How Hotel Loyalty Programs Fail to Deliver Heads in Beds

Deanna Ting interviewed the CEO of Red Lion hotels for Skift and he slammed loyalty programs pretty hard but I’m not sure the actual lessons come through in his thinking.

Red Lion acquired Knights Inn from Wyndham, blocking Wyndham’s attempt to own every bad hotel in America. And Red Lion CEO Greg Mount threw some shade at Wyndham Rewards, suggesting that ‘only Hilton and Marriott’ get traction from their loyalty programs.

The only two programs that drive meaningful demand are Hilton and Marriott,” Mount said. “Outside of that, some of these other systems have large numbers, but they’re not getting a significant amount of demand. It’s kind of a falsehood as it relates to what’s really being driven. I know there are systems [loyalty programs] out there with 80 million guests to it, but they still have to take 30 to 35 percent of their demand from OTAs [online travel agencies].

Red Lion Hello Rewards isn’t nearly as big or rich a program as Wyndham Rewards. So he’s re-assuring Knights Inn owners that they’re not losing out in moving from one program to the other, by saying that loyalty programs don’t matter for all programs — essentially that sure Red Lion’s program is weak but it’s not like Wyndham was great either.

That misses the point. While Wyndham’s “North American occupancy share by loyalty members is 37 percent, up 6 percent from 2015 when Wyndham Rewards was relaunched” and Marriott’s is 55%, there are several things going on here.

Obviously the ‘only Hilton and Marriott’ is hyperbole, since it leaves out IHG Rewards Club and World of Hyatt. He’s really just incentivized to slam Wyndham.

Loyalty programs are separately about recognition (elite benefits) and reward. Lower end properties have less opportunity for both. Budget hotel chains suffer the ‘Greyhound Road Rewards’ problem (10 bus trips rewards you with… another bus trip).

Wyndham has made some progress solving it by making their more aspirational properties affordable and introducing homesharing redemptions, although I’m not sure their messaging has been as strong or clear as it could be.


Wyndham Kona Hawaiian Resort, credit: Wyndham

Elite benefits are also limited at budget properties. They aren’t as well-suited to providing VIP treatment experiences.

Lower average daily room rates fund less in a program, and more budget conscious guests may not be as likely to spend more to remain loyal to a preferred chain.

So while there’s been some reporting of the Red Lion CEO’s claims that loyalty programs don’t drive bookings, he’s really saying that Red Lion doesn’t drive bookings through its loyalty program and that’s ok because others in the market don’t drive as many bookings as higher-end chains. That doesn’t mean Wyndham Rewards doesn’t move the needle at all, or isn’t a better program than Red Lion’s.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. You are quite correct. Since Hyatt’s footprint is so small, it takes a real effort to reach their top loyalty level each year. But the program is so superior that I find a way to make it happen. The same is true of Omni. There are relatively few hotels and it is a challenge to make their “Black” level. But it’s worth it. Speaking for myself, those programs, plus those of Marriott/Starwood move me to direct 95% of my significant travel to only those hotel groups.

  2. Good observations Gary. I’ll disagree that Wyndham is close to owning all the bad hotel rooms… Choice is giving them a battle in “worst rooms” category. Do you remember when Choice was on “Undercover Boss?” 😮

    I think you’ve hit the problem with these loyalty programs: what are they loyal to? No matter how good the program is, no one wants to be loyal to Knights Inn.

    I was surprised when I read Red Lion bought Knight’s Inn, but on the upside, they cannot do worse with it than Wyndham has done.

  3. Haha “blocking Wyndham’s attempt to own every bad hotel in America”

    I worked for an independent hotel that was acquired by Wyndham once, blocking my vow to never work for them.

    I remember they sent us a corporate trainer to train us on guest service. He kept remarking what a great class we were and how usually he has to remind people to smile and use appropriate words.. I wanted to say “well yeah we’re a decent hotel and your portfolio is garbage”

  4. Gary:
    You forgot to mention Best Western Rewards. According to their website:
    “Join a program that really gives back. Awarded as one of the top hotel loyalty programs. It pays to join Best Western Rewards.”
    Just wondering what king of awards they won…
    By the way, I have counted 74 (!) Best Western hotels in Paris and vicinity.

  5. Not every budget hotel is crap and not everyone aspires to stay in an “aspirational property”. Not every luxury property is luxurious, depending upon one’s definition of luxury.

    I’ve stayed in both and upon check out, my stay in a luxury property did not make me a smarter or happier person.

  6. I participate in Choice Rewards, which includes Comfort Inn, Quality Inn, Sleep Inn, Rodeway Inn, Econolodge, etc. I even have redeemed a few free hotel stays there. While I appreciate programs, like Hilton Honors, and even redeem awards on them, I do have a need to save money sometimes.

    For example, when overnighting at JFK, none of the airport hotels have a good location with restaurants. I might as well save my money and stay at a Choice Rewards hotel. Another useful example is when I am on a road trip or visiting a small city. The local Comfort Inn can be clean and be located conveniently. I do admit that Econolodges tend to be more run down than Rodeway Inn, which can’t compare with many Comfort Inns.

    The bottom line is that a cheaper hotel chain reward can be useful. It’s not like Greyhound.

  7. Good assessment, this is trash talk by phone RLH CEO and not supported by the facts.
    Wyndham actually had one of the highest growth rates of direct bookings among all the major chains – which can be attributed to their loyalty program.
    Whatever you think about Wyndham, their rewards program IS putting more heads into beds, or at least doing it with lower commissions.

  8. I agree with Ron & Dave! I used to have my own independent start-up business in the 1980s/90s which required me to travel to burg towns in Ohio, Indiana, Wisconsin, and Michigan incl. Upper Peninsula. Most of my stays were at independent motels priced at $23–30 buxanite. Some were nice & comfortable, while others I would reject as dumps today!
    I actually felt extravagant for staying in a $45 Holiday Inn, but remembered that I would get 500 airline miles worth ~$10 back! And if I got a free night from the Fairfield Inn punchcard, that was money I could spend on dinner & drinks or pay my electric bill at home.
    SO if you’re lucky enough to jet-set to Paris, Aruba, Hawaii, Tokyo, Sydney, London, etc. be thankful! And don’t dis those who like to save $$ when traveling to their sons’ youth sports matches in Elkhart, Paducah, Findlay, and Kenosha!

  9. My interest in hotel loyalty programs has kept me away from OTA’s, so they can make a difference.

  10. He’s probably right – with the exception of the highest tier most loyalty programs offer little of relevance, either in terms of rewards or service to their members. The flaw is that the programs treat everyone the same (within a tier). Minimal effort is made to use the information they have to make the programs more relevant through personalization. Would we use Facebook if all we saw was posts from random people – of course not. We go back because we see information about people of interest to us. If the loyalty team really wanted to drive business they would do the hard work to deliver personalized, relevant offers and communications.

  11. Outside of the Dolce brand, which is weird, there isn’t a single Wyndham property I would want to stay at. The same for Choice, at least in North America. There are some good Clarion hotels in the Nordic countries, where the other only choice is Radisson. Marriott, legacy Starwood and Hilton are almost nonexistent in the Nordic countries.

    And I didn’t know that Wyndham had aspirational properties.

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