Loyalty programs are just a scam for you and the hotel to rip off your employer, right? Or are you really getting a cheaper/better deal than using a marketplace such as booking.com
Generally, no, loyalty programs from hotels are not a scam. Or, I guess, it’s probably most accurate to say that they do not have to be a scam to be profitable, some places may run them as a scam anyway.
Speaking from the other side of the desk, guests can vary wildly in how much they cost to accommodate. A good guest (mostly one who cleans up after themselves) can cost as little as one-quarter of the average guest, that significantly improves the margin on the room and we can definitely afford to pass some of those savings on to you once we know you’re a good guest.
Speaking from a broader view, the kind of guest who stays often enough to meet loyalty targets is usually travelling for work. Their demand for accommodation is inelastic (job needs them in this place for this long) but very substitutable (pretty much any clean room will do). It makes sense to sacrifice some margin to capture that.
So there’s a few good reasons why hotels or hotel chains can offer real discounts in their loyalty programs.
Right, and as a hotel/airline, if given the choice between upsetting two paying customers.. who do you upset: someone who has done 100 nights/flights with you this year, or the guy who got a last minute rate from an online travel site and picked you because you were $5 cheaper?
The 100 nights/flights guy is also probably a much lower touch customer as they are just in&out for work, and "know how things work" generally so doesn't have unreasonable expectations for what they have paid.
It can go both ways. The 100 nights/flights person gets really familiar/routined to what's on offer and is going to complain when you change the brand of rum. Corporate expects you to personally welcome them, read their preference notes and make sure you give them something to bring to their kids because it's their birthday.
You're expected to upgrade them to the best available room/seat but they complain to corporate when someone that does 101/year gets the upgrade instead. If their flight gets cancelled/delayed because they flew into a known hurricane, you better watch out for it and proactively re-book them or hand out food/hotel vouchers.
The $5 discount OTA person... give them the crap room/seat that nobody else wants and just ignore their whining.
Just based on my experience of being the latter and trolling flyertalk...
I mean thats one dark way to look at hotel loyalty programs.
Another way to look at them is they are a gamified & transparent method of becoming "a regular" at a hotel/airline and generally get in return, commensurate better product/treatment/service, especially in cases of adverse events like short notice changes, delays, cancellations, etc.
Just like if you go to the same pub/restaurant in your hometown over & over, you'll get recognized as a regular.. and maybe on occasion get some free apps, access to a table when they might otherwise say they are full, and friendlier treatment. Except at a national/global scale across a brands properties/planes/airports/etc.
It is interesting to me that travel is one of the few remaining places where customer loyalty is in any way rewarded. And why shouldn't it be?
Sometimes it's a tax thing. The points usually don't count as a taxable benefit, so even if you're travelling for your own incorporated business, it's a way to squeeze a few percent of your expenses out as tax-free income.
Or at least a tax-free retirement benefit (not bad if you have an employer).
But it is funny to read on the travel discussion boards how much road-warriors hate hotel/airline X Y or Z because their points program isn't great, but they're substantially cheaper.
Some country's tax policies consider employer-paid meals a (partly/fully) taxable benefit, but if the hotel provides it for free, that's cool.
Same thing with credit card points. That's a huge one for squeezing out tax-free income out of your business.
I guess that depends on the country. In several European countries I have worked the points are property of the employer or they are taxable benefits. However, it is widely practiced and probably rarely prosecuted that employees just use them for their private fun and don't declare anything to the tax office.
However, if you get into any quarrel with your employer that can be fatal. Now they have an good argument to fire you with any compensation because of your wrongdoing. This had recently happened to the head of a Finnish government agency, ironically enough the audit office.
Part of the push for loyalty programs is that Booking (and Expedia) have tried to have a "most favored nation" clause in their agreements with hotels that states that hotels can't advertise a lower price elsewhere...unless they have an existing relationship with the customer. Hotels are often paying 20%+ in commission, so they're highly incented to get you to sign up for their program and give you free wifi or whatever and a few bucks off the room price.
EU regulation is pushing back on the MFN clauses, but I'm not sure what the current state of things is.
Booking.com's entire business is dependent on them being able to advertise the lowest price. If not, then all hotels would just use booking.com for visibility and get all reservations themselves. In short: Booking.com would pretty much instantly go out of business.
If Booking.com wasn't charging any commissions, there would be a strong reason reason for anyone (hotels or guests) to avoid them.
If the difference was small enough, many guests would still book through booking.com instead of the hotel out of ignorance, not caring enough, or because booking provides a better experience.
It'd cut their profits by limiting the commissions they can charge, but I don't see why they would go out of business.
