Loyalty Programmes in the Travel Industry
Loyalty programmes key to combat recession
- Loyalty programmes were important during the recession to stimulate demand through promotions, and enabled companies to compete on something other than price.
- Travel loyalty programmes have evolved to allow the earning and redemption of miles/points through ways other than travel including co-branded credit cards, on-line stores, dining and through other partners. As a result, these programmes are now more in line with coalition loyalty programmes, which are loyalty programmes that involve multiple businesses and are not tied to one main industry.
Airlines lead the way
- Airlines in the US have the highest membership counts for their frequent flyer programmes. While a large population helps support those figures, the US also has a large air network dominated by domestic flights, and many flyers sign up for multiple programmes across carriers.
- Ryanair and easyJet, with 72.7 million and 49.6 million passengers respectively in 2010, have pursued different frequent flyer programme styles. In March 2011, easyJet became a redemption partner with the coalition loyalty programme Nectar in the UK.
Hotels ramp up their offer
- As the global recession impacted demand in 2008, hotel companies were aggressive in improving their loyalty programmes to steal share. Hotels introduced no blackout dates, offered new ways to earn points and added additional perks for points redemption such as offering unique experiences.
- Members of loyalty programmes account for a large proportion of hotels’ occupancy and revenues, with many hotels reporting at least 30% of occupancy coming from their members. As an important demand driver, many hotel loyalty programmes get their own marketing campaigns.
Co-branding is key
- Co-branding with financial cards is important for travel industry loyalty programmes, especially with credit cards in the US. Airlines, in particular, benefit from selling their miles to financial institutions as the issuers pay for miles/points in advance, and many pay a bonus for new accounts opened and to form the original partnership.
- In 2010, American Express stated that the SkyMiles Credit Card products with Delta Airlines accounted for 5%, or US$36 billion, of its worldwide billed business.
- Coalition loyalty programmes are more prevalent in Western Europe. Coalition programmes often have a co-branded credit card to allow more opportunities for earning points.
- Opportunities abound for co-branded credit cards in Asia-Pacific with China, South Korea and Japan expected to account for 88% of the growth in credit card spending.
Future trends to watch
- With increasing maturity in developed markets, loyalty programmes are likely to experience the fastest growth in membership in emerging markets, where opportunities for co-branding partnerships are significant thanks to the expected substantial growth in card spend.
- With lucrative business travellers always on the road, mobile applications will become key in checking accounts, booking stays and accessing recommendations.
- Social media is a strong tool to interact with loyal travellers, and it is expected that more programmes will step up their social media activities, whether in private communities or on Facebook, to communicate with their customers.