Loyalty Programs and the Changing Landscape of Brand Commitment

OVERVIEW

We've been digging into the evolving way travelers choose between travel brands, and it's become clear that the role loyalty programs play is hard to pin down. Throughout the many conversations we’ve had with travelers over the last 18 months, a notable 56% of them have told us (in one way or another) that loyalty programs are losing their sway in decisions over travel brands, a trend that holds regardless of demographics or trip purpose (e.g., business trips, vacationing, etc.). Looking ahead, 47% expect these programs to hold the same or even less sway over their choices in the next year or so.

Despite this, many are still playing the field with loyalty memberships—juggling four or more hotel programs and a couple of airlines too. More collecting than committing. Equally as confusing has been finding that 57% of our latest respondents are still on the lookout for new programs to join each year.

What are we to make of this? If their pull over choice is weakening, what role do they play? How can commercially focused travel brands start to think about their programs operating in a more exploratory approach to loyalty, where commitment is made in a very competitive and fluid marketplace? Our latest MODIV Mindset study hopes to pull back the curtain a little and help answer some of these questions.

From Insight to Impact: Evolving Loyalty Strategy for the Modern Traveler

Whether a new shift in mindset for travelers or something that’s been a steady consideration for years, it’s clear that activating against traveler trust offers travel brands meaningful commercial opportunities. Doing so requires pulling a very complex and sophisticated lever that requires a unified effort across an organization’s commercial teams – marketing, sales, brand, loyalty, revenue management – to align priorities and strategies. It will be a team sport and not everyone will even be aware of the rules. It will take proactively engaging with and educating all your revenue stakeholders on the value of trust and then mapping a playbook for starting to mine the value of trust. We’ve partnered with organizations looking to do just this, so if you’d like to chat, MODIV is always available to go deep on this topic.

LOTS OF CARDS: A QUEST FOR VARIETY OR JUST A NEW THING TO COLLECT?

The average traveler is a member of four or more hotel loyalty programs and two or more airline loyalty programs, with a 57% likelihood of joining at least one new travel loyalty program each year.

So What: Loyalty brands that don’t find ways to capture the early engagement of a promiscuous traveler will not only see new memberships erode, but they’ll also miss the very small window of time to capture valuable attention.

COMMERCIAL SEGMENTS: WHO IS DRIVING LOYALTY DEMAND?

Distinct traveler segments like Road Warriors, Big Spenders, Up & Comers, and Engagers are shaping the loyalty landscape with their specific needs and travel behaviors.

So What: A loyalty brand that overlooks the distinct needs and behaviors of key traveler segments like Road Warriors and Big Spenders may struggle to achieve market penetration and loyalty program effectiveness, leading to diminished returns.

BRAND BATTLES: WHO’S STANDING AT THE TOP OF A CROWDED MOUNTAIN?

The top travel loyalty brands share the market almost equally, with no single brand dominating in terms of traveler preference. Consumers appear ready for a big player to change the game.

So What: Programs that minimize the need for real differentiation will be sitting with the other “me too” brands, shouting into white noise and missing out to brands that can rise above it all.

SILVER IS THE NEW PLATINUM: HOW LONG UNTIL THE POINT HOARDERS ARE EXTINCT?

Travelers are not looking for delayed gratification; they want loyalty programs that offer rewards and experiences just for giving them a try.

So What: Loyalty programs that stick to traditional, long-term reward structures without offering immediate, tangible benefits may fail to attract the modern traveler, leading to a gradual erosion of active membership.

THE FINDING

Travelers are “collecting” memberships instead of committing to brands. The average traveler is a member of four or more hotel loyalty programs and two or more airline loyalty programs. 57% expect to join at least one new travel loyalty program each year.

SO WHAT

Loyalty programs need to adapt to the “try-and-move-on” mindset. Loyalty is not exclusive.

Travelers are hungry for differentiation. They want value just for “trying” programs.

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THE FINDING

There is no clear leader when it comes to loyalty brands in travel. The top names near evenly share more than 90% of the total available awareness and preference.

SO WHAT

Despite the indiscriminate joining of programs, gaining relevance if you’re outside the leading group will be an uphill battle. Loyalty programs will need every resource they invest to work as hard as possible.

Identifying the data signals that will separate the “triers” from those who intend to be loyal will give you the biggest impact of each marketing investment. Look for those that are looking for you.

Look outside the travel industry for tactics that will break the cycle of noisy, same-old-same loyalty strategies being run by the leader group.

THE FINDING

Traditional travel programs are not the only ones on the block anymore. A meaningful amount of loyalty attention and commitment now sits with brand agnostic credit card programs and the growing popularity of short-term rental platforms.

SO WHAT

Traditional programs need to contend with a shifting landscape which could see them losing out to more flexible and novel models of loyalty.

Credit cards that are not tied to travel brands have started to steal meaningful amounts of attention from loyalty consumers. The flexibility they offer is a strong pull.

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THE FINDING

Despite their weakening influence, loyalty programs continue to play a role in why some travelers will choose one brand over another, a role that also appears to influence where a traveler books their trips.

SO WHAT

The tendency to book via loyalty platforms can and should continue to be a key differentiation strategy for leading brands.

It will be important to develop tactics that capture the attention of the millennial and younger generations as they continue to grow into being the primary source of travel volume. Their attention will be the most valuable and critical for loyalty brands.

THE FINDING

When we asked about trip purpose, loyalty programs continue to carry an influence we’re used to seeing with business travel but start to lose their pull with other trip types.

SO WHAT

There is a lot of nuance in the desired program design. Focus on a narrower set of strategies and tactics that meet the demands of your brand’s most desired target. Don’t try to be everything to everyone or you’ll end up the same as everyone.

Travelers will continue to define “how loyalty works” by the mechanics they are used to. Expect to need customer education and change management with any truly new tactics you introduce.

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THE FINDING

When asked to build their own programs, travelers lean into things like micro-earning and surprise and delight rewards instead of the more traditional point accumulation and structured currency tactics.

SO WHAT

THE FINDING

Enticing and keeping travelers comes down to fundamentals: customer service, program simplicity, and exclusive efficiencies.

SO WHAT

It’s helpful to understand the areas that are not as influential on enrollments or engagement. While these cannot be completely ignored, they are likely not worth holding up as brand hallmarks.

Many of the important aspects of driving enrollment and engagement are dependent on in-hotel and in-flight executions to truly bring to life. This creates an extra layer of complexity.

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The Why & What

What is MODIV Mindset and why was it created?

MODIV Mindset is a bi-monthly global survey engaging with over 1,000 travelers across 22 countries and 11 localizations. We created it to supplement our clients' existing insights strategies, providing them with rapid, actionable information on connecting with travelers and their ever-evolving expectations in commercially viable ways.

What consumer trends led to the creation of Mindset? Modern consumers, particularly travelers, demand a personalized experience; they prefer brands that understand their unique needs and preferences. The hospitality industry faces numerous challenges in this regard, especially in the wake of the impact left by the global pandemic-induced disruptions. MODIV Mindset was created to help hospitality brands navigate these challenges and deliver experiences that are individually tailored and purposed.

How does Mindset help with consumer research needs? MODIV Mindset was designed to address the challenges our hospitality clients face in cataloging, interpreting, and using consumer insights. The survey provides agility, speed, price efficiency, and specificity. It serves as a real-world, inspirational starting point for our clients to develop unique strategies for identifying, marketing to, and fostering relationships with modern travelers worldwide.

Who are the target respondents of Mindset?

MODIV mindset tracks 16 psychographic, demographic, professional, and travel behavior dimensions – with standard segment and brand reporting. Each bi-weekly wave of MODIV Mindset is tightly screened to ensure we’re speaking with:

Travelers who are at least 21 years old
Travelers who take 4+ trips per year (covering all stay occasions)
Travelers living in one of the 25 countries we monitor

We also balance our samples (oversampling when necessary) to ensure we’re capturing:

A balanced representation across genders
A representative sample from each country based on the percentage of that country's GDP made up of travel (inbound and outbound)

What parts of the travel industry does Mindset cover? The survey covers lodging, air, and car rental (including on-demand services). It provides over 16 demographic, psychographic, and professional attributes for complete, real-world segmentation. It catalogs drivers of expectations, preferences, and trust across these segments and explores expectations of travel brands at various price points and for different trip occasions.

What is MODIV's approach to reporting patterns and trends? MODIV Mindset focuses on identifying patterns and trends that persist over multiple survey waves. We refrain from reporting anomalies or insights that do not recur or grow over several waves. Furthermore, our emphasis lies in understanding future-focused mindsets rather than past behaviors – we are interested in what travelers hope and expect in the next 6-12 months.

How is your research validated? Our results are regularly reviewed by industry experts for validation and interpretation. This ensures that our survey lives up to our expectation that it provides commercially relevant, real-world insights.

How have travel brands used MODIV Mindset? Our clients have found numerous applications for MODIV Mindset, from defining unique marketing strategies to building meaningful relationships with modern travelers. If you'd like to see specific examples or explore how you might be able to use it too, please contact us directly.

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