Excerpt from Phocuswire
Building loyalty in travel has been a hair-puller for the industry since the early days of the internet.
Travel being an infrequent activity combined with consumers' high price sensitivity, further amplified by the OTAs' self-inflicted harm of focusing their communications mostly on low prices, seemed to be insurmountable hurdles to build a truly loyal customer base.
With Airbnb shaking up the travel landscape by taking off like a rocket with a fraction of the marketing spending shelled out by the travel mastodons, the rest of the industry is shifting its focus and doubling down on its loyalty strategy.
Are the largest players in the industry rising to the challenge of building a compelling value proposition that makes travelers flock back to these brands without needing to pay the so-called "Google tax" time after time?
Let's dive deeper into the recent retention efforts and the future plans of the major OTAs in the West.
Expedia: One loyalty program to rule them all
The Seattle-based travel giant has been the most vocal among its peers around its loyalty ambitions, announcing its plans, in May 2022, to stitch together its different loyalty programs into one unique program called One Key that will be rolled out in 2023.
What's unique: Expedia's aggregated base of 154 millions members gives the company a strong head start. The group will also be able to boost the attractiveness of the program by offering one of the widest range of travel products within the industry (accommodations, air, rental car, activities and cruises) for members to redeem their points.
Vrbo, the rising star in its brand portfolio, being part of the program gives Expedia additional gunpowder in its battle against Airbnb and Booking.com to win over the most popular accommodation category after the pandemic.
What's next: The loyalty mechanism of the new program will be similar to its existing programs, consisting of upfront discounts combined with loyalty points being earned on each purchase, which can be redeemed in future bookings.
Flawless execution will be critical during next year's roll out. The travel giant will have to ensure that customers of the existing programs perceive the new overarching reward scheme beneficial and avoid confusion with multiple memberships within the group. Otherwise, the company might risk a stampede of frustrated existing members due to a perception of downgraded benefits.
Another risk will be exposing the close ties between brands to the end customer, operating pretty much as one storefront under different colors. Expedia will have to walk a fine line to avoid the benefits of a consolidated program being offset by a potential dilution of its individual brands' equity.
Booking.com: Letting the "Genius" out of the bottle
Booking.com's Genius program has become a cornerstone of its retention strategy. The travel giant re-doubled its investment in the program last year by adding a third tier that unlocks up to 20% discounts for frequently repeating customers.
What's unique: A fundamental difference in the loyalty value proposition of Genius versus most of the other travel loyalty schemes is the fact that Booking.com solely focused on providing immediate benefit to members with a large offer of upfront discounts, avoiding complex reward schemes that promise future benefits.
In a brilliant move, the OTA convinced hotel partners to finance the burden of these discounts in exchange for a higher ranking in search results.
Booking.com built an additional lever to expand the reach of its loyalty program beyond its own brand. Granting access to the Genius program to its extensive B2B network as a co-branded hotel product allowed customers from companies like easyJet or Lufthansa to benefit as well from their Genius status for accommodation bookings.
What's next: Trying to add higher Genius levels with even larger discounts over time might be a mission hard to crack when discounts are mostly funded by hotel partners.
But the travel titan holds in its hands a feature that can potentially unlock the next level of retention: Booking.com's Rewards & Wallet, a product that was launched pre-COVID without much fanfare and has been kept deliberately decoupled from the Genius program.
Over the past 18 months, Booking.com has invested in an overarching payment platform, which is allowing it to gradually move away from an agency model to a merchant model, already reaching 60% of global adoption last year.
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