The overall contribution of loyalty program members to the growth of occupancy surged despite lower marginal contribution per member .
DATA TRENDS
Loyal Following
HOTEL LOYALTY PROGRAMS DRIVING OCCUPANCY GROWTH , FINDS CBRE .
By KATHAKALI NANDI
T
hough growth in many key metrics slowed in 2023 , the overall contribution of loyalty program members to occupancy growth soared despite lower marginal contribution per member , a recent survey by CBRE concluded .
RevPAR growth in the U . S . has normalized following a post-pandemic acceleration and dipped by 2.1 % yearover-year in the first quarter , with the U . S . portfolios of some of the big publicly traded hotel C-corporations declining as much as 5 %, CBRE found .
Hotel loyalty programs play a crucial role in helping the growth of occupancy , especially during shoulder seasons and periods of economic uncertainty . In its study , CBRE analyzed the loyalty programs of five hotel companies in the U . S .: Choice Hotels International , Hilton , Hyatt Hotels Corp ., Marriott International and Wyndham Hotels & Resorts .
The average number of loyalty members per room jumped to 128 from 120 in 2023 , the study found ; however , the 6.4 % YOY growth was much lower than the 8.2 % fiveyear CAGR . Average contribution of loyalty members to occupancy increased by 2.5 percentage points to 51 % last year . The rise in membership , higher ADR and occupancy contributions helped drive a 9.3 % increase in the balance sheet liabilities associated with loyalty-point accruals available for future use .
The average hotel balance sheet liability per loyalty program member declined by 1.7 % YOY in 2023 to $ 18.86 from $ 19.19 . Liability per member stood at 87 % of 2019 levels in 2023 , indicating that members were either staying less on average , redeeming more or a combination of the two .
At 1.1 , the number of room nights stayed by the average member returned to pre-pandemic levels in 2023 . The figure is below 2016 ’ s 1.8 nights per member , suggesting that the percentage of membership consisting of heavy users ( more than 30 nights a year ) is slipping as earning of loyalty points is increasingly becoming linked with credit cards and affiliate programs and less directly with just frequent travel .
This doesn ’ t indicate that the members are less valuable for hotels , as they could have different travel patterns and fill seasonal lows or weak demand periods . It is , presumably , a marker of a broader base of loyalty members overall , who , on average , contributed fewer nights compared to 2016 , CBRE said .
Loyalty point redemption revenues improved by 11 % in 2023 to stand at $ 1.1 billion from $ 982 million in 2022 . This could suggest that more points were redeemed to book rooms last year and could also partly be a result of the 4 % rise in ADR or devaluation of loyalty points required to earn a free night .
Brand affiliation can prove to be beneficial to hotel owners and operators , including key money , mezzanine loans , favorable management terms and access to the brand ’ s member base .
P & L data from CBRE ’ s Trends in the Hotel Industry revealed that loyalty point expenses soared by 14.3 % in 2023 , higher than room revenue growth of 8.3 % and total revenue growth of 9.4 %. It concluded that members represent a bigger percentage of overall occupancy and that higher room rates and fees potentially increased costs . While hotels have been increasing loyalty program fees , the benefit of higher guest loyalty to the hotel brand should offset the cost by increasing occupancy as well as ancillary revenues .
72 hotelsmag . com September 2024