Loyalty programs scramble to stay relevant

With travel at a standstill, several U.S. airline and hotel loyalty programs have taken steps such as extending status through next year, reducing the requirements to obtain status for 2021 and delaying point expirations.

Analysts, though, said that loyalty programs should also creatively and strategically leverage their resources to maintain brand awareness now as well as to spur travel when the Covid-19 crisis starts to ease.

"Loyalty programs that are built on travel, when travel comes to a halt, they need to think of ways to stay top of mind," said Nick Ewen, points and miles editor for the Points Guy.

As of April 8, Delta, United, Alaska, Hilton, Hyatt and Best Western were among the travel brands that had announced that members with loyalty status would keep their levels through 2021. United and InterContinental Hotels Group had reduced 2021 accrual requirements for those who don't already have status. Various companies, including American, Wyndham and Radisson, had temporarily halted point expirations.

But a few companies have also started to get creative with loyalty programs in order to maintain brand awareness even while people aren't travelling. Ewen pointed to Air Canada's Altitude program, which is currently awarding elite qualifying miles in exchange for donations of the program's Aeroplan points. For every five points, an Altitude member donates to a charity fighting Covid-19, that member gets one elite qualifying mile.

Another example is Russia's S7 Airlines, which is running a promotion through April 30 in which customers can earn 100 of its Priority program miles each day simply by clicking an "I'm home" button on its website.

Seth Miller, editor of the airline-focused passenger experience website PaxEx.Aero, said travel loyalty programs should also leverage partnerships while people are staying at home. By way of example, Miller said that he has made Home Depot purchases through the United app in the past in order to accrue MileagePlus points. Armed with that data, the MileagePlus program might want to push an advertisement to him about home improvements. If Miller were to then shop Home Depot online using MileagePlus points, it would give United the dual benefit of remaining relevant while moving those points off its liability sheet.

"The most important thing is that the loyalty programs aren't just about getting passengers on planes or heads into beds," Miller said. "They are really a branding experiment."

Still, when the Covid-19 pandemic ebbs, loyalty programs will be an important tool for getting people back on planes and in hotel rooms.

Just as the programs can use customer data to encourage alternative types of point to spend now, they can also use that data to spur travel during the early phases of recovery. For example, said Miller, an airline might know that a customer goes to the same destination every June and stays at the same hotel. In such a case, the carrier can push out a targeted promotion.

In a recent column on his View From the Wing website, miles and points expert Gary Leff wrote that loyalty programs will be a key to the resurgence of travel brands. Airlines, he noted, devalued programs during the several years of the boom that preceded the Covid-19 crisis. But now, with lots of empty seats to fill, carriers can more aggressively use the programs to incentivize travel, just as they have done in the past.

Leff suggested that loyalty programs use promotions to award miles to members for such activities as exercising or sharing future travel aspirations on the program's website. He also suggested that programs sell points inexpensively.

"Usually, the biggest risk of cheap mileage sales is immediate redemption for the most expensive awards, but that's mostly not an option for consumers now," Leff wrote. "Generate cash flow and dreams."

On the redemption side, Leff suggested carriers commit to lowering award pricing for a period of time while also making more redemption seats available. He even suggested that carriers take advantage of parked planes, cheap fuel and having too many employees by running and promoting redemption-only flights.

Ewen said he expects that loyalty programs will, in fact, make redemption cheaper as the Covid-19 crisis starts to lift. He also noted that Hyatt cancelled plans that had been set for March to alter its awards chart by adding peak and off-peak pricing.

Still, said Ewen, it will be important for loyalty programs to discount with caution.

"You don't want to do bargain basement, because that can shift the mindset of the consumer as to what the price should be," he said.