<B>Hotel Loyalty Goes Int'l</B>
By Bruce Serlen
Already an industry force in the U.S. market, such frequency programs as Hilton Hotels Corp.'s Hilton HHonors, Marriott International's Marriott Rewards, Starwood Hotels & Resorts Worldwide's Starwood Preferred Guest and Bass Hotels & Resorts' Priority Club Worldwide now are exerting a major influence on travelers' lodging choices in international markets. Driven by the opportunity to earn free hotel stays, as well as possibly free airline miles or luxury merchandise, both U.S.-based travelers and travelers originating in other countries have shown they will extend a high degree of loyalty to the hotel programs which they belong.
Frequency programs are costly to establish and complicated to administer, but the hotel companies already have made the investment in building their programs in the core U.S. market, so the infrastructure is in place as they expand internationally. In Edinburgh, a U.K. business destination a tier below London, for example, Hilton International acquired the landmark 249-room Caledonian Hotel in March 2000 and promptly earmarked $15 million for renovations. "Given our central location, the intention was to make the hotel the leading business hotel in the city," said Dagmar Muhle, general manager.
A key to this strategy was the frequency program. As part of Hilton International's marketing agreement with its U.S. cousin Hilton Hotels Corp., its properties, including the Caledonian, could participate in HHonors, which offers guests the chance to earn both hotel points and airline miles for each stay. "It distinguishes us in our market, giving business travelers one more reason to choose the Caledonian," Muhle said.
If European-based business travelers were ever neutral about frequency programs, that's no longer the case, said Sarah Reid, Hilton area director of sales. "As in the U.S. market, Europeans increasingly want to gather the points earned on business trips for leisure or family travel," she said. "Frequency programs may not enjoy the same long tradition they do in the United States, but we're definitely moving in that direction."
For travel managers, frequency programs are a double-edge sword. On the one hand, getting travelers to participate in the frequency program of a chain that's part of the company's hotel program is a good way of ensuring the traveler will stay within policy. Travelers, after all, want to earn additional points and are happy to comply. If, on the other hand, travelers' allegiances are to a chain not in the hotel program because they're already members of that chain's frequency program, it makes policy compliance more problematic. In extreme cases, travelers may look for reasons to opt out of the corporate program to book their own favorites. Yet, travel managers are hard pressed to dispute the frequency programs' appeal, especially to rank-and-file travelers who view the points as a well-deserved perk.
As such, the big four multi-brand companies (Bass, Marriott, Starwood and Hilton) have begun recruiting members among travelers at their national and global accounts. "For the most part, our accounts are supportive in extending membership to their travelers," said Jim Berra, Starwood vice president of loyalty marketing.
The hotels' outreach can include special marketing efforts. "We'll provide specially designed enrollment promotions for these accounts, which include bonus point offers for enrolling, sometimes through the client's intranet," said Steve Sickel, Bass vice president of relationship marketing.
There's also a practical reason for auto-enrolling an account's travelers. "Once they're in Marriott Rewards, we have a good profile of their travel needs and this information automatically flows to the reservations process," said Bruce Wolff, senior vice president of distribution sales and marketing at Marriott. "Consequently, they're saved having to mention their preferences every time they make a reservation."
There's no question that membership in frequency programs has grown at an accelerated pace worldwide in recent years. Marriott Rewards reported having 14.2 million members at year-end 2000 and expects to pass the 15 million mark in June. Hilton HHonors, Priority Club Worldwide and Starwood Preferred Guest each had between 9 million and 11 million travelers signed up. And of the 9 million Starwood members around the world, 3 million came onboard in 2000.
Yet, membership is only one measure of success. More important is the percentage of members who give a hotel company enough patronage to qualify as a frequent guest. Marriott defines frequent guests as travelers who make six trips a year or more. At Starwood, an "active member" is one with at least one stay in the past 12 months. About 36 percent of Starwood's system revenue is associated with stays by Preferred Guest members.
One of the rationales at these companies for maintaining elaborate frequency programs is that members would accumulate points at one brand at one price point with the intention of redeeming them at another brand and price point. As they continue to track the data, however, companies have found this isn't always the case.
"Research shows that 75 percent of Priority Club members earn points at more than one of Bass' five brands," Sickel said. However, Bass has found that most members redeem points for free nights at Holiday Inn and Holiday Inn Express. "The distribution of these two brands makes up 80 percent of Bass' hotels and they require the lowest number of points to earn a free night," Sickel said.
At Marriott, members tend to redeem within brand. "This may be because they are most comfortable with the brand they regularly choose for paid nights and, therefore, comfortable with the brand for redemptions," said Lynne Roach-Hildebrand, senior vice president for loyalty and database marketing.
As at Bass, a healthy percentage (45 percent) of Starwood's redemptions occur outside the brand where the majority of points are earned. Yet, Starwood's Berra doesn't attribute this to either how many properties a brand has or how many points are needed to merit a free night. To the contrary, he attributes it to Starwood's network of resorts and upscale hotels in major markets.
At Marriott as well, Roach-Hildebrand has found that when members don't redeem within brand, they're more likely to redeem at a brand that provides an equal or greater level of service. "They trade up," she said.