Hotel loyalty programs have continued to expand beyond a reward for frequent travelers and remain a relatively cost-efficient way to drive occupancy, although they can make it harder to target the most highly valued guests.
This is according to an analysis by CBRE, which found that hotel loyalty program membership surged 14.5% last year to 675 million, pushing users per room up by 7.4% to 137. The expansion of loyalty programs, along with the standardization of perks such as free water and Wi-Fi, as well as early and late check-in and check-out, has created margin headwinds for owners. However, guest satisfaction scores have improved over the past decade.
The average member contribution to occupancy increased to 52.8%, up two percentage points from 2023, but room nights per member decreased. Loyalty programs delivered 12% more room nights year-over-year, while average room nights per member declined by 4% to one.
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This shift suggests a growing proportion of members are either dormant, overlap in multiple programs, are infrequent travelers or are earning points through credit cards and partnerships rather than frequent hotel stays, said the report.
CBRE noted that increases in loyalty program revenues and liabilities were balanced for the first time in years last year, at 8.3% and 8.4%, respectively. Program revenues reached a post-pandemic high of $1.2 billion, while liabilities were $2.4 billion. However, liability per member fell by 5.3% last year to $17.85, or 11.3% of the average daily rate (ADR), down from 21.9% in 2016.
“This indicates that each member had a relatively small savings of points — just a fraction of a room night — to encourage future redemption travel,” said the report.
Loyalty fees outpaced revenue growth last year, increasing 4.4% compared with 2.7% revenue growth. Overall, program costs remain modest at just $5.46 per occupied room or 1.6% of total revenues. That was up from 1.58% in 2023, said CBRE. While costs are increasing, loyalty programs are still effective at ensuring steady room demand even in low seasons and insulating against economic cycles.
CBRE said hotels should focus on maximizing redemptions that fill shoulder seasons – those periods of time between peak and off seasons – and drive ancillary revenue through incentives like food and beverage credits, spa perks and exclusive experiences.
“Owners, asset managers and developers should benchmark total program ROI against alternative distribution channels,” CBRE said. “By measuring the value attribution of loyalty programs, brands can demonstrate their loyalty program’s ROI, owners can avoid overpaying for programs that don’t outperform online travel agents (OTAs) and investors can assess whether loyalty-driven assets deserve premium valuations.”
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
