. For example, I feel like this largely sums up what we’ve seen in the hotel industry lately. With almost every hotel promotion I write about, I finish with “this is worth taking advantage of if you happen to be staying with _____ anyway, but it’s not worth going out of your way to take advantage of this.”

Take Starwood’s current promotion, for example. You earn 250 Starpoints per night, but only starting with the third night, and there’s a huge list of excluded hotels.

Sure, as consumers it’s better than nothing, but I don’t really get what’s in it for the program. If one of the major hotel programs stopped offering frequent promotions, I’m sure their competitors would quickly follow. At a minimum, I can say that promotions like this don’t impact whether or not I stay at Starwood hotels.

That brings us to the second type of promotion, which is something lucrative enough to generate incremental business. As much as I don’t generally like IHG Rewards Club, I think this is something they do well with their “Accelerate” promotions, where they offer tailored promotions that they think will actually put heads into beds.

There’s a lack of creativity nowadays

Primarily I’m disappointed by airline loyalty programs nowadays. The lack of creative promotions is just plain sad.

Some may say “well airlines can fill seats without offering promotions.” While that’s true, virtually any travel brand believes that a loyal member is willing to spend more with the brand they’re loyal to (not just total, but per transaction), so you’d think they’d take advantage of that by offering promotions that actually can impact consumer behavior, even among loyal members.

Let me give one example. I’m an Executive Platinum member with American, I requalify quite easily, but I’m not loyal to the airline by any means. The airline gives me very little incentive to be incrementally loyal.

Now imagine if American offered something similar to what IHG Rewards Club does with their “Accelerate” promotions. They know how much I usually fly, and if they emailed me and said “if you fly this much more over this period, we’ll offer you ______.” They know my plans, and they could do things that incentivize incremental business, but they don’t… because they’re lazy (and so are their competitors).

Instead they only seem to offer lucrative promotions to non-loyal members. For example, American has sent out all kinds of targeted fast track promotions for status. I’m not saying that’s a bad idea, but it’s just telling that they only see value in rewarding those who aren’t actually loyal in such a way.

Do loyalty program executives not understand how the internet works?

With the Iberia promotion we just saw published, a lot of people are asking “what were they thinking?”

Let’s look at the reality of what’s happening:

  • A bunch of us are booking $28 tickets ($15 before tax), and getting 9,000 Avios for them, so this boils down to Iberia indirectly selling 9,000 Avios for $15
  • We are impacting the demand for future travel, and in the very short term making Iberia flights a worse option for those who actually want to fly with them
  • Iberia’s site has even crashed, which suggests they weren’t ready for the level of demand they’re dealing with; imagine how much business they’re missing out on because of that

So what conclusion does this lead me to? Clearly Iberia Plus executives don’t understand how the internet works. They don’t understand that if a promotion is really that good, a ton of people will take advantage of it. And they won’t pay any more for those tickets than they have to.

This wasn’t as much of an issue back before people got most of their information on the internet, but nowadays it’s something we see over and over. I can’t count the number of times we’ve seen loyalty programs pull promotions because they underestimated the demand.

My guess here is that Iberia wasn’t fully thinking this through. They probably thought “oh, we’ll have a few extra people who happen to see this promotion book.” That’s probably the extent to which they thought about it.

If they wanted to prevent what’s actually happening then they would have required people to actually fly the segments (and award the Avios after flying), and added a minimum revenue requirement for a flight.

A promotion can make sense and be unprofitable for some

A loyalty program could intentionally offer a promotion that may seem too good to be true, but at the same time still make money on it:

  • Loyalty programs only pay a small percentage of the cash cost to partner airlines for award flights
  • They’re counting on a lot of people not redeeming their points at all, or efficiently

Even though I don’t think Iberia intended to offer the promotion this way, who knows, they might not actually lose much money on it.

Furthermore, even if a program is quite deliberately offering a promotion, there are circumstances under which they may offer a promotion and lose money on it for some members, but make money on others. That’s just how it works.

It’s no different than how airlines sell seats. On the same flight you could have someone who paid $50 and $500 for the same seat, and the flight is sold out weeks in advance. I’m sure they’d love to buy back that $50 seat from the person who booked way in advance and resell it at a higher cost.

Loyalty program executives: please try

My point with this post is twofold.

First of all, loyalty program executives, please give us some fun promotions. It’s ridiculous to me that there’s such little middle ground — either promotions are lame-as-could-be, or they’re so ridiculously generous so as to appear to be mistakes.

I understand the travel industry is doing quite well, and planes and hotel rooms are full. However, these loyalty programs are extremely engaging to many, so give us more to strive for, rather than just taking members for granted. And I’m not saying they should give us stuff for free, but actually put some effort into coming up with promotions that can engage us and be profitable for you, rather than offering nothing. It’s just plain lazy not to. If you don’t believe in the power of your loyalty program to change our behavior, you probably shouldn’t be running one.

And second of all, this is more of a PSA, but also understand how the internet works. Before you offer a promotion, ask yourself what would happen if demand were exponentially higher than you’re anticipating.

That’s all.

What do you make of the current state of loyalty program promotions?

Comments

  1. Nice, lucky are u feeling it become less fun to write about them or just reflective upon the world we living in today where people are getting more oblivious towards how things ought to work than how we actually come this far.

  2. But that’s the world today. Who cares about current customers? The point is to generate new perceived customers and their potential and not what they actually bring in.

    This short term thinking make the company look good for investment. Nobody cares about keep current customers !

    Loyalty ??? What’s that ? Go to the market and buy me kilogram of it

  3. A few weeks ago, AA offered me double miles on any flight booked between now and September. It was actually useful for once. Normally, I never get offered anything enticing from the Hotels or Airlines. My promotions always seem like they’re targeted for families or the cruise ship crowd. It should be pretty clear from my spending footprint that I’m a business traveler.

  4. I was interested to see that Iberia web site crashed yesterday.

    I never received an email on my 10th booking and still not 24 hours later.

    But I have the booking code and all 10 charges are on my card.

  5. This is a good time for the travel industry … travel along with rates are booming and there is a shortsighted perception by the travel industry that meaningful promos are not needed now.

  6. While I totally agree, but I should say “Look who’s talking.” for the part about the internet.

    I’m not a frequent traveler and am just scalping from these promotions, which make me feel guilty.

  7. AA doesn’t seem to encourage loyalty anymore. AA miles became very difficult to redeem. They are also a lot more difficult to earn through flying than before. The easiest way to earn them is through the credit card sign up bonuses. Therefore they encourage people to sign up for credit cards, make the minimun spending to get the sign up bonus, and never use them again.

  8. Lucky, remember there´s loads of competition in the spanish domestic market: airlines and high-speed train. And specially in Spain/Europe, no one is gonna sell you a flight for 400 eur, when Ryanir is doing it for 40 eur: something called revenue management. So, it won´t necessarily affect spanish travellers.

    It´s a weird promotion, but Iberia is really pushing it.

  9. I bet there is some (probably junior) marketer somewhere at Iberia that said to his/her boss that this promotion was going to blow up in a bad way, and was ignored.

  10. I feel this way about Hyatt. Used to love taking advantage of their Stay More promos (earn 75000 points for staying 25 nights) but, even before World of Hyatt transition, nothing as tempting. That’s on top of no longer getting a points amenity upon check-in.

  11. Like Donna above, I got a good offer from United a few years ago. If I flew X miles in a certain period, I would get a good bonus of miles. There was also a second tier if I met the first goal. It was enough of a bonus to influence my travel plans and I purposefully picked United for some trip I had coming up and got both bonuses. However, I received a similar offer this year but the bonus was so low and the spending threshold was so high, it wasn’t worth it anymore. The key for the airlines is to figure out that sweet spot where the promotion is actually enough to influence travel decisions instead of pathetically small rewards for a lot of business.

    Also the “accelerate to status” promotions for new flyers drive me crazy as someone who earns status. I’d love to see better “keep your status” promotions because I am starting to not want to bother with loyalty.

  12. That’s the exact reason why I’m not loyal. I’m opportunistic and then top up from amex or Starwood whenever and wherever it’s needed.

    I have stopped chasing status and get it if I can.

  13. Since recent changes with AAdvantage I stopped more or less using American Airlines as my preferred airline and been choosing with price only. I was platinum or executive platinum for over 10 years straight but now requalifying and earning miles flying predominantly economy is not working for me.

  14. I got the Marriott promotion, “on the 3rd night start getting 750 points per night”. Big deal.

    In planning a night to stay in Portsmouth NH, it was between a Hilton Garden Inn at 140/night and the Sheraton at $154/night. The former is a slightly nicer hotel and closer walk to downtown. That Sheraton was having a “Our Hotel’s Birthday” package with 3,000 pt Starpoints per stay. Guess which hotel we’re staying in….

  15. I sure wished they had “let us help you keep your status” promotion now and then.
    One thing that irks me is that hotels where I use to stay at on a regular basis I would get the “have you stayed here before” when I would literally stay there 10-12 times a year. I would stay at a certain Marriott about every 15 months, and they always did the “Mr. Montgomery welcome back, its good to see you again, we have upgraded your room” How hard is it to put “repeat guest” or “wife really likes the chocolate bar” in the comments section of the guest info? People want to feel recognized and special. When staying in 100 rooms a night it just becomes a bed, but it makes my wife’s day when they remember she likes chocolate. I am sure she’s not the only one that feels that way.

  16. And how is this different form the 50,000 – 100,000 mile/point promotions for new credit cards vs the minimal, if any, retention bonuses? Loyalty is not valued. “New” customers are valued. That’s how and why we play the game.

  17. I can’t speak for airlines because they don’t view “loyalty” programs the same way, but from inside a hotel company, they really are re-imagining the role of loyalty and trying to create meaningful value for customers. Loyalty is a competitive imperative for hotel companies, but it’s just a profit center for airlines. It’s not about a transactional points earning promotions, because analytics often show that promotions aren’t beneficial, and that shouldn’t be the main purpose of a loyalty program. But it can be an incremental benefit.

  18. I think we need to wait and see when it comes to the Iberia promotion. I think they will credit the Avios, but how many will actually be able to get a redemption that makes sense for them? If Iberia floods the market with time-limited Avios and then restricts availability (or availability can’t meet demand) then they come out on top, and no one will be able to blame them because 90% of the people who booked ten oneways are throwing ten oneways away.

    I’m just going to wait and see…

  19. @Lucky, this raises an interesting question about Iberia’s revenue management. If they’re smart they will significantly oversell these flights based on a quick look at the booking patterns/dates and they can double or triple dip. Not sure how that washes with the cost of the Avios they’re so long out but if they’re smart they won’t let those flights go out (almost) empty.

    @Bill the difference is with the credit card bonuses the banks expect to make it back on interest and fees. Iberia has no such liklihood of capturing future business from this loss leader promo.

  20. As a Marriott Platinum Premier Elite with enough nights for Lifetime Platinum but a few hundred thousand points short, I went out of my way for years to stay at Marriott hotels. That sometimes meant driving 40 minutes through rural America to get to the nearest Courtyard, but it was “worth it.” But in recent years, I’ve started “sleeping around” because the incremental return through Marriott Rewards no longer offsets the “opaque” discounts I can otherwise find.

    Take, for instance, an upcoming stay in Pittsburgh. My Marriott hotel choices were:

    Marriott City Center – $170 per night – earns 3,050 points worth $27.45 – 16.1% back – $142.55 “effective” nightly rate

    Courtyard Downtown – $132 per night – earns 2,380 points worth $21.42 – 16.2% back – $110.58 “effective” nightly rate

    Renaissance Downtown – $151 per night – earns 2,765 points worth $24.89 – 16.5% back – $126.11 “effective’ nightly rate

    The Marriott and Courtyard are your typical “where am I?” corporate hotels, while the Renaissance is at least a better reflection of the city, if not a bit disappointing in the rooms department. But then, you look at a site like “Hotwire” where you can book:

    Hotel Monaco Pittsburgh – $104
    Omni William Penn Hotel – $83

    The Hotel Monaco is just a few years old and significantly nicer than any Marriott offering in the region. Meanwhile the Omni William Penn Hotel is virtually identical to the Renaissance in that it has gorgeous public spaces and tiny, dated rooms.

    So what do I miss out on by not staying at a Marriott?

    No room upgrade? That’s fine. I’m one person, and I’d rather have a great room than a dated or corporate-feeling suite.

    No free breakfast? I normally get a croissant and coffee for breakfast anyway, so paying $10 out of pocket at the Monaco still puts me ahead.

    And right there is where the value of being “brand loyal” falls apart. If you know how to do your homework and leverage the opaque channels (Hotwire, Priceline) and discount sites (HotelTonight, LMT Club), the value proposition for a loyalty program falls apart.

    I should note that I am an independent contractor and so it’s all “my money” I’m paying with for business and leisure. I could see how this logic wouldn’t apply for the corporate road warrior who stays at Marriott’s across the globe on his company’s dime to take his family on an annual vacation to the Ritz Grand Caymen. But as the world becomes increasingly entrepreneurial, I think figuring out a way to engage those customers – the freelancers – should be a priority for the “loyalty” programs.

  21. I know I am going to come across as a Debbie Downer, but I wonder if we are on the down side of the curve, and “loyalty programs” will gradually disintegrate or morph into different creatures. I am probably much older than most of the OMAAT readership, and did benefit from the old loyalty schemes, but have seen many become extinct as the hamsters (we) jump into another wheel.

  22. If a hotel chain just make someone feel special by providing great service/experience, people will come back. There is no need to offer free nights or free breakfast etc. A good example is Aman properties. They are expensive. They rarely have any discounts (you can get discounts if you stay at more than one Aman in one single trip). There are no points one can accumulate. But there are plenty of Aman junkies out there for a good reason. If Aman is too pricy, try Azerai Hotels. Maybe someday hotels like Westin, W, etc can learn that giving someone a good experience will earn their loyalty not discounts and miles (those will work to certain extend but obviously costly for bottom line).

  23. The additional systemwides at 150k and 200k on AA keep me loyal to one world for second 100k of yearly travel.

    Because of my travel patterns, I get more from these then I would by diversifying my status with other alliances. Plus through status matches I can often do both.

    I do realize those extra 4 systemwides were a benefit that was taken away from me, but can’t let that get in the way of assessing value.

  24. I got into Hyatt for long stays due to their 75,000 points for 25 nights promos.
    They don’t care anymore since they became WOH, now only running crap promos like the current 2500 for 5 nights. Yea great. That’s 1/6th of what it used to be. Might as well not bother.

  25. @Ethan:
    Excellent post. You make a compelling argument especially if traveling solo. Where it falls apart for me is when I’m traveling with family and bed choice is an unknown.

  26. Accor Hotels had a promotion: Le Club Accorhotels Air Canada Aeroplan Offer: Earn 5,000 Bonus Miles Per Stay Between October 1 – December 31, 2014.

    They offered the promotion for one month. You could book a room for $30 at Ibis to qualify for 10,000 points which you could then convert to 5,000 miles. In the end they wouldn’t give any points and ignored customer emails. What a wonderful loyalty program!

  27. Totally sympathize – I was offered free AA platinum pro status for 3 months (with an 18 month extension for completing 20,000 EQMs and $2,400 EQDs). While it turned out great for me because I have free OW sapphire until I get BA silver this November, I can imagine it is frustrating for PP members who have flown 75,000 miles and spent $9,000 in a year with AA.

  28. Huge promotions now usually mean excess devaluations later. You need to spend the points as soon as you get them or you’ll be at the mercy of terms and conditions.

    What’s the point in grabbing a 100% transfer bonus when the program in question devalues by 100??

  29. The big growth of this hobby came during the economic downturn in the late ’00s and early ’10s. Now that the economy is better, promotions in general just don’t have to be as good. I think that is the simple explanation.

    The other downside of the internet being widespread is that if programs micro-target their deals, people will still share the offers they received on flyertalk and other forums. The people who don’t receive an offer get huffy and complain. It works for IHG because not many people care about their loyalty program in general. If Hyatt or SPG tried the same you would get a bunch of elites whining about how they don’t feel special.

  30. I got a custom status challenge for Hilton Honors simply by going to the chat page on their site and asking for one. They agreed to bump up my status a level if I booked and completed 4 stays within 90 days. I intentionally requested this when I knew I had some business trips coming up. They gave me the challenge and I went ahead and booked. Easy.

  31. Personally, I think loyalty programs specifically target people like me. I’m a mid level traveler, with combination business/leisure travel. I fly about 50-80k miles and spend 50-70 nights pet year. If I’m not loyal to one airline and one hotel chain then I never reach any status that’s worth while. So I’ve chosen to stay with United and Hyatt for those reasons. Love the 4 suite upgrade and 2 regional upgrades plus I can bring my whole family up to economy plus.

  32. A lot of executive platinums seem to complain about the new AAdvantage program without realizing how much more value they get out of it than anyone below them. You get 11 miles per dollar spent on flights, while I get 5 miles per dollar as a non-elite member. How is this incredible bonus unfair to you Lucky? If anything it is unfair to me and is tilted too heavily to you.

  33. Lucky,
    You and a lot of my fellow readers of OMAT are honest and sincere people, thus you sort of expect the same out of the weasels and hustlers who run airlines and hotels for the most part.
    They are NOT like us—-these are the same stock option grabbing, compensation “board” users who make a zillion times the average baggage holder or hotel maid! They can’t even FAKE sincere loyalty to their best customers!
    Look at the Delta Diamond fliers— as a thank you to their super fliers and in a probable concession to AMEX, the spend waiver goes from 25K to 250K!
    That’s the bait-and-switch corporation that run the travel industry.

  34. You really have no working knowledge of loyalty programs. Bonus points could be conditional to drive business to certain hotels as well.

  35. Lucky, thanks for the post. It is disappointing how most brands basically forget about you once they’ve lured you in…

    I’d be interested to know exactly which airline and hotel loyalty programmes you are a member of and how you maintain them all. That would be a fascinating and useful post!

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