Hotels Up The Reward Ante

<B>Hotels Up The Reward Ante</B>

By Bruce Serlen

Its competitors may argue otherwise, but when Hilton Hotels Corp. expanded its frequent guest program last month, it was a warning sign that other major hotel companies had to raise the stakes on their programs--if they wanted to remain competitive.

The enhanced HHonors program lets members earn both hotel points and airline miles for the same stay at most rates. "Travelers also are able to exchange points for miles and vice versa," said Jeffrey Diskin, HHonors president and COO.

In addition, the Hilton program is now in effect at all the former Promus Hotel Corp. brands--Doubletree, Embassy Suites and Hampton Inn & Suites--that it acquired last year. About 2,000 hotels now are covered by the program. "There are now that many more properties around the world where travelers can earn points, giving the program much more critical mass," said Diskin. "One sign of the expanded program's impact has been the amount of usage we're seeing at the former Promus hotels during the past few weeks."

Marriott International, meanwhile, is introducing three elite levels in its frequency program, known as Marriott Rewards. Effective in June, members will be awarded silver, gold or platinum status when they stay 15, 50 or 75 nights, respectively, in a Marriott hotel during a calendar year. Elite members will be entitled to upgraded benefits and services such as reservations guarantees and welcome amenities.

"We're introducing the elite levels to recognize our most frequent guests, who tend to be business travelers," said Holly Mendelson, a Marriott Rewards marketing director. Members earn credits by staying in any of Marriott's nine brands.

Of the 12 million Marriott Rewards members, a significant percentage should qualify for the enhanced status.

Similarly at Starwood Hotels & Resorts Worldwide, recent enhancements to its Preferred Guest program focus on the most frequent of the frequent travelers--again the business traveler. "Travelers who stay 25 nights or more in any of our brands in a calendar year are now entitled to what we're calling 'platinum concierge service,' " said Hoyt Harper, senior vice president of marketing programs and business development. Launched in March, this service allows members to call in advance to access such concierge services as booking dinner reservations or ground transportation. "Previously, services like these were only available to guests already at the property," said Harper.

Hotel companies must proceed with caution as they continue to raise the bar on program benefits and services. "What they don't want is to end up creating a kind of price war," said Stowe Shoemaker, Ph.D., assistant professor of marketing at the Harrah College of Hotel Administration at the University of Nevada, Las Vegas, who studies frequency programs. "If they aren't careful, they risk devaluing their programs by offering more and more benefits."

For their part, travel buyers continue to view hotel frequency programs as a mixed blessing. On the one hand, should the preferred hotel list in a given city include hotels where travelers are members of the frequency program, travel managers are happy to have them book these properties. If, on the other hand, travelers are going to seek out hotels that are not on the approved list because they want to earn points, travel managers are apt to have a problem.

Be that as it may, the major hotel companies increasingly are focusing on flexibility as they fine tune their programs' benefits and services, with that frequent traveler clearly in mind.

"Business travelers today never have enough time--they're planning more weekend getaways with shorter lead times and fewer full vacations," said Harper, "so frequency programs that can deliver the most individual, personalized service will succeed." Additionally, time is at such a premium that travelers sometimes extend their business trip to allow for a few days' vacation. "Possibly because they earn credits for business travel, they want to redeem their accumulated credits for the leisure portion," said Hilton's Diskin.

Ease of conversion becomes crucial. "Travelers are deciding to go away on this kind of leisure travel at the last minute and want to redeem their points quickly and without red tape," Diskin said. With this in mind, Hilton has begun placing a dedicated frequency program manager on property at its different hotels.

Likewise, this time pressure explains the increasing interest in redeeming credits for travel packages. "Not only can our members redeem credits for our numerous hotels in Orlando, for example, but for tickets to Disney World," said Marriott's Mendelson.

Better service requires better communication, whether through traditional newsletters, promotional mailings, e-mail or the Internet. "Sixty percent of our platinum-level members elect to receive communications from us online," said Starwood's Harper. "And thanks to the power of the Internet, we can personalize communication to these members in increasingly sophisticated ways."

Given how much they already travel, the most frequent travelers are often the ones who redeem their points for non-travel related goods and services. "Ironically, they aren't as romantic about travel as some others, simply because they do it so much," said Diskin. As a result, the hotel companies are lining up an increasing number of non-travel partners. Hilton HHonors members, for example, can redeem points for such items as jewelry, clothing, cosmetics, home accessories, flowers and even baked goods.

Hotel companies' focus on the most frequent traveler shouldn't be surprising, said University of Nevada's Shoemaker. "Certainly, they are interested in retaining the loyalty of their best customers," he said. "But seeing the special perks available to this class of traveler encourages those at the bottom tier to stay loyal in the hope of one day enjoying this special access themselves. It's a real motivator.