Studies show that loyalty program members aren’t just frequent travelers; they’re also highly engaged customers who are willing to spend on additional services to enhance their experience. In this article, we’ll explore how hotels can expand their loyalty programs and integrate ancillary products and services to maximize loyalty, boost revenue, and drive long-term growth.
Loyalty Programs Drive Hotel Revenue Growth
One hotel trend that’s been hard to miss lately is the rapid rise of loyalty programs. Look at Marriott, which leads all hotels with 192 million loyalty program members; or Hilton, whose loyalty program membership has more than doubled since 2018.
As the world’s top hotels recognize that loyalty program members are their most valuable customers, they’re investing in new platforms and solutions geared at offering better experiences to these loyal customers, and at the same time driving long-term revenue.
According to a recent study by Plusgrade, the global leader in ancillary revenue solutions, loyalty program members are 41% more likely than non-members to have traveled in the past three months, and more than four times as likely to travel at least a few times each year.
It’s clear that by focusing on the needs of these high-volume travelers — whether it’s tapping into the growing demand for ancillaries, or using loyalty points to offer more personalization and flexibility — hotel owners and operators can dramatically boost their bottom line.
The Rise of Ancillaries
As the popularity of hotel loyalty programs booms, so does the demand for ancillary products and services. These include room upgrades, early and late checkouts, pre-reserved dinners and spa sessions, and more.
Loyalty program members are ideal customers for ancillary products. Not only are they avid travelers — according to the same study, 4 out of 5 loyalty members consider travel an essential part of their life and make it a priority to travel regularly — 83% have purchased an ancillary or add-on in the past, while 92% say they’re willing to purchase one in the future.
These savvy and engaged members understand the value of loyalty programs, and they know what they want when they travel. Research shows they’re more likely to redeem points for hotel rooms at full or partial cost, and they’re also more likely to use points for flight and hotel upgrades and other add-on services.
To understand the opportunity for hotels, consider that the research study shows, 71% of loyalty program members prioritize convenience and efficiency when choosing a hotel, and 65% prioritize comfort and luxury, even if it means paying a premium. When you combine that with their willingness to spend on ancillaries, you can see why revenue-minded hotel operators are giving these valued guests even more ways to enhance their experience.
Points in Their Favor
Another trend hotel operators should keep in mind when optimizing their revenue strategy is the growing preference among travelers for using points instead of cash.
The same research shows that more than half of travelers are willing to pay for upgrades or ancillaries using points instead of cash. This is especially true of loyalty program members, who as savvy travelers are always looking for ways to maximize the value of their points. Two-thirds say they prefer using points to pay for comfort-related amenities, 69% are willing to redeem points for room upgrades, and 63% would redeem points for hotel add-on services.
Flexibility isn’t just a nice-to-have — it’s the number-one thing travelers look for when choosing a hotel loyalty program. Giving guests more ways to earn and redeem points is a great way for hotels to offer flexibility and gain a competitive advantage, whether it’s by allowing guests to pay for add-ons and upgrades using a mix of cash and points, or providing the option to bid on ancillary products using points or a mix of cash and points.
Driving Repeat Purchases
Hotels can maximize loyalty and increase revenue by taking lessons from other industries, where study after study show that ancillary offerings drive repeat purchases.
In the airline industry, for example, passengers who have experienced a seat upgrade in the past are more than three times as likely to pay for one in the future. A similar case study comes from the cruise industry, where one cruise line operator found that upgrades led 23% of passengers to bid on a higher cabin level for their next cruise, with 18% booking the exact same cabin level they had been upgraded to before.
We see similar data in the hospitality industry. Studies show that while 41% and 48% of first-time users are willing to use points for hotel add-ons and upgrades, respectively, these numbers rise to 85% and 88% among guests who have enjoyed similar services in the past.
Like other industries, hotel loyalty program members are more likely to redeem loyalty points for ancillaries they’ve experienced before. By offering memorable ancillary experiences, hotels not only create happier, more loyal guests, but also a virtuous cycle of repeat purchases that drives long-term revenue growth.
Turning Loyalty into Revenue
The rise of loyalty programs and ancillary services, combined with the emergence of new data-driven technology solutions, has created a golden opportunity for hotel operators to improve the guest experience, maximize loyalty, and drive growth.
Loyalty members, with their high engagement and willingness to spend, offer massive potential to drive both immediate revenue and repeat business. Hotels that offer flexible options and innovative solutions that cater to their most valuable customers will not only stand apart from competitors, but also build lasting relationships that translate to long-term success.
Hotels can boost revenue and build loyalty by focusing on high-value members, offering personalized experiences, and integrating flexible ancillary options that cater to guest preferences, driving immediate and repeat business.
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