Would you rather spend the rest of your life on a tropical island or in a bustling city? Would you prefer an unlimited gift card to your favorite restaurant or clothing store? Would you rather explore the depths of space or the ocean's depths?

These questions can spark endless debates without a clear winner. Let's try another:

Would you rather gradually accumulate loyalty points to reach "gold tier status" at your favorite hotel chain, or receive instant rewards tailored to your personal interests and preferences?

Here, the choice is clear. Nowadays, especially among younger generations who haven't committed to a points program, there's a growing preference for instant rewards.

Points-based loyalty programs are falling out of favor, replaced by experience-led rewards that cater to guests' desires for immediate gratification and personalization. To meet these new expectations, hoteliers must leverage guest data and think creatively about their loyalty offerings. Here's why.

The Drawbacks of Points-Based Loyalty

Think back to when points-based loyalty programs were revolutionary. Forty-one years ago, Hilton and Marriott were the pioneers, quickly followed by the rest of the industry. Gamification and bragging rights attracted travelers, giving rise to communities of avid points-chasers like The Points Guy.

The pandemic accelerated the shift away from points. After lockdowns and disrupted plans, guests sought to regain control through "revenge travel." Even the most points-centric websites began questioning the relevance of points-based hotel loyalty programs.

Guests also started demanding that hotels meet their expectations, expressing their preferences and making choices with their wallets. For example, just two years after the pandemic began, 78% of travelers preferred to stay in eco-friendly accommodations at least once in the coming year, with 81% valuing sustainable travel.

This is when the cracks in loyalty points programs became apparent. Guests sought new and exciting experiences, making points seem less appealing. Digital transformation further widened this gap, as guests increasingly sought convenient, novel, and exciting experiences that made them feel understood.

Points programs also became so common that they lost their allure. Simply put, points became boring. They don't offer the same excitement as instant rewards and lack personalization. According to PwC, 40% of business travelers choose a loyalty program for its personalized experiences. Hoteliers looking to stand out must use their guest data to create unique loyalty offerings.

As younger generations gain prominence in the industry, points programs are losing their appeal. According to Deloitte at NAVIGATE Miami, Gen X, Millennials, and Gen Z will make up nearly 90% of trips by 2030, with the latter two representing over half of all trips. Millennials and Gen Z have a strong enthusiasm for travel post-pandemic and a strong preference for experience-based rewards.

Four decades since their inception, it's time to refresh loyalty programs.

Experiences Over Points

Ellis Connolly, Chief Revenue Officer at Laasie, an AI-powered loyalty platform, highlighted the appeal of experience-led rewards on the Hotel Moment podcast:

"What if there were unique experiences that you could offer as rewards to travelers? Now you're not just giving points."

He elaborated, "It's about aligning rewards with guests' specific interests and brands, and using that data to re-engage guests with targeted content, boosting email open rates, click-through rates, and driving more revenue."

If guests have an average of 5.1 positive experiences at your property, they're more likely to become loyalty members. Personalization, both on-property and online, is key. Guests will tell you what they want if you listen. Gathering and acting on feedback is one part of the equation, but analyzing guest data is equally important.

One hospitality group excelling in experience-led loyalty is Ennismore's Dis-loyalty membership. For a small monthly fee, members receive 50% off stays at new hotels, 20% off properties they haven't visited before, 10% off return visits, and more, including a free barista drink daily. It's a creative approach to loyalty without relying on points.

In a recent Hotel Moment podcast conversation, Carlo Del Mistro, Chief Digital Officer at Ennismore, discussed how they use guest data to drive ancillary revenue. He stated, "Data is at the core of what we do. Dis-loyalty gives us insight into our members' spending and travel habits."

Food and beverage play a significant role in personalizing the guest experience. As Del Mistro noted, "The hotel's atmosphere and F&B are crucial. We have members who come for meetings and then stay for the free barista drink. They start with F&B and continue with us for travel."

This demonstrates the value of experience-focused loyalty programs. Ennismore offers unique experiences across their portfolio, enhancing guests' stays in ways that 500 loyalty points simply can't match. The key is creating a data-driven, personalized loyalty program that resonates with each guest. That's why 63% of executives recognize the need for changes in their loyalty programs.

The Future of Loyalty Programs

Creating a loyalty program is a business endeavor. Like any business initiative, decisions should be data-driven. To gain a comprehensive view of guests' spending, technology is needed to collect data throughout the guest journey and synthesize it into guest profiles for a 360-degree view of behavior.

Enter the Customer Data Platform (CDP).

A CDP centralizes guest data, enabling the analysis of guest preferences and the design of a loyalty program that caters to them. With robust guest data, you can personalize the guest experience from pre-arrival to post-stay. Guests will notice, especially when rewarded for returning.

Loyalty programs are a vital part of your brand's identity. They are as integral to the guest journey as booking and check-in. As you develop an experience-focused loyalty program, infuse this emphasis into your marketing messaging, whether through email or over the phone. Guests will appreciate knowing that your hotel offers more than points and rewards them with experiences that matter to them.