Hotel Loyalty Program Costs Rise as Memberships Expand

What's Happening?

In 2024, hotel owners experienced a significant increase in fees associated with guest loyalty programs, surpassing the growth in brand royalty payments and marketing assessments. According to CBRE Hotels, loyalty program fees grew by 3.9%, outpacing the rise in rooms occupied and rooms revenue. This trend indicates that loyalty program members contributed more to hotel occupancy than in previous years. The fees, averaging 2.2% of rooms revenue, were highest at upper-upscale hotels, which cater to corporate and group travelers who value loyalty benefits.

Why It's Important?

The rising costs of loyalty programs reflect their growing importance in the hotel industry. These programs help brands reduce customer acquisition costs and maintain occupancy during economic downturns. As loyalty memberships expand, hotels benefit from increased direct-to-consumer access and enhanced brand loyalty. However, the financial burden on hotel owners is significant, requiring strategic management to balance costs and benefits. The trend underscores the need for hotels to innovate and offer compelling loyalty incentives to attract and retain guests.

What's Next?

Hotel brands are expected to continue expanding their loyalty program offerings, including adding new brands and experiences to attract diverse customer segments. Owners may need to explore cost-effective ways to enhance loyalty benefits, such as offering exclusive experiences or optimizing redemption opportunities during low-demand periods. The industry will likely 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 operators.

Beyond the Headlines

The expansion of loyalty programs highlights a shift in consumer behavior, with guests increasingly valuing personalized experiences and rewards. This trend may drive hotels to focus on creating unique offerings that differentiate them from competitors. Additionally, the emphasis on loyalty programs could lead to partnerships with other industries, such as travel and entertainment, to provide comprehensive benefits to members. The evolving landscape may also prompt discussions on the ethical implications of loyalty programs, particularly regarding data privacy and consumer rights.