Choice, Cendant Offer Upscale Benefits At Other Chains

Members of Choice Hotels International and rival Cendant Hotel Group's frequent guest programs this winter gained the ability to redeem their points for stays at full-service hotels outside the Choice and Cendant portfolios of midprice and economy brands. The additional hotels are full-service upscale or even upper-upscale properties. Many are in desirable domestic and international locations, where Choice and Cendant don't have inventory.

The move is a way for Choice, which partnered with Preferred Hotels & Resorts Worldwide, and Cendant, which struck deals with both Sol Melia Hotels & Resorts and Outrigger Hotels & Resorts, to compete more effectively with the industry's larger and more established frequency programs. Because such hotel companies as Marriott International, Hilton Hotels Corp. and Starwood Hotels & Resorts Worldwide have brands that cover a range of price points, including midprice, members of Marriott Rewards, Hilton Honors and Starwood Preferred Guest had the option to earn points at a lower-level price point chain and redeeming them for free nights at more expensive properties.

For travel buyers, hotel frequency programs are a mixed blessing. If membership encourages travelers to comply with a company's travel policy by booking the preferred hotels, buyers tend to view the programs favorably. On the other hand, if travelers use membership in programs at non-approved chains as a reason to book outside of travel policy, buyers would more likely view them as a negative influence. Buyers looking to drive room nights to Choice or Cendant brands may find travelers more likely to book approved hotels to accumulate points due to the affiliations with Preferred, Sol Melia and Outrigger.

A precedent was set last year for this kind of cross-price-point partnership when frequent guests of Hawthorn Suites, an extended stay brand that is part of U.S. Franchise Systems, became eligible to redeem points for stays at Hyatt Hotels & Resorts. The U.S. Franchise Systems-Hyatt relationship differs, however, in that the Pritzker family, which controls Hyatt, is the majority owner of U.S. Franchise Systems. By contrast, the Choice arrangement with Preferred and Cendant's deals with Sol Melia and Outrigger do not go beyond a mutually beneficial marketing alliance.

"The idea was to expand the reach of our program, which is called Choice Privileges, to be able to offer members a greater range of options," said Cynthia Lakas, senior director of database and frequency marketing for Choice, whose brands include Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, EconoLodge and MainStay Suites. "With over 3,000 U.S. properties of our own, we wanted the program to have a more upscale focus. The 128 Preferred Hotels worldwide give us that."

Lakas said the new partnership played to the aspirational aspect of any successful loyalty program. "Preferred's hotels, which are in destinations ranging from Vail, Colo., to Acapulco, Mexico, and St. Moritz, Switzerland, are ones you'd want to save your points for," Lakas said. "Our frequent guests typically are hard-working road warriors who are on the road a lot. At the end of the year, they want to be able to take their family on a special vacation as a kind of reward. This makes it possible."

Cendant's Trip Rewards frequency program, launched last year, chose partners with properties in the Caribbean and Hawaii as well as Asia, Europe and South America.

"When they poll frequent travelers, the redemption destinations that come up as most desirable include the Caribbean and Hawaii," said Jill Noblett, vice president of loyalty and direct marketing for Cendant, whose brands include Ramada, Days Inn, Super 8, Howard Johnson and Wingate Inns International. "Among Sol Melia's more than 330 properties are resorts in Puerto Rico and the Dominican Republic, while Outrigger with 51 properties is a well-known brand in Hawaii and also has hotels in Australia, New Zealand, Fiji, Tahiti and Micronesia."

Part a loyalty program's appeal is that members can earn free nights in international, even exotic destinations they might not get to visit otherwise, Noblett said. "If you extend the reach of the program internationally, you're giving people an experience that's outside the norm, that's exciting," Noblett said. "It keeps people loyal to our brands and wanting to earn more points."

According to both Lakas and Noblett, it requires considerably more points to redeem an award at one of the participating full-service hotels than it would at one of their own company's brands. "This only stands to reason, given how much more elaborate full-service hotels and resorts can be," Lakas said.

The disparity also is consistent with redemption requirements at Marriott Rewards, Hilton Honors and Starwood Preferred Guest. "Our consumer testing indicates that people view this as fair and don't have a problem spending the extra points," Noblett said.

For Preferred, Sol Melia and Outrigger, the advantages of partnering with midprice and economy chains are twofold. One is purely economic, the other about building brand awareness.

"We're happy to have bookings we wouldn't otherwise get," said Michelle Woodley, Preferred vice president of distribution and marketing services. "In a typical scenario, guests have enough points to be able to redeem for one or two nights, for which we're compensated by Choice Privileges. People stay extra nights at their own expense, so we benefit there as well."

For both Preferred and Sol Melia, however, the arrangements are an opportunity to help build visibility for their respective brands. "While we're prominent in Europe, the Caribbean, South America and elsewhere, U.S. travelers don't know Sol Melia especially well, so this is a chance to change that," said Ronald Roy, Sol Melia vice president of marketing. "Getting people into the door, whether it's a city hotel or resort, can lead to repeat business, not to mention positive word of mouth and further referrals." In Preferred's case, the brand is a collection of independently owned hotels that may not be well-known beyond the local market.

Hawthorn Suites' program with Hyatt, while successful, has taken time to build momentum among travelers, according to Mike Leven, chairman and CEO of U.S. Franchise Services. "Communication is crucial, so people are clear about what they're being offered, how they go about redeeming, and so on," Leven said. "But the hotels have to be realistic as well as to just how many of their travelers are likely to want—or be able—to redeem at the higher level."

Hyatt next month will begin offering frequent guests at AmeriSuites hotels, a midprice chain it acquired in December, points in its Gold Passport program.