What's Happening?
In 2024, hotel owners experienced a notable increase in fees associated with guest loyalty programs, surpassing the growth in both room occupancy and revenue. According to CBRE's analysis of 4,187 U.S. hotels, loyalty program fees grew by 3.9%, outpacing the 1.3% increase in rooms occupied and the 2.7% rise in rooms revenue. This trend was particularly evident in upper-upscale hotels, where loyalty program fees constituted a larger percentage of rooms revenue. The growth in loyalty program fees reflects an increase in membership and a higher contribution to occupancy rates, with loyalty members accounting for 52.8% of occupancy in 2024.
Why It's Important?
The rising costs of loyalty programs highlight their growing importance in the hospitality industry. For hotel owners, these programs are crucial for maintaining customer loyalty and filling rooms during off-peak periods. However, the increased fees also pose a financial challenge, particularly for midscale and economy hotels where loyalty membership is less prevalent. The data suggests that while loyalty programs drive occupancy, they also require significant investment from hotel owners. This dynamic could lead to strategic shifts in how hotels manage and promote their loyalty programs, potentially affecting pricing and service offerings.
What's Next?
As loyalty program fees continue to rise, hotel owners may seek ways to optimize these costs by enhancing the value of their programs. This could involve offering more personalized experiences or expanding the range of benefits to attract and retain members. Additionally, the industry may see increased transparency in loyalty program expenses, as CBRE plans to benchmark these costs in 2026. This could lead to more informed decision-making by hotel owners and potentially influence the structure of loyalty programs across the industry.
Beyond the Headlines
The increase in loyalty program fees also raises questions about the sustainability of current models, especially as members use points faster than they earn them. Hotels may need to innovate by offering unique experiences or partnerships that enhance the perceived value of loyalty points. This could include collaborations with other industries, such as travel or entertainment, to provide diverse redemption options.
