Travel loyalty programs are at a crossroads. With shifting customer expectations, technological advances and the growing importance of personalization, traditional loyalty currencies and rewards are no longer enough.
Despite the quest for meaningful relationships that lead to lifelong customers, travel companies are only too aware of the challenges as well as the opportunities that lie ahead.
Damien Pfirsch, head of Rocket Travel by Agoda, believes the problem with loyalty programs is rooted in their complexity and aggravated by a disconnect between changing customer expectations and how programs are designed.
“The complexity of loyalty programs, with multiple verticals and intricate reward structures, often alienates customers,” he said.
“Customers are less likely to recommend these programs as they are not meeting the customers’ needs effectively. It’s really important that these programs are highly customizable and become an experience that is in line with the rest of the brand. High cart abandonment rates, for example, are partly driven by complicated checkout processes.”
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Pfirsch cites a Statista survey of 1,000 consumers from the United States that revealed 22% abandon purchases due to complexity. Customers are less likely to engage with programs that fail to provide clear, immediate value.
“The key to building a best-in-class loyalty program is personalized rewards powered by agile and scalable technology. Customized platforms with the look and feel of the brand, with the added advantage of expert back-end tech support,” Pfirsch said.
Rocket Travel, which published its own loyalty research late last year, revealed that 40% of bookers on the best-performing loyalty programs book more than once.
“By focusing on intuitive experiences, clear value propositions and flexible options, loyalty programs have the opportunity to deliver greater engagement and satisfaction,” Pfirsch said. “Success lies in designing programs that place the customer at the center, ensuring they remain engaged and excited in an ever-evolving travel landscape.”
A number of startups in the loyalty landscape are trying to do just that, whether through exclusive content or emerging technologies.
Loyalty’s opportunity gaps in search and communication
Introduced in November of last year, loyalty platform Journey aims to help travelers find unique, independently-owned boutique hotels, luxury resorts and private rental homes. Travelers earn points for their stays, which they can redeem for future travel and other perks.
“Travelers today face an overwhelming amount of choice,” said John Sutton, founder and CEO of Journey. “By designing a platform from the ground up, we introduce travelers to inspiring, off-the-radar properties while rewarding them for supporting independent operators.”
Noam Shapira, who previously co-founded insurance company Pattern, is now working as co-founder and CEO of B2B service Via.ai, an artificial intelligence-driven, personalized travel digital concierge.
The company's mission is "to transform every interaction into a loyalty-driving, revenue-boosting moment," it said in a LinkedIn post last year.
“Loyalty is driven by multiple things. One of them is trust,” Shapira said.
He believes that without trust, customers will only view loyalty in a transactional context. While it may seem counter-intuitive to build trust using digital representatives such as a chatbot, their ability to answer customer questions quickly and naturally helps build confidence in the brand.
“People are actually getting attached to the AI. It’s very exciting that you could talk with someone 24/7 without limitations or barriers,” he said.
Gal Ori, his co-founder at Via.ai, said that the digital concierge language model provides the personalization that loyalty programs need.
“Most loyalty programs are very one-directional,” he said. “They will send you a push notification or email … there is no conversation.”
Frequently interacting with loyalty customers lets the digital concierge learn details that enable a more personalized offer.
“Every minute of the day, it’s there for them. It knows about them, and all the time, there is a two-way conversation, proactive and reactive, around different offerings.”
Today’s travelers also want loyalty programs to offer them experiences.
“They can fly from Dallas to Las Vegas, but they might be very excited if they are going to [use] Amex now because they can go to a Formula One party after the race in Las Vegas,” Gal said.
People are actually getting attached to the AI. It’s very exciting that you could talk with someone 24/7 without limitations or barriers.
Noam Shapira
Gal also suggested that brands should be willing to put customer needs first to build trust and loyalty. And, that even extends to having the concierge recommend a competitor’s services when it better suits their travel plans.
“Think about how much more loyal the customers will be if American Airlines, one day, would come and say, ‘You know what, to get to Las Vegas on this date, there is a Southwest Airlines flight that is cheaper than our flight, and they’re also going four times a day to Las Vegas, we’re going just once a day.’ More than likely, customers will continue to come to American Airlines again. They might not just leverage the one transaction here and now, but this is how they actually will create goodwill for the future,” he said.
It might be difficult to imagine the exact scenario that Gal provided ever happening. Still, his point is that if the AI concierge is to build trust it should be more of an objective, reliable advisor, not just a brand advocate but a relationship advocate.
Inevitably, travel brands will decide how far they want to take this, and the AI system is adaptable.
Understanding the evolving loyalty landscape
During The Phocuswright Conference last November, Jenn Scheurich, managing vice president at Capital One Travel, highlighted the importance of listening to customer needs.
“Sometimes there is a little bit of a disconnect between what people say they want and how they actually behave in the real world,” she said. “We spend a lot of time looking at both, trying to triangulate the answer around how we craft our own products, services and offerings to drive loyalty.”
Nadia Omer, CEO of AirAsia MOVE, pointed out that many programs cater only to frequent travelers, but there is an opportunity to expand.
“[People] can earn from different methods..based on their earn brand habits, we build personas that tell us whether they would like to go more deep into the services part of it or would like to go broader.”
After researching their customer preferences, AirAsia MOVE appeals to those who might otherwise fall through the gaps in loyalty programs and focused on delivering value to the underserved middle-class market. “For mainstream and lower-income customers, it’s about cash, discounts and true instant value,” she said.
For Oral Muir, vice president of partnerships, experiences and distribution at Hilton, the key is creating “emotional currency” through personalized services and providing unique experiences. To that end, Hilton has forged partnerships, such as a 20-year relationship supporting team McLaren, and it brought select loyalty customers to the Vegas Grand Prix.
“We love these partnerships because they help people have these once-in-a-lifetime experiences and bucket list things,” he said.
Scheurich also pointed to the importance of getting to know customers through data. “Just really investing and understanding the customer, understanding the research, talking to them, keeping the customer at the forefront of all of the problem-solving you’re doing,” she said. “We spend a significant amount of time just really deep in customer data and customer research, working back from not just what customers are telling us but also what the data is telling us around there.”
Ultimately, the success of loyalty programs lies in their ability to drive meaningful engagement. “We measure overall top-line booking volume growth and the percentage of customers who are repeat users and how they continue to engage beyond our travel program,” said Scheurich. “We look at overall brand perception and what we’re able to drive via customers.”
However, the value of the loyalty currency driving transactions still matters.
For Omer, key metrics include the mix of loyalty currency purchased and the points spent in place of cash. She said the number of loyalty points purchased has risen from 20% to 40%. “That’s really good that other players are seeing the value,” she said. “The percentage of my payments that are using any form of points..has also doubled.”
The future of loyalty programs lies in their ability to evolve beyond traditional frameworks. By focusing on personalization, simplicity and meaningful experiences, brands can create programs that foster deep, lasting customer relationships. As Muir said, “It’s about listening to the customer and helping them find new ways to dream, shop and stay with us.”