Strategies for Increasing Millennial
Participation in Hotel Loyalty Programs
IndustryView | 2015
Millennials, a demographic that generally has more time and money available for travel, are a valuable marketing target for hoteliers. Given that research shows loyalty program members can account for more than half of a hotel’s total reservations, it’s critical for hotel professionals to know what strategies can boost enrollment in such programs among this growing traveler segment.
This report analyzes millennial preferences as they relate to loyalty programs to help hoteliers improve the marketing of them to this demographic.
Hotels today increasingly want travelers between 18 and 34 years old—the generation known as “millennials”—to book repeated stays at their locations. Hotel loyalty programs, which offer guests points for staying with a brand that can be redeemed for free stays or other services, can help encourage repeat business. These programs not only help boost customer retention, but as guests earn more loyalty points, they also tend to spend more with that particular hotel brand.
Millennials represent the next lucrative customer base for the hospitality industry. However, their relationship with brand loyalty is more nuanced than that of other generations, and many long-standing marketing methods don’t have the same effect on them. They are, however, more technologically inclined and connected to the Internet—so the opportunity to attract their attention is greater than that for other age groups.
Hotel solutions that focus on customer preferences can help hoteliers develop and manage a loyalty program, but the process must also be strategically tailored to attract millennials. To learn more about how this segment prefers to engage with hotel loyalty programs, we surveyed a random group of 18- to 34-year-old consumers. This report highlights our key findings.
Our data indicates there are significant opportunities to attract millennials to hotel loyalty programs, as 86 percent of respondents are not currently participants.
Previous studies have shown that millennials are less likely to be brand-loyal. This idea has likely informed many marketing campaigns within the past few years—but perceptions about millennials may have been oversimplified.
New research, such as the report linked above, reveals a more nuanced definition of millennial brand loyalty. These individuals are still willing to become regular customers, but they’re much more discerning than previous generations because they have more information available to them on which to base their decision (e.g., peer-submitted reviews and ratings, hotel websites and online news coverage about companies).
But while there may be a new definition of brand value, “it’s not a disloyalty,” says Jeff Fromm, president of FutureCast, which provides marketing insights and research about millennials. “They’re willing to do a little more homework and they’re more savvy.”
Breaking our respondents into two age groups, we find that the participation rate in multiple loyalty programs is about 10 percent higher among slightly older millennials (those age 25 to 34 years old).
Mary Miller, vice president of marketing for Stash Hotel Rewards—which offers a loyalty program for independent hotels—says 6 percent of their program members are between the ages of 25 and 34, while just 1 percent are younger millennials (those age 18 to 24). This is because older millennials typically have more advanced careers, higher incomes and more reasons to travel because of work or family, she explains.
Using hotel management software with customer relationship management (CRM) functionality can help hotels identify millennials who are former guests, and then target them via marketing campaigns to show what they can offer beyond just a free room.
Hotel CRM systems offer profile settings that allow the hotel staff to segment guests by various demographics, including age. Hotels can target those guests between the ages of 25- and 34-years-old, and use the marketing features to set up an email campaign that presents a list of redeemable rewards and reminds them of the ways to earn points. Such targeted marketing can help increase participation for this informed and potentially very loyal demographic.
Of course, being a member of a hotel loyalty program doesn’t necessarily imply life-long brand loyalty. But for millennials—who are generally more picky about what companies they do business with—it shows at least some commitment to continue staying with a particular hotel brand.
We next wanted to explore whether annual income affects millennial engagement with loyalty programs. As it turns out, there’s a positive correlation between income and participation.
This doesn’t surprise Fromm, who says that income should be very relevant in this relationship. For any age group, consumers with higher incomes do tend to participate more in travel-related loyalty programs: More than 71 percent of those making $100,000 or more a year are enrolled in a loyalty program, according to a travel study performed by Parago.
Parago’s study also explains that 66 percent of travelers making $200,000 a year or more are likely to spend money when they think they have found a “good deal,” such as those offered to loyalty program members, versus 47 percent of those making $19,999 a year or less.
Further contradicting the perception of millennials as fickle, the most common reason our respondents give for joining a hotel loyalty program is loyalty to a specific hotel brand, cited by 46 percent.
Hotel marketers should take notice of brands that successfully engage with millennials and aim to inject simplicity, transparency and meaning into marketing materials that promote a hotel’s loyalty program offering.
Another 41 percent of our respondents say they joined because the rewards were easy to earn. Fromm adds that there are two components of a rewards program that millennials appreciate: frequency of rewards, and “surprise and delight.”
The loyalty program should offer rewards early (perhaps following the first stay after a guest joins the program) and often (stagger rewards to maintain interest). The hotel should also occasionally sprinkle in rewards that are beyond what customers expect in order to “surprise and delight” them.
These can be small things, such as offering guests unexpected freebies like cookies left in the room or a magazine based on a guest’s preferences—or they can be something more meaningful. For example, a semi-regular guest at the Gaylord Opryland Hotel wanted to find the specific Sharper Image clock radio the hotel keeps in its rooms. After a few years of unsuccessful searching, she Tweeted the hotel about it.
A note and two clock radios surprised and delighted a Gaylord Opryland Hotel guest
During her next stay, the hotel left two of the clocks and a handwritten note in her room. This gesture generated strong loyalty from the customer, and earned the brand positive recognition from those who heard about it. Big or small, these unexpected offers can show millennials that the brand is willing to do something unique and exciting for its customers.
The most exciting part of hotel loyalty programs is that members get to spend their earned points on rewards, which can include discounts on stays, room upgrades or other perks.
Among respondents in our sample, over half (51 percent) say they most frequently redeem loyalty points on a free or discounted stay, followed by room upgrades (19 percent) and airline tickets (12 percent). These rewards can help millennials save money on purchases they would likely make anyway on future trips.
For recreational travelers, the local cuisine beyond the hotel is often a key focus of their trip. For business travelers, Stash Hotel Rewards’ Miller says that free food and other rewards probably aren’t as appealing because companies often cover those costs for employees. This may explain why much smaller percentages of respondents favor rewards other than room stays and airline tickets.
So while hotels should still reward millennials with free or discounted stays, they should also look for opportunities to create more personal and unique experiences for guests.
To let loyalty program members know how many points they have and how they can use them, hotel brands need a way of notifying them. Some do this with a stand-alone app for rewards management, or through a basic hotel management app. Virtually all of the major hotel software brands have some type of online dashboard that members can access to check points or redeem rewards.
Alternatively, many hotel management systems also include customer relationship management features. These can enable the addition of a customer-facing loyalty page to the hotel’s website to check and redeem points.
Despite these options, 49 percent of respondents say they prefer to learn about their loyalty points via a simple notification email. Since email also remains the most effective tool for marketers, in addition to notifying guests about their loyalty points, email also presents a marketing opportunity for hotels.
Fromm says the content hotels include in such emails should be unique to the guest’s preference. For example, if a guest’s stay history shows they purchased an item from the hotel spa during their last visit, the email could offer a discount on a massage to encourage them to spend more during their next stay.
Keeping with the themes of simplicity and transparency, research suggests that using a conversational tone and stating clearly and quickly what the consumer is getting, whether it’s a service, a product or an idea, is ideal for communicating with millennials.
Some hotels have started awarding points to those who post about the property on social media platforms, such as Twitter and Facebook. When we asked respondents how likely they would be to take part, the results are quite polarizing: 27 percent each chose “very likely” and “not at all likely.”
Fromm says that, while he doesn’t think millennials are particularly averse to posting about a brand online, it has to have some clear value for them—whether they’re sharing for points or simply because they find the message of the campaign appealing.
When Marriott Hotels, for example, wanted to promote its CasaMagna Marriott Cancun Resort in 2012, it asked travel video bloggers to post on their social media accounts with the “#gottequila” hashtag. The brand reached nearly 2 million viewers with the campaign.
The Four Seasons Hotel in Jackson Hole also found success among millennials with its “#StealthStache” campaign, for which guests were encouraged to post photos of their real or fake moustache for the chance to win a trip for two to the Wyoming property.
Four Seasons’ #StealthStache hashtag campaign
These campaigns were successful because they used a combination of humor and relevant trends among millennials (for example, the popularity of facial hair), and encouraged co-creation (asking for peoples’ videos and photos).
Overall, most respondents (58 percent, combined) say they would find a mobile app for a hotel’s loyalty program “very” or “moderately valuable.” Indeed, millennials make up the largest percentage of mobile app users, according to eMarketer: they account for 54 percent of smartphone app users and 40 percent of tablet app users.
Many hotel management software mobile apps allow loyalty program members to check their status and book rooms using points, which provides guests with a quick and easy way to take advantage of any offers they may be eligible for.
The use of a mobile app also provides hotels with another communication channel it can use to connect with guests and offer notifications for upgrades and services. Reservation software can also store guest information, and front desk employees could ask guests if they have the app. Some hotel systems also include CRM functionality that can manage loyalty profiles and show which members have downloaded the app.
With this information, hotels can then reach out with deals or remind users what the app can offer. However, hotels need to show how the mobile app would benefit millennials by presenting a varied list of possible rewards upfront to gain their interest. Once they are engaged and understand the perks, the hotel has a much better chance to attract millennial business.
Millennials are an attractive group for hotels to target for loyalty program enrollment because they’re generally eager to travel and have money to spend. While millennials currently don’t make up a large percentage of loyalty members, Miller advises hoteliers to start reaching out to them now.
“In the next five to 10 years, as millennials enter their peak earning years, this generation will provide the majority of spending for travel and leisure,” she says.
As such, hotels must refocus their marketing materials with a new understanding of what strengthens brand loyalty for millennials: simplicity, relevance and surprise. A hotel loyalty program should be easy to join and earn points through—and should include unique rewards that are personal and unexpected, in addition to offers for free or discounted rooms.
Finally, since millennials are among the most tech-savvy, updating them on their loyalty program status via email notifications or with a dedicated mobile app can increase engagement while providing hotels with another line of communication to reach them through.
To find the data in this report, we conducted a five-day online survey of six questions, and gathered 1,944 responses from random consumers within the U.S. We screened our sample to only include respondents who were between 18 and 34 years old, and who are members of at least one hotel loyalty program. Software Advice performed and funded this research independently.
Results are representative of our survey sample, not necessarily the population as a whole. Sources attributed and products referenced in this article may or may not represent client vendors of Software Advice, but vendor status is never used as a basis for selection. Expert commentary solely represents the views of the individual. Chart values are rounded to the nearest whole number.
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