Loyalty programs: discounted status in 2021-2022?

As we’ve written before, hotels and airlines are doing everything they can to keep their best customers engaged in their loyalty programs in this time of pandemic when many would have lost their status as the thread that holds them to one brand or another.

As for the 2021 statuses, acquired in 2020, the matter is settled with a general application of the principle of the blank year. It’s as if nothing had happened, no matter if the client has consumed or not, he will start again in 2021 with the status with which he started 2020.

2022 status acquisition already on the agenda

But what about the 2022 statuses, to be acquired in 2021. Yes, we are waiting for the sector to recover, for a vaccine and for many other things that will make us hope that by the end of 2021 we will be able to travel as we did in 2019, before the crisis.

But there are still unknowns.

Will some destinations be overzealous in continuing to close their borders or restrict access despite the vaccine?

At what time of the year will the tipping point take place that will allow us to move into the “after”? Mars? July? September? November? Depending on the date things will be totally different.

If we can hope that the end of 2021 will look like 2019 there is a good chance that part of the year will look like 2020. And the same questions will come up again: if people don’t travel or don’t travel enough, usually not because of themselves but because of restrictions, how do you keep them engaged in their various loyalty programs?

2021: no blank year

We can already bet that 2021 will not be a blank year in this respect as it was in 2020. Not that the players in the sector can’t afford it, after all, giving a status to a client who can’t take advantage of its benefits doesn’t cost much, if anything.

But, quite simply, if the sector still experiences in 2021 a context capable of justifying a new blank year, the question will not be to know if the statutes are preserved but if there will still be airlines to make us travel and hotels to sleep!

And if we bet on a restart, even a gradual one, in 2021, finding oneself with customers who will have traveled a lot and others hardly at all, and in the end giving them the same thing, will not work. We can see in the comments of this article the reaction to the implementation of the blank year by Air France (for the analysis of the commercial policy of Air France concerning the loyalty program is in this article) that even in the midst of a pandemic there are things that are misunderstood, so imagine during a recovery.

Discounted status: Hilton and Hyatt take the lead

Neither a normal year nor a blank year, 2021 will therefore be an “adapted” year. Understand that maintaining statuses will not be “free” but that there is little chance that the normal criteria will be applied.

Hilton and Hyatt have already announced that the acquisition of status for 2022 (i.e., 2021 stays) will require reaching only 50% of the normal thresholds.

We are sure that other hotel chains and airlines will follow suit. It remains to be seen when this will be announced and official.

What are the discounts and announcement dates?

Two questions arise for industry professionals.

What discount should be applied? This will of course depend on the “seriousness” of the situation. In our opinion between 25 and 50% if 2021 goes as planned. 75% if the crisis continues.

When to announce it? Once such an announcement is made, there is no turning back. The discount can be improved but not reduced. Therefore, the best time to make announcements is as late as possible, once you have the best visibility. Why announce 50% today when 25% may be enough or even (we can dream) that no discount will be necessary. But not too late either: otherwise the customers who are afraid not to renew their status will go to a competitor where it will be easier.

We can expect most players to position themselves between March and June once they have more clarity.

And a two-stage policy can also be considered. Announce an initial discount level in the spring and then increase it at the end of the summer if you realize that the year is going to be harder than expected.

This would be a logical strategy, except that in the meantime, Hilton and Hyatt have been the first to pull the trigger and set a kind of standard: a hotel chain that announces tomorrow that it is only lowering its thresholds by 25% would look stingy and that would work against it. In this case, it is better to wait because customers will think that as long as nothing is announced, they can always expect a discount at the same level as the others.

The Hilton and Hyatt Hold-Up

Why did Hilton and Hyatt move so early? Two things explain it from our point of view:

– Want to reassure their customers right away and avoid any wait-and-see attitude. This will prevent them from thinking “it’s no use I won’t maintain my status”.

Hold up members of competing programs. For example, Marriott has not announced anything, the “Titanium Elite” member who thinks he will have hard times making his 75 nights may be tempted by the promise of a Diamond Hilton in 30 nights!

Will this pay off? One thing is certain: Hilton and Hyatt have “secured” their customers who will not go elsewhere. Whether this will allow them to steal customers from others will depend on how difficult it will be to travel in 2021 (which we don’t know) and how quickly competitors will make their announcements.

What risk are they taking? The risk that everything goes well and that this discount turns out to be useless. Not for what it will cost them at the time, but because elite status inflation is never good for a loyalty program.

Is there a risk of devaluation of loyalty programs?

This is something I’ve seen quite often on some blogs and specialized forums: discounted status = devalued program.

Where does this fear come from? Because the more people can claim a benefit, the less certain they are of getting it.

Example: a status gives the right to an automatic upgrade in suite. If you have 10 suites available and 7 eligible clients coming in, everything is fine. If they are 12 you will have two disappointed.

Example: A status gives access to the hotel’s club lounge. With 20 people it’s cozy, with 30 it’s tight, with 50 it’s unbearable.

In short, the more status members there are, the more the benefits linked to each tier decrease either mechanically (there are not enough superior rooms to upgrade everyone) or programmatically (benefits are removed from certain tiers to reserve them for the superior tiers)

So will discounts in 2021 make programs devalued in 2022? Maybe so, maybe not.

Not because tourism professionals do not discount their status to get more status members but simply to allow current members to keep their status. If there is an increase in the number of status customers it is supposed to be marginal.

Yes, because if the professionals make a mistake in their discount policy and are too generous compared to the reality of the health situation, there is a risk that platinum and other diamonds will proliferate for at least a year!

This is the risk taken by Hyatt and Hilton for example. If 2021 goes almost normally, there will be a real inflation of the number of “status” customers which will degrade the value of the program for its members. It’s unlikely, but nowadays you can’t be sure of anything.

Discounted statutes certainly, programs hopefully little devalued … 2021 certainly has many surprises in store for us, let’s hope that for once it will be good ones.

Photo : airline loyalty program by MMXeon via shutterstock

Bertrand Duperrin
Bertrand Duperrinhttp://www.duperrin.com
Compulsive traveler, present in the French #avgeek community since the late 2000s and passionate about (long) travel since his youth, Bertrand Duperrin co-founded Travel Guys with Olivier Delestre in March 2015.
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