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 The Brancatelli File

joe WHY YOU'RE NOT LOYAL
TO HOTEL LOYALTY PROGRAMS


BY JOE BRANCATELLI

October 20, 1993 -- When you drop this line at lunch with a client, or use it in your next sales meeting, make sure you give credit to Mike Ribero, senior vice president of marketing at Hilton Hotels.

"Next to the U.S. dollar," Ribero said last week, "frequent flyer miles have become the currency of choice in America."

Ribero's theory isn't hard to prove. Everybody traffics in frequent flyer miles these days. Business travelers earn them from long-distance companies, credit card marketers, restaurants, flower-delivery firms, parking lots, shirt makers, car manufacturers and magazine publishers.

Even hotels give business travelers frequent flyer miles. And therein lies the metaphorical rub, at least as far as the nation's leading hotel chains are concerned.

Hoteliers have spent a decade trying to build their proprietary frequent stay programs into loyalty-building machines similar to airline frequent flyer programs. All most have gotten for their efforts are huge marketing bills and precious little loyalty that can be traced to frequent stay plans.

"Business travelers couldn't care less about frequent stay programs," said Charles E. Brownfield III, vice president of sales and marketing of Inter-Continental Hotels. "We dropped ours in the late 1980s because it was clear that the only way to motivate business travelers to change hotels was by giving them what they wanted--frequent flyer miles."

Radisson Hotels came to the same conclusion as Inter-Continental and switched to awarding airline frequent flyer miles at about the same time.

But stressing frequent flyer miles over frequent stay points really began to sweep the hotel industry earlier this year. Two large chains--Sheraton and Holiday Inn--revamped their frequent stay plans to emphasize the fact that business travelers could earn airline miles whenever they stayed at a participating hotel. Both chains also changed the name of their program's "currency" to miles rather than points.

And Marriott Hotels, which operates the Honored Guest Awards program, by industry consensus the hotel field's only consistently successful frequent stay plan, went so far as to introduce a second loyalty program. Called Marriott Miles, the plan offers Marriott guests frequent flyer miles rather than free hotel stays, the main benefit of the Honored Guest Award program.

But the switch from frequent stay points to frequent flyer miles doesn't necessarily have a happy ending.

Business travelers not only want frequent flyer miles, hoteliers say, they want free hotel stays, too. Ironically, however, one thing frequent flyer miles can't buy is free hotel stays. They are available only in the frequent stay programs that hotels are de-emphasizing in favor of frequent flyer miles.

"There may not be a monolithic market that just wants airline miles," said Nan Moss, assistant vice president of marketing programs for Hyatt, which operates the Gold Passport frequent stay plan. "Miles are increasingly popular as the currency, but frequent stay plans are the only place where business travelers can earn free hotel stays."

Ralph Giannola, vice president of marketing for Marriott, agreed.

"We had very little defection from Marriott Honored Guest when we introduced Marriott Miles," he said. "That's because truly frequent travelers know Honored Guest is where you get the free hotel stays. You can have all the frequent flyer miles in the world, but you've got to be in a frequent stay program to win a totally free vacation."

The miles-versus-points conundrum has been exacerbated in recent years because hotel frequent stay programs have largely eliminated a practice called "double dipping."

Hotel chains once routinely allowed business travelers to double their earnings by offering frequent flyer miles and frequent stay program points for each stay. Now, however, frequent stay programs usually require business travelers to choose airline miles or frequent stay points when they check in.

In fact, when Hyatt eliminates double dipping in Gold Passport on January 1, Hilton Hotels will be the last major company to allow business travelers to earn frequent flyer miles at the same time they accrue points in Hilton HHonors, the chain's frequent stay program.

"Marriott basically got the franchise for frequent stay programs when they launched Honored Guest in 1983," said Ribero. "Hilton was the last hotel chain to launch [a frequent stay program], so I've been swimming upstream for years. "But now I got something to sell. I'm the only guy out there still offering a double dip. Essentially, I'm selling two for the price of one when everyone else is selling one for the price of one."

BUSINESS TRAVEL NOTES
Speaking of earning frequent flyer miles at hotels, large mileage bonuses are being promoted by Marriott and Inter-Continental. Members of Marriott Miles earn double miles for each Marriott stay before February 15. After four stays at Inter-Continental or Forum hotels before March 31, members of the American AAdvantage program will earn a 5,000-mile bonus. American Airlines says it will add business-class service on four daily nonstops between Los Angeles International and Miami this winter. A business-class cabin will also be added on American's daily flight between San Diego and New York. Thai Airways will eliminate its four weekly flights between Los Angeles and Tokyo on October 31. Another major business travel destination, Boston's Logan Airport, is raising its taxes. Effective November 1, all departing travelers will pay a $3 "passenger facility charge."

This column originally appeared in The Los Angeles Times business section.

Copyright 1993-2007 by Joe Brancatelli. All rights reserved.