Despite High Awareness Among Consumers, Majority of Travelers Never Claim Membership in Loyalty Programs by OTAs

| December 10, 2013

In the past five years, online travel sales have grown from $93-Billion to over $160-Billion, with hotel reservations accounting for almost 40% of this total volume. Online Travel Agency (OTA) websites are responsible for one-third of the online hotel bookings, indicating their importance in the distribution and reservation chain.
 
The 2013 Hotel SCORES syndication, which measures the impact that Hotel Frequent Guest Programs (FGP) have on hotel usage and loyalty, shows that 70% of FGP Program members are aware of Loyalty Programs offered by OTAs. According to Phoenix Marketing International, this high awareness should be expected.
 
Despite this high awareness of OTAs among Hotel Loyalty Program Members, very few (29%) claim membership in an OTA Loyalty Program. According to Phoenix Marketing, when looking at who among FGP Program members carries a membership in OTA Programs, it’s seen that OTA Members tend to be most likely from Generation “Y”, prefer Economy-Tier Lodging products, and spend an average of 25 nights a year in hotels. These individuals appear to be a less-experienced traveler than most members of most members of Hotel FGP Programs.
 
Phoenix believes that there is a place for the OTA web sites and OTA Loyalty Programs in the distribution channels, but hotels should be looking at offering a rationale for using their own web sites. While the consumer may be able to get a room at a property for the same price whether they use an OTA site or a hotel site, it is in the financial interest of the hotel to drive traffic through its own site. It is interesting to note the emergence of Roomkey.com, a web site developed by a combination of six hotel companies in early 2012. This site offers the traveler the ability to earn points in the hotel FGP Programs, something the traveler may or may not be able to do when booking through an OTA site.
 
In closing, regardless of how an individual books a hotel room, one of the key issues facing the industry - both OTAs and hotel companies - is educating the consumer in the booking channel options they have and providing an easy-to-use reservation platform.
 
 
Hotel Frequent Guest Programs… A Revenue Enhancer or a Revenue Drag?
 
The 2013 Hotel SCORES syndication, which surveyed over 12,000 FGP Program members in eleven countries and measured the impact that FGP Programs have on hotel usage, demonstrates the ability of loyalty programs to have a positive influence on share of room nights. The study further shows that members purchase additional room nights when redeeming awards.
 
According to Phoenix Marketing International, a Loyalty Activity Continuum exists among FGP Members. Year-after-year, as a Member becomes more active in a Hotel Frequent Guest Program, the greater the share of room nights they give to the brands in their preferred FGP Program. As a person moves up this Loyalty Activity Continuum… from becoming a Member… to being an Active Member, to achieving Elite Status… the share of room nights they “give” to hotels in a particular loyalty program increases dramatically.
 
When the FGP Member share of room nights given is compared to all brands associated with an FGP Program to a random mix of all guests, it is not uncommon to see share increases on the magnitude of 150% to 500% as one move up the Loyalty Activity Continuum.  
 
And additional revenue is not just driven by an increase in share of room nights from Members. The 2013 Hotel SCORES data shows that among individuals redeeming a room award, three-out-of-four (73%) purchase at least one additional room night with each redeemed award. Among the redeemers, they purchase an average of 2.1 room nights with each redemption. With a 2012 industry Average Daily Rate (ADR) of $106, plus any additional F&B revenue, or revenue from other sources, there is quite a bit of additional income coming into a property with FGP award redemptions.
 
 
 

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