Loyal customers are one of the primary drivers of any business as it costs more to a company to sell to a new customer rather than selling to an existing customer. Loyalty programs are the rewards given by a company to those customers who make repeat purchases from the company. Loyalty programs in the travel industry have evolved in order to add more value to customers’ travel experiences. There is a continuous innovation in the loyalty program and reward system by the travel companies. The tourism sector has become highly competitive with more and more number of new entrants in all its industries. The higher the membership level, the greater is the privilege received by a customer in the form of rewards. These programs have proliferated the number of first-time travellers as well as the travel frequency of the same tourists.
Loyalty Programs in Tourism Industry: Drivers
Increased competition has forced the hotel operators to focus on innovative ways to attract and retain their customers. Tier rewards points are more effective for high commitment, higher price point businesses such as airline companies, hospitality businesses and insurance services. A fee based loyalty program is also more influential in retaining customers. Hotel operators today also provide a fee based loyalty program that is beneficial for the customer as well as the company. Companies that are able to connect to their target audience irrespective of discounted and non-monetary rewards gain an upper edge. To sustain the competition in the industry, travel companies are trying to create and add value to loyalty programs by emotionally connecting with their customers.
Further, coalition programs and strategic partnerships between companies in the tourism sector are mutually benefitting. Customers of one company are potential customers for another company as well. Multi-currency programs are offered by various travel companies and airlines such as Travelex Limited ABN, which provides customers with the “Qantas Airlines Frequent Flyer Points”. These reward programs save passengers’ time by providing currency exchange benefits.
In addition, loyalty programs have a positive impact on the occupancy rate, operating margins, profitability and revenue generation of the hotels. Some hotel chains offer a greater geographic coverage whilst other hotels offer free stays and other perks during the stay. Renting a car could be the last but not the least activity a traveller would do after reaching the desired destination; it even costs lesser than everything else a traveller has booked such as airlines, suites etc. These services provide higher levels of recognition to the frequent renters. National Car Rental is the pioneer company that started the loyalty programs. Its loyalty program “Emerald Club” offers reward points for business travellers as well. The Hertz Corporation is also one of the first companies to launch a travel loyalty program with its “Gold Plus Rewards System” as a three-tiered loyalty program.
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Loyalty Programs in Tourism Industry: Mode of Execution
It is a prerequisite these days to have flexibility in loyalty program offerings because of the dynamic nature of the travel industry. Features such as using cell phone number instead of a long loyalty card number are trending today, which make loyalty programs card independent. Virtual offices for execution of loyalty programs make them platform independent as well. Completely customised loyalty programs and redemption rules can be launched based on the amount spent by customers, card holder’s demographic, date and time, goals reached, products bought, the location of the store etc. Travel loyalty programs can be launched on social media such as Facebook or through a firm’s own mobile application unlike the earlier scenario where loyalty programs had to be introduced at the point of sales only.
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