Does Double Dip’s death spell an end to occasional loyalty?

Rest in peace, Double Dip. You were a glorious way to earn so many points on Hilton stays. But the 2018 version of the Hilton HHonors program is killing the Double Dip in favor of far more lucrative HHonors earnings rates for frequent guests. It is a significant shift in the company’s loyalty strategy. Will it succeed?

The rich get richer

For the occasional guest the earning potential of a HHonors-affiliated stay drops. For top-tier elites the earn rates increase. This pattern matches what other loyalty schemes have done in recent years: Those who spend more money with the company get rewarded. In HHonor’s case that includes big bonuses every 10 nights (encouraging more stays, not just higher spend) and the ability to gift status to another traveler for high night counts. Guests who earn elite status will also be able to rollover extra nights to the following year, another motivation to keep stays focused on the HHonors program.

Combine the increased earning rates with a co-branded credit card for even greater earn rates and a frequent HHonors guest can do pretty well under the new program’s earning rules. Which is a good thing given the inflation the program has seen in redemption rates in recent years.

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The poor get poorer

An occasional guest previously had little reason to credit points to a HHonors account. The thresholds for an award night were relatively out of reach and locking in to the program rather than choosing an OTA-based scheme or just shopping by price was typically a poor RoI. The new rules make that poor choice an even worse one. Crediting to HHonors now still has the mediocre “local” points and no longer adds on a partner bonus.

In this context Global Flight CEO Ravindra Bhagwanani suggests that the Hilton HHonors program is conceding defeat in the face of OTAs and the unloyal.

The changes announced by Hilton are hence perhaps nothing less than a capitulation in front of the reality, understanding that the economics of a hotel program may only work out when focusing on the truly loyal customer – who represents obviously only a small part of the total database.

This may be a traditional view among some loyalty programs but I believe it misses the massive potential value that customer base represents. Moreover, converting that base to a profitable loyalty consumer might not be as expensive as suggested.

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Converting the Unloyal

It is highly unlikely that someone not invested in the points scheme today will not suddenly find themselves convinced of that value. Building (or revising) a loyalty program today based only on points earn-and-burn is fine if only the “truly loyal customer” Bhagwanani describes above is the target. But that spectacularly narrow focus ignores massive potential for a program’s growth. Fortunately the hotel programs already have most of the systems in place to be able to deliver the small wins that a currently unloyal customer could respond to. It is these little tipping points that raise the odds of bringing that guest into the fold as a long term frequent guest or even just switching them from an OTA booking to direct (free wifi, the current carrot on that front, doesn’t always work).

Delivering those benefits and getting consumers to understand that they are tied to loyalty is a challenge. It requires a shift in service delivery at the front desk and getting consistency there – particularly across thousands of properties – is difficult. But many little things that hotels already have on offer at little to no incremental cost can be used to tip the balance in favor of loyalty. Changing the way loyalty is defined within a program brings this to fruition and is a far more noble effort than simply giving up on that massive segment of customers. Yes, there is a cost to converting the unloyal into a brand’s portfolio. But the for the companies that tweak their ideas of loyalty and value just a bit the potential win is significant.

Want to hear more?

I’ll be presenting on the topic of loyalty program limitations and the unloyal at the Loyalty 2018 Conference hosted by FlightGlobal Events in Bangkok February 6-8. Come join this informative and fun event for more!