Tracking the loyalty strategies of online travel giants

Building loyalty in travel has been a hair-puller for the industry since the early days of the internet. 

Travel being an infrequent activity combined with consumers’ high price sensitivity, further amplified by the OTAs’ self-inflicted harm of focusing their communications mostly on low prices, seemed to be insurmountable hurdles to build a truly loyal customer base. 

With Airbnb shaking up the travel landscape by taking off like a rocket with a fraction of the marketing spending shelled out by the travel mastodons, the rest of the industry is shifting its focus and doubling down on its loyalty strategy.

Are the largest players in the industry rising to the challenge of building a compelling value proposition that makes travelers flock back to these brands without needing to pay the so-called “Google tax” time after time? 

Let’s dive deeper into the recent retention efforts and the future plans of the major OTAs in the West.

Expedia: One loyalty program to rule them all 

The Seattle-based travel giant has been the most vocal among its peers around its loyalty ambitions, announcing its plans, in May 2022, to stitch together its different loyalty programs into one unique program called One Key that will be rolled out in 2023. 

What’s unique: Expedia’s aggregated base of 154 millions members gives the company a strong head start. The group will also be able to boost the attractiveness of the program by offering one of the widest range of travel products within the industry (accommodations, air, rental car, activities and cruises) for members to redeem their points.

Vrbo, the rising star in its brand portfolio, being part of the program gives Expedia additional gunpowder in its battle against Airbnb and Booking.com to win over the most popular accommodation category after the pandemic.

What’s next: The loyalty mechanism of the new program will be similar to its existing programs, consisting of upfront discounts combined with loyalty points being earned on each purchase, which can be redeemed in future bookings.

Flawless execution will be critical during next year’s roll out. The travel giant will have to ensure that customers of the existing programs perceive the new overarching reward scheme beneficial and avoid confusion with multiple memberships within the group. Otherwise, the company might risk a stampede of frustrated existing members due to a perception of downgraded benefits.

Another risk will be exposing the close ties between brands to the end customer, operating pretty much as one storefront under different colors. Expedia will have to walk a fine line to avoid the benefits of a consolidated program being offset by a potential dilution of its individual brands’ equity.  

Booking.com: Letting the “Genius” out of the bottle 

Booking.com's Genius program has become a cornerstone of its retention strategy. The travel giant re-doubled its investment in the program last year by adding a third tier that unlocks up to 20% discounts for frequently repeating customers. 

What’s unique: A fundamental difference in the loyalty value proposition of Genius versus most of the other travel loyalty schemes is the fact that Booking.com solely focused on providing immediate benefit to members with a large offer of upfront discounts, avoiding complex reward schemes that promise future benefits. 

In a brilliant move, the OTA convinced hotel partners to finance the burden of these discounts in exchange for a higher ranking in search results. 

Booking.com built an additional lever to expand the reach of its loyalty program beyond its own brand. Granting access to the Genius program to its extensive B2B network as a co-branded hotel product allowed customers from companies like easyJet or Lufthansa to benefit as well from their Genius status for accommodation bookings. 

What’s next: Trying to add higher Genius levels with even larger discounts over time might be a mission hard to crack when discounts are mostly funded by hotel partners.

But the travel titan holds in its hands a feature that can potentially unlock the next level of retention: Booking.com's Rewards & Wallet, a product that was launched pre-COVID without much fanfare and has been kept deliberately decoupled from the Genius program. 

Over the past 18 months, Booking.com has invested in an overarching payment platform, which is allowing it to gradually move away from an agency model to a merchant model, already reaching 60% of global adoption last year. 

In parallel, the number of offers including credits for future purchases where Booking acts as a merchant, keeps constantly growing in their search results..

Booking’s “Rewards & Wallet” feature will become an additional growth engine for increased customer retention, as stated by its senior vice president of fintech Daniel Marovitz, “Today the wallet is a way to manage discounting and credits. As for tomorrow, well…I think it's very rational to imagine that that's something that can go deeper into loyalty and deeper into friction reduction for sure.”

Booking.com might supercharge its loyalty playbook even further by expanding Rewards & Wallet to its sister company OpenTable, allowing customers to redeem and earn credits in restaurants. 

Tying in a high frequency service like dining out into their travel rewards program, would be a step change to keep its brand top of mind for even less frequent travelers.

Hopper: Embracing social commerce in the West

Hopper has earned the “New Kid in Town'' badge among the major OTAs in recent years. 

After riding the price prediction wave and leading the fintech hype in travel during COVID, during The Phocuswright Conference, Hopper’s CEO Fred Lalonde unveiled its latest strategic bet to cement Hopper’s position among the big OTAs: social e-commerce.

Through gamification and referral mechanisms inspired by Asian players like Pinduoduo, Hopper wants to increase user engagement and ultimately build a loyal customer base.

What's unique: Being an app-only travel player can be a blessing and a curse. Hopper can laser focus all its product and marketing efforts in one platform and have a much more intimate knowledge about its consumer behavior. On the flip side, being cut off from the biggest acquisition channels in travel, Google Adwords and metasearch, significantly limits its capabilities to efficiently reach new audiences.

Hopper is betting that the $200 million ad dollars its CEO claimed to be spending pre-COVID in app download marketing is better invested in rewarding customers via engaging mechanisms like games or referrals and repeat bookings.

What's next: Flooding users with rewards along the customer journey should certainly boost Hopper's app stickiness and repeat booking factor.

The jury is still out on whether this aggressive strategy can build true customer loyalty or might become a loss making loop that needs to be fueled with endless financial incentives to keep spinning.

Hopper will also need to find the right formula to keep up its growth fueled by customer referrals against competitors who can pump new customers through well-oiled performance marketing machines.

Airbnb: Going off the beaten loyalty path

Airbnb has arguably been the largest disruptor in travel over the past decade. From the early days, the poster child of the sharing economy decided to take an unconventional path in customer acquisition, by shunning performance marketing and focusing on building a strong brand that connected at a deeper level with the aspirations and desires of travelers.

What's unique: In the loyalty playbook, Airbnb also decided to rewrite the rules by focusing on its unique brand proposition and great customer experience, while avoiding any type of reward programs.

The company’s recent strategic bet to boost customer stickiness has been around expanding Aircover. This protection guarantee originally created for hosts was rolled out for guests too, ironing out potential pain points such as property damage during the travel experience. 

In its last quarterly earnings, CEO Brian Chesky went as far as comparing the program to Amazon Prime, by delivering a standardized service consistency and making it in his own words “the gold standard for customer service in its category”

What's next: Airbnb's approach to acquisition and loyalty has so far played out spectacularly well. Its share of more than 90% in direct bookings makes the rest of the industry pale in comparison.

Will the industry challenger be able to convince its customers to keep coming back without any financial reward? Chesky does not rule out some type of membership program further down the road, but Airbnb is likely to keep challenging conventional wisdom around loyalty for years to come.

Heart vs wallet: the loyalty conundrum

Most global online travel players are betting on financial rewards as the key pillar to boost customer retention. Bringing Expedia’s loyalty programs under one roof, expanding Booking.com's wallet and rewards in accommodations as well as other travel products and dining services, or applying Hopper’s social layer around rewards - all ultimately aim to win the customers' wallet through financial incentives.

Will Airbnb’s vision of a love brand that wins the customer’s heart by delivering a delightful travel experience prove to be a more powerful reason to keep customers coming back? 

If the past decade was primarily ruled by the overlords in online customer acquisition, expect this decade to be shaped by the players who manage to build a genuine loyal customer base in travel.