Hoteliers Offer Loyal Guests Less-Restrictive Benefits

When Best Western International relaunched its Gold Crown Club International frequent guest program in February, it was sure to include "no blackout dates" as a key provision. Six Continents Hotels similarly eliminated those restrictions this winter when it revamped its Priority Club Rewards program. These hoteliers joined Starwood Hotels & Resorts Worldwide and Marriott International, which were first among the multi-brand companies to banish the restrictions from their programs. In so doing, these companies -- inadvertently or otherwise -- put competitive pressure on points-based loyalty programs, such as Hilton Hotel Corp.'s HHonors, which still include the restrictions.

Best Western vice president of strategic services David Kong said, "We looked for additional ways to improve our program and limited restrictions, such as blackout dates, because our guests clearly told us that was one of the things they didn't want."

Whether redemption restrictions exist or not, frequency programs remain a mixed blessing for travel managers. On the one hand, travelers participating in the frequency programs of the chains included in the company's hotel program is a good way of driving compliance. Travelers want to earn the points and, therefore, don't have to be pressured to book those chains. On the other hand, if travelers' allegiance is to chains not in the program because they hold membership in these competing chains' frequency schemes, they're more likely to seek ways to book those chains.

This disparity is greater than ever in today's weak economy when travelers may be especially cost-conscious when it comes to their leisure travel. As a result, the idea of getting a free family vacation by accumulating as many points as they can in their existing loyalty programs will seem highly appealing.

Aside from the multi-brand companies, a number of midprice and economy hotel chains have no blackout date provisions built into their frequency programs. In these cases, however, the stakes are different. Because these hotel companies typically have one brand—or a number of brands at the same price point and type of location—there isn't the same appeal as being able to earn points at a midprice property on the highway and redeem them at a deluxe European destination or tropical resort.

Frequency programs at such midprice chains as Wingate Inns International, which is part of Cendant Corp., and Comfort Inn and Quality Inn, which are units of Choice Hotels International, are examples. In the case of Best Western International, the portfolio includes many properties in Europe and Asia, so the range of redemption options increases significantly.

Complicating the situation at the midprice and economy levels is that many hotels are franchised. Consequently, final decisions on such a matter as blackout dates is left to individual owners. As a result, such brands as Best Inns & Suites and Microtel, which are part of U.S. Franchise Systems, leave the imposition of blackout dates to owners.

Historically, blackout dates and capacity controls have been the major irritant for business travelers at deluxe or upper upscale properties, as they're told the dates they want to book a room either have been blacked out or are already at capacity and, therefore, are unavailable. Ironically, these travelers end up feeling alienated, the opposite of what the hotel companies would want their frequent guests feeling.

Considering their often hectic calendars, frequent business travelers need to be able to redeem their points when their schedules allow. Typically, this means peak periods precisely when the hotels are able to fill their rooms with regularly paying guests.

Appropriately enough, Marriott named the enhancement to its program the "Stay Anytime" awards. Yet, the awards require members to pay an additional 50 percent more points than regular awards, according to Lynne Roach-Hildebrand, Marriott senior vice president of loyalty and database marketing. She maintained, however, that even with the premium in points, the enhancement was a better deal than the no blackout provisions offered by competing programs.

Starwood based its approach on the results of its market research. "Business travelers told us they wanted a program that allowed them to redeem when they wanted and for where they wanted to go," said Jim Berra, vice president of loyalty marketing. "Consequently, we eliminated blackout dates and capacity controls to the point where members can redeem for stays anytime, anywhere," he said.

Looking back, Starwood chairman and CEO Barry Sternlicht was aware of the power of frequency programs in general—and the controversy around blackout dates in particular—when he first signed off on the design of Starwood Preferred Guest. "The more customers know about the no blackouts value proposition, the better off we are," he said. "True road warriors, those who really know frequency programs, are very loyal to SPG," he said, citing the top international destinations where members can redeem points. "Members can opt to have free stays in Venice or Rome, staying at world-class properties like the Gritti Palace or the Grand, or go to Hawaii, Fiji or Bali," he said.

Underscoring travel buyers' concerns about the effect of frequency programs on compliance, Sternlicht said some members were so loyal "they'll switch hotels because of it."

Even infrequent travelers have responded. "There are a lot of three-night-a-year stayers who have done their due diligence," Sternlicht said. "People have been conditioned to think you can't stay where you want to stay when you want to stay there, but you can now. The more word gets out, the more loyal they become."

As the power of the frequency programs grow, Sternlicht can see these allegiances eventually influencing buyers' hotel programs. "The more loyal members become, the more they request us to the corporate travel departments," he said. By extension, travelers might object to changes in a company's hotel program, if it meant eliminating chains where travelers had years of accumulated points.

Asked whether he ever imagined that frequency programs would grow so popular, Sternlicht said he thought their potential as a marketing tool still was greater. "They're all drivers of business. This is a currency people have almost become conditioned to expect," he said, adding that hotel programs are really just a "small cousin" to airline programs.

"In the same way, what's the point of getting infinite miles, if you can't use them," he asked. "As a customer, I had thousands of miles I never used because I could never use them when I wanted to get away. So what use were they to me? I could have used them as wallpaper."

At Hilton, the strategy is to keep blackout dates in place for the time being. "In light of the cutbacks in travel budgets this year, occupancy rates at some of our more desirable properties are down, so availability is much less of an issue than it had been previously," said Jeffrey Diskin, HHonors president and COO. "Therefore, travelers are much more likely to be able to redeem their points for the time and location they prefer."

At the individual property level, general managers in locations that are popular for point redemption last month said this business was an important source of revenue for them. "For travelers who value art and culture, Venice is a natural choice to want to redeem your points," said Giuliano Corsi, general manager of the Hotel Danieli, a Starwood Luxury Collection property originally built in the 15th century. "Because their mindset is that they're saving money on the room, guests are more relaxed spending in the restaurants and bar."

Corsi, who also is Starwood's area manager for its Venice portfolio, estimated that 25 percent of Starwood guests in Venice are members of the frequency program, either earning or redeeming points. He also noted that frequency programs have grown as popular with European business travelers as they have with Americans.

"In the past few years," Corsi said, "Europeans have caught up with the concept, as understanding of the excellent value built into frequency programs has grown."