With all the disheartening airline and hospitality news of late, it’s easy to become skeptical – especially when you’re discussing the state of the two industries’ loyalty programs.
When it comes down to it, loyalty is an old fashioned quid pro quo, support the brand with your pocketbook and the brand will reward you for it. As programs mature under the pressure of challenging markets, loyalty marketers ask more of their customers and are increasingly not willing to give the same in return.
Case in point, Delta’s questionable decision last month to end its policy allowing the transfer of miles to friends and family when a SkyMiles member dies. Additional changes come to mind, made earlier this year, requiring members to spend a minimum amount with the airline in addition to flying thousands of miles to earn recognition perks, a topic I addressed in my recent post, Delta SkyMiles: Triumph or Turbulence Ahead? Then there’s hotel brands Hilton, Starwood and Marriott, each of which has tinkered with its loyalty program, requiring members to earn and burn more points for benefits like free rooms. Many of these programs have also quietly shuffled the deck of their most valuable properties, moving many rooms even farther out of reach for certain travelers. For Marriott, that means about 25% more points required for free stays in most of their properties.
These brands repeatedly promote the idea that reward programs are about driving loyalty and continued business. But the aforementioned examples reveal a different truth; reward programs exist to enrich the offering brand, and in most cases drive upselling rather than providing democratized rewards.
As an industry insider, it is difficult for me to argue with much of this belt-tightening. But as a professional who has often relied on creativity, I wonder if the recent constraints of loyalty programs present an opportunity for new profitable solutions? Well, naturally, and I’m going to share just one of those solutions with you now.
Sniffing out Loyalty Success; Snuffing out Stereotypes
PointsHound was launched in beta last October and made significant platform upgrades made in March. In a nutshell this startup is an OTA (Online Travel Agency) with a loyalty twist. Users can book hotels with the platform and not only earn points for that hotel chain, but through a ‘double dipping’ concept, earn their choice of airline miles as well. How cool is that?
Apparently the masses find it very cool as the online hotel and airline booking service has garnered some particularly positive press and received over 10,000 new user sign-ups in less than 6 weeks. Just last month the company announced it had received $425,000 in seed funding from industry bigwigs like Erik Blachford, former CEO of Expedia, and Spencer Rascoff, CEO of Zillow and co-founder of Hotwire.com, among others.
While many airlines and hotels offer rewards programs, coordinating them for travelers can be difficult. Add in the perception of constant rule changes and mounting confusion and you’re left with a traveling public that’s on the verge of becoming disloyal to some of the best-known loyalty programs. Already Colloquy has found that, of the $48 billion doled out yearly in the rewards industry, some $16 billion goes unredeemed, a clear signal something is amiss.
PointsHound knows all about the impending loyalty backlash because its founders, Peter Van Dorn and Chris Boyd, are part of what they estimate are the United States’ 8 million elite frequent fliers – travelers who make at least 13 hotel bookings a year at about $300 per stay. Catering to just these travelers is a $30-billion-a-year industry.
“Given that the average frequent traveler belongs to something like 18 loyalty programs and is active in 8, it’s just too overwhelming to keep track of all the one-off promotions that come and go,” said Van Dorn recently. “These travelers need simple tools that allow them the flexibility to choose how they earn and reliably maximize their earning potential so they can get the most out of the programs they belong to.”
Booked for a Smooth Flight and Pleasant Stay
As I mentioned before the particular appeal of PointsHound is its ability to allow members to earn extra frequent flier miles as well as points toward a hotel stay – called “double up” – provided they stay at one of the 100,000 participating hotels. That means about 1,200 miles earned per night for the average member, or roughly the distance from New York City to Miami. Earn rates can be even higher depending on the number of nights you book through the site. Combine that with a well-publicized low price guarantee for hotel booking rates and you end up with a company that’s genuinely trying to break the airline and hospitality loyalty mold.
Of course, one company going against the grain of reward program stinginess and untangling loyalty confusion won’t immediately calm passenger nerves. But in the age of social media, where word-of-mouth has been given a powerful digital boost, brands like Delta, Marriott, Starwood and others might soon find they’ve run up to the limits of loyalty program fiddling.
One successful startup is an important step in the right direction.
So, what’s your take on PointsHound? Will frequent fliers start abandoning their current loyalty programs in favor of this new model? How close are we to the tipping point and what other loyalty innovations should PointsHound and other companies consider in the months ahead as the travel season ramps up? Share your thoughts in the comments section below.