Sturdy loyalty packages assist lodge manufacturers decrease buyer acquisition prices, improve direct-to-consumer entry, and offset occupancy shortfalls throughout shoulder intervals and weaker financial circumstances. After analyzing publicly out there knowledge from 5 massive lodge corporations, we discovered that whereas progress in a number of key metrics slowed in 2023, loyalty members’ total contribution to occupancy elevated, although marginal contribution per member contracted.
Advantages
The common variety of loyalty program members on the topic 5 corporations elevated 11.3 p.c in 2023, slower than the 15 p.c progress fee in 2022. Members-per-room elevated 6.4 p.c yr over yr from 120 to 128.
The common contribution to occupancy from loyalty members grew to almost 51 p.c in 2023, up from roughly 48 p.c in 2022. Nonetheless, loyalty packages have gotten much less dominated by frequent vacationers (+30 nights a yr). The variety of room nights booked by the typical loyalty member in 2023, 1.1, returned to 2019 ranges final yr. That is properly beneath the 1.8 nights stayed per member in 2016, suggesting that the share of membership comprised of heavy customers is declining because the packages have change into extra tied to bank cards and affiliate packages and fewer immediately with simply frequent journey. This doesn’t imply that members are much less beneficial, as they might have totally different journey patterns and fill seasonal dips or weak demand intervals, however this development does point out that the bottom of loyalty members contributed fewer nights than they did in 2016.
Legal responsibility
From the model perspective, loyalty program legal responsibility per member, which is the typical greenback worth every member has accrued in unredeemed factors, ended 2023 at 87 p.c of the pre-pandemic ranges. Loyalty level redemption revenues elevated by 11 p.c final yr to $1.1 billion from $982 million in 2022. This might point out that extra factors had been redeemed to e book rooms in 2023; nonetheless, it is also as a result of 4 p.c rise in ADR or the devaluation of loyalty factors wanted to earn a free evening.
Prices
The company prices incurred to keep up loyalty packages are paid for by charges charged to the lodges within the system. Per the eleventh version of the Uniform System of Accounts for the Lodging Trade (USALI), visitor loyalty program charges embrace “any prices related to packages designed to construct visitor loyalty to the property or model.” To realize a greater understanding of current traits in visitor loyalty program charges, CBRE analyzed the loyalty program charge funds made by 4,454 U.S. lodges in our Developments within the Lodge Trade database from 2022 to 2023. In 2023, these lodges averaged 215 rooms and achieved a 69.3 p.c occupancy with a $211.44 ADR.
In 2023, visitor loyalty program charges averaged 1.5 p.c of complete working income, a ratio that was best at upper-midscale (2 p.c), upscale (1.6 p.c), and upper-upscale lodges (1.6 p.c). Loyalty charges as a p.c of complete working income was lowest at financial system (.3 p.c) and midscale (.9 p.c) properties. To a point, this metric serves as a proxy for the chain scales that profit most from visitor loyalty members staying (for pay) at lodges and incomes factors. Typically, loyalty program members journey most steadily for conventions and enterprise, explaining the bias towards the upper priced chain scales. Since loyalty program charges are charged as a p.c of income earned, it’s not shocking that charges on a dollar-per-occupied-room (POR) foundation are best at luxurious and upper-upscale lodges, and lowest at midscale and financial system lodges.
Visitor loyalty program charges are usually charged as a p.c of the entire income earned when loyalty program members pay to remain at a lodge and earn factors. Due to this fact, with loyalty program charges rising at a better tempo than complete working income, it may be assumed that loyalty program members signify an rising share of paying visitors yr over yr.
From 2022 to 2023, complete working income on the CBRE pattern elevated by 8.8 p.c, whereas visitor loyalty program charges paid grew by 17 p.c. The best distinction between income and loyalty program charge progress was noticed within the upscale, financial system, and upper-midscale segments.
For our Developments survey, CBRE captures 4 totally different franchise-related charges on a discrete foundation: royalty charges, advertising assessments, reservation charges, and visitor loyalty program charges. From 2022 to 2023, the 17 p.c improve in loyalty charges was best among the many 4 parts, whereas every of the three different parts elevated by lower than 10 p.c in 2023. The magnitude of the distinction in year-over-year change confirms that loyalty program members are comprising a rising share of paid visitors. It may be assumed that the lodge corporations will improve the prices of all 4 franchise-related charges, so extraordinary progress in visitor loyalty charges paid have to be attributable to a rise within the variety of loyalty visitor stays.
Price Transparency
In addition to the visitor loyalty program charges, lodge house owners are additionally accountable to pay for the additional facilities and companies offered to loyalty program members throughout their stays. Such prices could embrace complimentary meals and beverage, upgraded rooms and housekeeping companies, factors offered as compensation for service failures, and entry to an unique govt lounge.
To offer lodge house owners and operators with better insights into these prices, the twelfth version of USALI consists of new loyalty program expense classes throughout the rooms, administrative and common, and gross sales and advertising departments. CBRE will start to benchmark these further prices in 2026 as the brand new USALI is adopted by the business.
