At the Gulf and Indian Ocean Hotel Investors Summit (GIOHIS), owners’ representatives voiced concerns over loyalty programmes. Omran Hospitality head of asset management Zoltan Kali questioned them and said: “Are these programmes making guests behave in a more loyal manner? In general, people tend to be signed to more than one loyalty programme most of the time. So are we really making guests loyal to one brand, or is it more of a discount aspiration?”
Luca Bandecci, who is the general manager and vice chairman of SBK Holding Hospitality Committee (the company that owns three Fairmont properties in the UAE — Fairmont Bab Al Bahr, Fairmont Dubai, and the newly opened Fairmont Fujairah) told Hotelier over a telephone interview: “Whenever you sign with an operator you have the opportunity to negotiate and relook at the loyalty promrame conditions. In our scenario, when we have an operator that we have already signed up with… and then you look at the acquisition of Accor buying FRHI. In this scenario, the conditions of the loyalty programme changes and you are sort of obliged to take the changes that goes with the whole acquisition. But either way you look at it, these [loyalty programmes] are an integral part of a management contract, and it’s very difficult to sign up with a chain by requesting to opt out of its loyalty programme.”
He also said that in some cases, operators compromised and gave in to the owning companies’ demands of opting out of the programme in order to be present in a particular destination, mainly gateway cities. “Overall there is not much that can be discussed, it’s actually easier to negotiate management fees with an operator rather than the loyalty programme. You can compensate the costs by negotiating the fees,” he said.
However, owners who were speaking at GIOHIS were not in agreement over the incremental value that a loyalty programme provides for each property.
Kali challenged the very reasoning behind a loyalty programme and said: “It is no longer loyalty, we need to be honest about it. From an owner’s perspective these loyalty programmes fly under the radar more often than not, and we rarely look into them because we are mostly concerned about top line [revenue] and cost. I witnessed many asset managers not even understanding how these work because they tend to be quite complicated and only the operators understand them.
“We have not looked into asking third-party companies to audit them, and we currently try to understand it ourselves. In our cases, which are mostly with one large operator, they [loyalty programmes] don’t bring us money. In fact, we are losing money, if we cancel them altogether [it would be a lot different].
“The main assumption here is that every guest that is part of a loyalty scheme is an incremental demand generator. This simply means the guest would have not come to the hotel had they not been a member of that particular operator’s loyalty programme. That’s a wrong assumption, it’s not true.”
However, operators claim loyalty programme members are responsible for a guaranteed percentage of occupancy: Hilton has pegged that number at above 50% of its hotel’s occupancy, and similarly, Marriott’s programme drives 35% of its room nights across the Middle East and Africa.
Aligi Gardenghi, the VP marketing of EMEA and commercial director MEA of Hilton, responded to Kali’s assertion, citing examples from the Hilton Honors (HHonors) loyalty programme.
Gardenghi said: “The way we develop ‘what is meaningful for the customer’ is, we have embedded that in to the loyalty programme. It’s not just about the points that members can earn — but the ability for guests to check in, and choose your room out of the hotel floorplan, that is something we have given our HHonor members exclusively. This also helps the owners protect their interest of creating value on meaningful things.” He also revealed that Hilton does not offer free Wi-Fi for guests who are not HHonor members.
According to Kali and Omran’s calculations, a new property would need around 3,000-4,000 incrementally generated room nights in order to break even with the redeemed stays by loyalty membership holders. “I don’t think that happens because those are a lot of room night; in fact, we cannot measure it,” he said. Omran Hospitality is an asset owner and manager that currently operates nine hotels, which includes the InterContinental Hotel Muscat, Millennium Resort Mussanah, Crowne Plaza Hotel Duqm and the Alila Jabal Akhdar to name a few.