Last week wrapped up the eighth annual Mega Event, hosted by Airline Information in Palm Springs, Calif., where the biggest players in travel descended from the sky and converged from the road to discuss, share and take a look back at the last year’s goings-on in the space across three major tracks: Loyalty/FFP, Ancillary Revenue and Co-Brand. This year’s event was dominated by heavy and midsize hitters, from airlines and ground travel to hotels and credit cards. Companies including Air Canada, Air France/KLM, Avis, American Express, Allegiant, Bank of America, Booking.com, Choice Hotels as well as clients like Amtrak and Sun Country Airlines all mingled in the California desert below a canopy of tall palms dressed in Christmas lights. Below are three takeaways from the 2017 Mega Event.
1. Driving loyalty means understanding the value you bring to your customers. As humans.
One of the most memorable discussions of this year’s event happened at the very beginning. The opening interview, as well as the first panel, featured tenured loyalty marketing leaders from Choice Hotels, Caesars Entertainment, and Southwest Airlines, who all weighed in on the question, “Are we really driving loyalty with our programs?” And while their answers were as varied as their geographical footprints and unique value propositions, they fundamentally agreed on one thing: To drive loyalty, double down on what your customers know you for and expect of you, and do that extremely well. Sounds simple. But it’s easily forgotten. Southwest’s Senior Director of Loyalty & Partnerships, Jonathan Clarkson, who shared the impact of Southwest’s program evolution from a credit-based to a revenue-based one, and what he learned from it. One of his key findings was listening to and understanding the sentiment of your customers—and acting on it. For example, his team’s research discovered that, despite most Rapid Rewards members being OK with paying for up to two checked bags, Southwest felt what was more important was to honor why people fly with them in the first place—for frequency and convenience. Despite it being an additional revenue stream, they opted out of charging for the first two bags. The benefit? Exponential program growth. Similarly, Josh Margolis, VP Loyalty of Caesars Entertainment, shared that their Total Rewards members want high-touch, high-experience rewards. Which is why CE assigns hosts to individual, high-value members. Hosts that don’t change over the course of your membership. Why? Intimacy is crucial to building long-term, valuable relationships. Key takeaway: Don’t violate the underlying fabric of your brand’s social contract with your customers. Stay true to that and your customers will stay true to you.
2. Are we giving loyalty programs enough credit (no pun intended)?
In Colloquy’s 2017 loyalty report, U.S. consumers hold upwards of 3.8 billion memberships in loyalty programs, a 15% jump since the prior research findings in 2015, and though the growth rate of membership is on the decline since the previous report (down from 26%), we can expect that this number will continue to grow. In the same report, the travel and hospitality sector alone accounts for 1.1 billion of those in 2017, or nearly a third. And this is just membership, whose figures only address the U.S. market. But what about the loyalty market cap in general? According to The Wise Marketer, the loyalty marketplace is around $218 billion, accounting for the global loyalty value chain. If we look at North America, the revenue and reach is extensive: the total value loaded onto the Starbucks app in 2016 was $4 billion; in Canada, total household penetration nationally of Airmiles is a whopping 70%; and 40% of Nordstrom’s total revenue is attributed to Nordstrom Rewards. For an industry often relegated to the sidelines of the larger marketing discipline, loyalty more than carries its own weight. So why is loyalty missing out on the limelight? Perhaps for many reasons—legacy mindsets, lack of understanding, or perhaps the kung fu ninja grip many CMOs still have on traditional advertising. But is it time to take note? Maybe it is. According to investment firm Stifel, American Airline’s AAdvantage program has an estimated value of $36.7 billion. American Airlines itself? $21.2 billion. Takeaway: Treat loyalty less like merely a marketing channel, and more like a long-term business strategy. Chances are it’s driving a significant amount of your revenue.
3. Disruption is happening in travel and hospitality. Here’s where.
What would a travel conference be without talking about disruption and new, emerging technologies? After all, last year’s show alluded to it and discussed it, but there were few signs of where it might rear its head. This year, however, during the annual Ai Lions’ Den (think Shark Tank at a small conference scale), where five companies have five minutes to pitch their products and services to a panel of tried-and-true industry veterans, we got a glimpse. Not surprisingly, they mirrored the larger technology, lifestyle and economic influences that are impacting consumer trends at a macro level. Namely, the sharing economy, health and wellness, payments, transparency and overall alleviation of friction. The winner of the group was Travelcar, a service that allows you to rent out your car while it’s sitting idle in the airport parking lot. You simply list your car, park for free and get paid. The airline you’re flying earns a commission and when you return, your car is exactly where you left it, boasting lower costs than traditional rental car fees and eliminating airport parking costs while putting money in the traveler’s pocket. Another contender was Affirm, an online payment service that allows travelers to book now, pay later. Touting itself as “the financial company for everyday people,” Affirm functions just like any online credit card payment option but makes the transaction more affordable and flexible, letting the traveler pay off the amount in three, six or 12 months, while footing the entire cost to the merchant immediately. Citing the fact that 67% of millennials don’t have a credit card, and 65% of Americans have a fear of debt, these types of payment options will only become more common. And lastly, to touch on the wellness trend, Sanctifly: a global members club that grants users access to hotel gym, pool and spa facilities without having to book a room. Users can, in real-time, search and select fitness options based on availability and layover time. So instead of wolfing down that fast food combo you’re blaming on the lack of healthy options at your terminal (let’s not kid ourselves), you could be running a 5K at the Hilton at London Heathrow. I’m just saying. The point? Much of the disruption happening in travel and hospitality is happening within the already established passenger journey moments—from airport parking and car rental options to online booking and airport health amenities. Takeaway: Succeeding new technologies are adding value to travel experiences by providing accessibility and solving problems that previously went unchallenged.