Student Name: Arpit Trivedi

Ayza Deshmukh
Bhavesh Rao
Chanchal Choudhary
Section:A
Subject Name: Front Office
Assignment Title: Loyalty Membership In Hospitality Industry

Word Count: 1500

Due Date: 23 th september, 2022

TABLE OF CONTENTS

1. Introduction 1

2. Impact on the Guest Experience

➢ Role of Loyalty Program
2

➢ Effect on Customers Booking Choice

2-3
 ➢ Guest Experience & Service Quality
3
➢ Pros & Cons of Hotel Loyalty Program
4

3. Conclusion
5

4. References
6
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INTRODUCTION
What is Hospitality Loyalty Program?
A hotel loyalty program or hotel reward program is a loyalty program typically run by a hotel chain. It is a
marketing strategy used by hotel chains to attract and retain business at its properties. The program works
to entice customers, especially business or other frequent hotel guests, to favour that particular brand or
group of hotels over others when selecting a hotel by offering discounts or privileges, such as upgrades.

Loyalty programs comprise a commonly practiced marketing strategy to maintain customer relationships
and generate return business (Hoffman and Lowitt, 2008; McCall and Voorhees, 2010). Despite the
proliferation of loyalty programs over the past three decades, some industry observers criticize these
programs for not accomplishing enough (Kim et al., 2009; Sharp and Sharp, 1999; Skogland and Siguaw,
2004); moreover, their profitability is questionable (Berman, 2006; Dowling and Uncles, 1997). Many
researchers have posited doubt on whether loyalty programs actually work (e.g., Dowling and Uncles,
1997;
O’Brien and Jones, 1995). They argue that many of the establishments of loyalty programs are, in fact,
copying behaviors and that loyalty programs in marketplaces generally fail to understand customer
behaviors and expectations (Sharp and Sharp, 1999; Wansink, 2003). In the hospitality industry today,
major hotels such as Hilton, Marriot, InterContinental and Best Western together have more than 10
million loyalty program members (Dekay, et al., 2009).

Research on loyalty programs is infused with the consideration of an industry-specific focus. American
Airlines launched the first loyalty program in 1981, and it was soon adopted by car rental firms, credit
cards providers, financial services firms, book retailers, gasoline stations and supermarkets (Berman,
2006).
Among all of these “copy cats,” the hospitality industry has become a mainstay (McCall and Voorhees,
2010) and currently, loyalty programs have attracted considerable interest in the hospitality industry
(Hoffman and Lowitt, 2008; McCall and Voorhees, 2010). The industry continues to embrace loyalty
programs for a variety of objectives, including rewarding loyal customers, generating customer
information, manipulating consumer behavior and combating and defending their market share
(O’Malley, 1998). Early managerial discussions on hotel loyalty programs can be found in the studies of
Reichheld and Sasser (1990), Bowen and Shoemaker (1998) and Dube and Shoemaker (1999).
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IMPACT ON THE GUEST EXPERIENCE

➢ Role of the Loyalty Program
Today, hotel customers no longer want to experience only genuine services from providers; they
want more. Customers seek better deals, demand amenities, write reviews, and share what they
got from hotels. The loyalty program, often called a rewards program or frequent-guest program,
is the core of this phenomenon (Raab et al., 2016; Xie et al., 2015). Customers have fought to
receive exclusive benefits by joining loyalty programs and developing their tiers to elite levels.
When accomplishing elite levels, customers can not only receive noteworthy benefits such as late
check out, free Wi-Fi, discounts for rooms and restaurants, free access to the executive floor
lounge, a free room upgrade, but also utilize the accumulated points for an upcoming stay,
transferring points to preferred mileages, or buying gifts (Hewitt, 2017).
The loyalty program is an essential tool for chain hotels to foster customer loyalty by providing a
combination of hard benefits generating an elimination of direct financial costs (e.g.,
complimentary stay) and soft benefits reflecting customers’ sense of special status (e.g., late
check-out) to customers who frequently make purchases (Yi and Jeon, 2003). The loyalty program
enables hotels to retain a number of customers who possess a high level of repeat-purchase loyalty
(e.g., decreased switching intention to non-program brands, increased purchase frequency) (Sharp
and Sharp, 1997).
Sharp and Sharp (1997,p. 473) defined a loyalty program as a “supplier’s structural effort that
provides customers with loyalty incentives such as points redeemable for prizes or discounts to
increase customers’ attitudinal and behavioral commitment to the supplier’s market offering.”
Over the past three decades, the loyalty program in hospitality industries has proliferated since
Marriott launched its loyalty program, Marriott rewards in 1983, which was a copycat of airline’s
frequent flyer programs. Since then, loyalty programs have become imperative for chain hotels to
have competitive and distinctive loyalty programs to survive in this age of unlimited competition
(Raab et al., 2016; Zahay et al., 2012).

➢ Effect on Customers Booking Choices

A loyalty program is commonly observed in our real world to establish and maintain a customer
relationship. However, there is limited research information on the effect of loyalty program
schemes on customers’ choice in an online booking context. The current study summarized the
awards currently offered by major hotels and online travel agencies (OTAs) and examined: 1)
customers’ preference toward attributes of the loyalty program, 2) within reward attributes, which
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contributes to an increase in consumers’ booking choice, 3) which attributes make customers book
on hotel websites rather than on OTA websites, and 4) the interaction between customer
involvement and hotel loyalty programs’ attributes on booking preference. The results revealed
that customers prefer rewards that are related to hotel booking and immediate point redemption.
Changing the reward attribute level from unrelated rewards to related rewards increased
customers’ probability of choice. However, timing of redemption did not affect the choice.
Further, the effect of related rewards on increasing the chance of booking was stronger for
consumers on a high reward program tier than those on a low reward program tier. However, no
interaction was found between time and customers’ tier of the program. Results suggest that the x
x effect of hotel and OTA’s loyalty program attributes on customers’ choice is different from
other industries’ loyalty programs.

➢ Guest Expectations Vs. Service Quality

Kinderis, Žalys, and Žalienė (2011) notice that technical quality is what the customer receives
during their stay. The hotel guest gets accommodation, the restaurant visitor gets food. This is an
external side of quality. Often, but not always, these elements may be measured by the customer,
their nature depends on the technical solution applied by the enterprise to solve the customers’
problem. Their availability and status may be shown to the customer before choosing the service,
since the expectation related to quality are affected in this way. Hence, technical quality is usually
related to material measures and technologies, the features of which are established by the usual
evaluation methods of the quality of the goods. However, the parameters of technical quality do
not ensure by themselves that the hotel will satisfy the customers’ wishes, even if they met
advance commitments and promises of the provider. The quality of even the highest category
hotel may be negatively evaluated by the customer in, for example, the case of the conflict with
service personnel or in case of theft. Thus, a customer is always affected by the manner in which a
technical servioce is provided to him. This manner defines another aspect of the quality, i.e.,
functional quality. This is the behaviour of provider and other circumstances – interest, attention,
respect, politeness of personnel, confidentiality, ability to find a solution in case of a force
majeure, etc. A functional quality is more difficult to control, since high quality deviation is
possible.
Research shows that monetary rewards are not the only drivers of customer-loyalty programs.
Experiential rewards provide greater long-term benefits. Loyalty programs are supposed to unlock
great value for companies by driving higher sales and boosting brand affinity.
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➢ Pros & Cons of Hotel Loyalty Programs

• PROS
1) Guest Recognition- With hotel loyalty programs, you will have systems and
procedures in place for recognizing frequent guests and ensuring that none are
overlooked both within your hotel and at participating properties.
2) More Bookings- The lure of instant perks can be a powerful way to convert travel
shoppers into bookers. Moreover, when travelers are familiar with a brand, they are
more likely to return. Research from Kalibri Labs found out that 40 to 60 percent
of hotel room bookings came from loyalty members.
3) Lower Cost- It’s far less costly to attract repeat guests than to convince travelers to
book for the first time. Furthermore, loyalty members are more likely to book
directly than through an Online Travel Agent, especially when offered an incentive.
The Kalibri Labs study found that direct bookers were on average 9 percent more
profitable than Online Travel Agent bookers. Even when hotels offered discounts
for booking directly, net average rates were higher than Online Travel Agent rates.
4) Rich Data- With a loyalty program, hotels can build rich profiles of guests and
track their preferences, interests and spending behavior. When travelers join a
program, they are asked for consent to receive communications and promotional
offers. This helps ensure compliance with privacy regulations like Europe’s GDPR.
• CONS
1) Administration Cost- As mentioned, a loyalty program can be time-consuming and
resource-intensive, requiring investments in technology, training and labour to
track points and redemptions, answer inquiries and engage members.
2) Marketing Operational Cost- Loyalty discounts and incentives can increase
marketing and distribution costs. Extending perks such as upgrades, amenities,
WiFi, food and beverage credits and early check-in/late check-out can burden
operations, displace revenue and increase expenditures. Hotels may extend
discounts and incentives for bookings that would have been made anyway. And in
extreme cases the costs of attracting direct bookings may exceed the costs of
Online Travel Agent commissions.
3) Cost Redemption- Points accumulated over time represent a liability on the hotel’s
balance sheet. The costs of redeeming rewards can be significant, displacing
revenue on rooms that would otherwise be occupied by paying guests. Further,
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some members may accumulate points at less desirable properties and redeem
rewards at more desirable properties, creating an imbalance.

CONCLUSION
Generating new business and attracting new guests requires significant investment in marketing and
advertising. Media campaigns, improving your search engine optimization, or paying online travel agents
such Booking.com a higher commission hurt your bottom line and are drag on your capital resources. It is
far more logical to develop a steady flow of repeat business from your past guests. Research carried out
by Second Opinion Marketing found that it cost five to eight times less to retain existing customers than
attracting new customers.
One of the best ways to boost your hotel’s repeat business is to establish a guest loyalty program. This
blog will provide you with an overview of hotel loyalty programs and the benefits a loyalty program can
bring to your hotel.

REFERENCES
o Berman, B. (2006), “Developing an effective customer loyalty program”, California Management Review,
Vol. 49 No. 1, pp. 123.
o Dowling, G. R. and Uncles, M. (1997), “Do customer loyalty programs really work”, Sloan Management
Review, Vol. 38 No. 4, pp. 71–82.
o Hoffman, J. L. and Lowitt, E. M. (2008), “A better way to design loyalty programs”, Strategy and
Leadership, Vol. 36 No. 4, pp. 44-47. o McCall, M. and Voorhees, C. (2010), “The drivers of loyalty
program success”, Cornell Hospitality Quarterly, Vol. 51 No. 1, pp. 35 -52.
o Kim, D., Lee, S., Bu, K. and Lee, S. (2009), “Do VIP programs always work well? The moderating role of
loyalty”, Psychology and Marketing, Vol. 26 No. 7, pp. 590-609.
o O'Brien, L. and Jones, C. (1995), “Do rewards really create loyalty”, Long Range Planning, Vol. 28 No. 4, pp.
130.
o Sharp, B. and Sharp, A. (1997), “Loyalty programs and their impact on repeat-purchase loyalty patterns”,
International Journal of Research in Marketing, Vol. 14 No. 5, pp. 473-486.
o Skogland, I. and Siguaw, J. A. (2004), “Are your satisfied customers loyal”, Cornell Hotel and Restaurant
Administration Quarterly, Vol. 45 No. 3, pp. 221 -234.
o Wansink, B. (2003), “Developing a cost-effective brand loyalty program”, Journal of Advertising Research,
Vol. 43 No. 3, pp. 301-309.
o https://www.reviewpro.com/blog/pros-cons-loyalty-programs/.
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