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THE EVOLUTION OF LOYALTY PROGRAMMES IN THE

TRAVEL INDUSTRY
July 2014
Euromonitor International PASSPORT 2 TRAVEL AND TOURISM: LOYALTY PROGRAMMES
INTRODUCTION
Key findings
Airline loyalty programmes
in transformation
To better cater to their highest paying passengers, airlines have made moves
to reward these lucrative travellers better, including switching to a spend-based
model for miles accumulation and joining forces with hotel loyalty
programmes.
Evolution in hotel loyalty
programmes
Although the hotel industrys recovery led to devaluations, hotel companies
continued to evolve their programmes, such as IHG offering free Wi-Fi for all
members starting in July 2014.
Co-branding remains key
but face challenges
Co-branded credit cards remain lucrative for the industry thanks to high-margin
sales of points or miles. However, co-branded credit cards face obstacles with
interchange fee regulation in Europe and to a lesser extent, competition from
general rewards cards.
Prepaid cards show
potential
Although prepaid cards are not as lucrative as co-branded credit cards, airlines
are launching these cards to appeal to those who travel abroad frequently or
do not have access to credit.
Improving the travel
experience
Loyalty programmes are expected to continue to improve by improving the
travel experience for members, especially their most lucrative elites. Mobile
and personalisation are the important areas where the next evolution will
occur.
Euromonitor International PASSPORT 3 TRAVEL AND TOURISM: LOYALTY PROGRAMMES
Proprietary
Model
One brand
One platform
Example: Tesco
Partner
Programme
One main brand tied to a company with partnerships
One currency earned and redeemed through many players
Example: Hilton HHonors
Coalition
Programme
A separate brand shared by multiple companies
A shared currency
Example: Nectar
Multicurrency
Plan
Multiple currencies that can be converted into one mega currency
Example: Multiplus SA
Loyalty programme models
MARKET BACKGROUND
Source: Alliance Data, Loyalty One
Euromonitor International PASSPORT 4 TRAVEL AND TOURISM: LOYALTY PROGRAMMES
Airlines in the US have the highest
membership counts for their frequent flyer
programmes. While a large population
helps support those figures, the US also
has a large air network dominated by
domestic flights, and many flyers sign up
for multiple programmes across carriers.
Multiple memberships are not as
common in Europe, with people usually
sticking with their national flag carrier for
loyalty programmes.
Southwest Airlines is a notable absentee
from this list. Southwest does not disclose
how many people belong to its Rapid
Rewards membership programme, but
has stated that 5.4 million flight awards
were processed in 2013. Asiana is also
missing but according to trade sources
had 8 million members in 2006.
When American Airlines and US Airways
combine their programmes, even with
duplicate members, the new programme
will likely surpass United for the top spot.


Airlines in the US have the highest membership levels
AIRLINE LOYALTY PROGRAMMES
Membership in Airline Loyalty Programmes 2013
Airline Programme Members (000)
United Airlines Mileage Plus 95,000
Delta Air Lines SkyMiles 90,000
American Airlines AAdvantage 74,000
US Airways Dividend Miles 30,000
JAL Mileage Bank 27,000
All Nippon Airways* ANA Mileage Club 24,900
Lufthansa Miles & More 23,000
Air France/KLM Flying Blue 22,000
Korean Airlines* Skypass 20,500
China Southern
Airlines*
Sky Pearl Club 15,000
TAM Fidelidade 12,200
JetBlue* trueBlue 10,000
Qantas Airways Frequent Flyer 9,400
Emirates Skywards 8,600
LAN Airlines LANPASS 8,500
Source: Frequent Flyer Services, company reports
Note: *Year end 2013 except for companies with asterisk; their membership counts are
some time within 2013
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With less competition thanks to
industry consolidation, US
airlines are focused more on
profitability than gaining market
share. Legacy carriers have
made moves to reward the
industrys most profitable
travellers with more perks and
an overall better travelling
experience.
Delta announced a radical
change in February 2014 by
saying it was switching to a
spend-based programme - the
first US legacy carrier to do so
(Southwest, JetBlue and Virgin
America spend-based loyalty
progammes). United followed
suit in June and it is likely that
American will switch once it has
finalised its merger integration.

A time of transformation for US airline loyalty programmes
AIRLINE LOYALTY PROGRAMMES
Jan 2013 Delta Air Lines Inc announced a spending requirement to
achieve elite status for 2015.
March 2013 Delta and Starwood launched the Crossover Rewards
programme, which extends elite earning opportunities and
benefits from each programme to those with status.
June 2013 United Continental Holdings Inc matched Deltas spending
requirement to achieve elite status for 2015.
July 2013 United and Marriott announced, RewardsPlus, their
reciprocal benefits for elite members.
Feb 2014 Delta announced a significant change to its loyalty
programme, effective 1 January 2015. Instead of earning
miles based on distance flown, travellers will earn miles
based on the amount spent on the ticket.
June 2014 Following Delta, United announced that it will also switch
to a spend-based system effective 1 March 2015.
Euromonitor International PASSPORT 6 TRAVEL AND TOURISM: LOYALTY PROGRAMMES


Given the industry rebound, the five largest hotel
loyalty scheme operators (Starwood Hotels &
Resorts Worldwide, Marriott International, Hilton
Worldwide, InterContinental Hotels Group and
Wyndham Worldwide) adjusted their programmes
in 2013 requiring more points for redemption at
certain hotels.
Changes made to the programmes in 2013 have
seen more hotels move into a higher category (and
in some cases, switching to a lower category).
Marriott, for example, created a new category that
requires 45,000 points for one night, the highest
number yet. The company has stated that 36% of
its properties moved up by at least one category,
1% will fall by at least one category and 63% will
remain in the same category.
Hyatt also devalued its programme in 2014 but did
add benefits to buffer the move. The company
introduced Points + Cash which allows
redemptions using half the points required plus
cash. The other perk is My Elite Rate where
Platinum and Diamond elites receive 20% off of
room rates.


Industry rebound causes hotel loyalty programme devaluations
HOTEL LOYALTY PROGRAMMES
Membership in Hotel Loyalty Programmes 2013
Name Members ('000)
InterContinental Hotels Group
Priority Club Rewards
77,400
Starwood Preferred Guest 67,000
Marriott Rewards 45,000
Hilton HHonors 40,000
Wyndham Rewards 32,200
Best Western Rewards 22,000
Choice Hotels Choice Privileges 19,000
Hyatt Gold Passport 16,000
Accor Hotels A|Club 14,000
Club Carlson 11,700
Source: Webflyer.com, company reports
Note: Starwood is an estimate
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Members of loyalty programmes account for a large proportion of hotels occupancy and revenues, with
many hotels reporting at least 30% of occupancy coming from their members. Not only do robust
membership numbers help with potential revenue opportunities, both within the programme and for sales of
points to partners, but they also help persuade franchise owners to build/convert to their brands to take
advantage of the built-in loyal base.
Hotel loyalty members generate significant revenues
HOTEL LOYALTY PROGRAMMES
Importance of Hotel Loyalty Members
Loyalty programme Importance in 2013
IHG Rewards
Members accounted for 38.2% of total room
revenues, roughly US$7 billion.
Marriott Rewards
Over 50% of all room nights are booked by Rewards
members.
Starwood Preferred Guest
Members accounted for over 50% of occupancy.
More non-US members than members in the US.
China is the second largest market.
Hilton HHonors Accounts for 43% of 172 million room nights.
Choice Hotels Choice Privileges
Members accounted for around a third of gross
domestic room revenue.
Hyatt Passport Members accounted for 34.3% of total room nights.
Source: Company reports, trade press
Euromonitor International PASSPORT 8 TRAVEL AND TOURISM: LOYALTY PROGRAMMES
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