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Loyalty Programs Revamp to Meet Changing Customer Preferences

by Marlene Goldman

Jun 14, 2024
June 2024

Airlines and hotels consistently tweak loyalty programs to draw brand engagement based on shifting consumer habits, and the
demands of younger generations make an impact. According to Chris Galloway, executive vice president, Strategy & Design, for brand loyalty experts Brandmovers, millennials are more active and engaged in loyalty programs than any other generation to date, and as Gen Z gains in buying/spending power, they also accelerate in their desire for loyalty and rewards programs.

Galloway notes trends like hyper-personalization, interactive content experiences and highly segmented offers are gaining momentum.

“Acquisition is still one of the goals of loyalty programs, but reactivating dormant members and increasing brand retention pays off at a much higher rate,” he said. When purchase frequency is fairly low, such as with booking flights and hotels, the key is to develop authentic brand engagements that keeps member value front and center.

“The objective nowadays in their loyalty programs is to convert their everyday members into credit card holders,” said Jay Sorensen, president, IdeaWorksCompany, which researches airline loyalty with the help of sponsor CarTrawler. “If members are going to fly an airline, they may take a trip one to four times a year. If they’re going to hold a credit card, there’s a potential for them to have daily interaction with the brand.”

The big four in the United States — American Airlines, Delta Air Lines, Southwest Airlines and United Airlines — benefit from what’s happening with their co-branded credit card programs … which is having a tremendous influence over their frequent-flyer programs, Sorensen added. “I think part of the reason behind seeing airlines increasing bag fees of late is to make the financial advantage of holding a co-branded credit card even stronger.”

Another effect is more people can qualify for loyalty status using credit cards, reducing opportunities for elite status perks. “I think over the course of time, elite status is going to become something that is declining in importance for members because the benefits have been reduced,” Sorensen said.

The prices of rewards in miles or points have increased significantly since 2019. Reward payback for 2024, which measures the reward value provided per dollar spent on base fares, dropped overall more than half from 2019. Basic economy fares disrupt the value provided by frequent- flyer programs through policies which reduce or eliminate mileage/points accrual.

Delta Air Lines offers no mileage points for Basic Economy bookings, while Alaska Airlines, American Airlines and JetBlue significantly reduced accrual rates. United accrual is the same for all tiers.

Delta Air Lines also appeared in the news recently when it significantly increased the cost to earn each status level, which more than doubled over the past couple of years. The earning requirements for Diamond status are 139 percent higher in 2024 than in 2022. Delta travelers could previously earn elite Medallion Status and perks based on a mix of how much they flew and how much they spent with the airline. But now Delta focuses on Medallion Qualifying Dollars, which puts less priority on members who book flights.

Delta had also announced stricter limits to access its Sky Club lounges, among other changes that did not sit well with loyalty members, forcing the airline to backtrack on a few items. These include increasing the limit on number of days per Medallion Year it placed on eligible card members for Delta Sky Club lounge access. Delta also now partners with rideshare app Lyft. United Airlines measures progress toward status by two types of qualifying activity earned during the calendar year: Premier Qualifying Flights, based on flight segments flown, and Premier Qualifying Points, based on airline surcharges like paid upgrades.

MileagePlus members who are also primary United MileagePlus Chase Cardmembers are eligible to earn PQP based on their annual credit card spend. New for 2024, PQP earned from card spend can be applied toward the requirements for 1K status.

United also recently launched MileagePlus miles pooling for members to contribute and combine their miles into a joint account. Groups of up to five members can now share and redeem miles in one linked account.

American Airlines limits the way AAdvantage members accrue miles. Starting with tickets issued this May 1, only flights booked directly with American, eligible oneworld and partner airlines, and preferred travel agencies can earn miles and loyalty points, unless the customer is registered with the AAdvantage Business program or has a contracted corporate agreement with American.

American also offers more flexibility for upgrades and Basic Economy fares, including trip credits for cancelation, for AAdvantage members who book through American or eligible airline partners’ websites or apps. American introduced Loyalty Point Rewards in 2023 with various reward levels and reward options. Now members can choose Loyalty Points as their Loyalty Point Reward and speed up progress toward status.

AAdvantage credit card holders can earn miles and loyalty points through various websites such as aadvantageevents.com, which offers access to Ticketmaster tickets, and by booking through AAdvantage Hotels or AAdvantage Dining.

One of the most straightforward reward programs is Alaska Airlines. NerdWallet ranked Alaska top among U.S. airlines for its frequent-flyer program because it still rewards miles based on distance flown rather than the amount spent, offering the best value per dollar spent for frequent flyers.

Alaska Airlines recently introduced its Global Getaways quarterly program offering up to 50 percent off award travel redemptions for a limited time to select international destinations.

Southwest Airlines now makes it easier to earn status. As of January, Southwest Rapid Rewards members only need to fly 20 one- way qualifying flights (previously 25) or earn 35,000 tier qualifying points to reach A-List status. It also now requires 40 one-way qualifying flights (previously 50) or 70,000 tier qualifying points to earn A-List Preferred status.

Starting this year, Rapid Rewards credit cardmembers will receive more qualifying points for dollars spent on purchases using co-branded Chase credit cards. As of this spring, Rapid Rewards Members also began to have the option to pay for their flights with a combination of cash and points.

“By lowering the tier requirements and making credit card spend count double toward tier requirements, we’re able to deepen engagement with our brand and co-branded credit cards while maintaining the core program values that our customers know and love — including unlimited reward seats, no blackout dates and points that don’t expire,” said Jonathan Clarkson, vice president, Marketing, Southwest Airlines.

Hotels see similar trends in their loyalty programs, with even more options for personalization. According to Hilton Hotels’s 2024 Trends Report, 64 percent of Gen Z travelers prioritize loyalty programs when traveling. Hilton Honors caters to Gen Z and millennial audiences with its Hilton Honors Experiences platform, according to Jenn Chick, senior vice president and global head, Hilton Honors and Customer Engagement. The platform lets members redeem points for concerts, sporting events and celebrity-driven moments.

“Looking ahead, we are excited to leverage our latest partners, AutoCamp and Small Luxury Hotels, to inspire our members to explore new stay opportunities as they plan their future adventures,” Chick said. Also, Tickets with Points lets members link their Hilton Honors and Ticketmaster accounts.

To build loyalty among the growing small- and medium-business segment, this year Hilton launched Hilton for Business, a new travel program that helps simplify travel management while enhancing rewards and discounts for loyalty, according to Chick.

Marriott Bonvoy recently launched the creation of MGM Collection with Marriott Bonvoy, a partnership with MGM Resorts International which will benefit members of both loyalty programs. Additionally, the new Apartments by Marriott Bonvoy caters to those blending work and leisure.

Marriott Bonvoy utilizes various strategies to engage millennials and Gen Z into the program. First, Marriott Bonvoy Moments offers once-in-a-lifetime experiences to members at a variety of point levels. An example would be a “hot lap” in a high- performance Mercedes car driven by a Mercedes AMG-PETRONAS Formula One Team driver through one of Marriott’s many sport partnerships. Last year Marriott Bonvoy launched 1 Point Drops to offer experiences for just one Marriott Bonvoy point. Additionally, members can now link Marriott Bonvoy and Uber accounts in the Uber app.

Choice Hotels also expanded its offerings. Following an integration with Radisson Rewards Americas, Choice Privileges recently launched two co-branded Mastercard credit cards and expanded Choice Privileges Experiences for which members can redeem points with the additions of NASCAR races and more college football, basketball, baseball and hockey experiences.

Hyatt Hotels’ World of Hyatt loyalty program collaborates with American Airlines AAdvantage and Mr & Mrs Smith, a platform offering direct booking access to boutique and luxury properties worldwide. World of Hyatt also offers its experiences platform, World of Hyatt FIND, offering more than 500 global experiences members can choose, as well as its Be More Here new brand platform. Be Here Now offers ways to experience well-being, including an exclusive collaboration with the streaming platform MasterClass. World of Hyatt members can also now choose whether to use their award or gift eligible awards to friends or family.

“Loyalty programs are evolving into being engagement platforms — the destination for meaningful experiences and valuable relationships,” said Kaitlyn Sheehy, manager, Global Loyalty & Corporate Brand Communications, Hyatt Hotels Corp. “We’re dedicated to actively listening to the feedback from our guests and members and integrating their feedback into our design.”

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