Expedia, Inc., is the first online travel intermediary to begin displaying a hotel chain's discounted loyalty rates next to standard rates. It's also the first to cheerlead for a hotel's own loyalty program.
The first chain to participate is Red Lion, a 114-property brand in the US and Canada. For the past month, the chain has been offering its cheaper loyalty rates alongside its standard rates on Expedia.com and Hotels.com.
Customers are offered the cheaper loyalty rates as long as they agree to join the hotel's membership program. (Those who already belong to the hotel's program can claim the rate by signing in with their credentials.)
Over the course of the month, membership sign-ups more than quadrupled, says Red Lion.
Expedia is in "deep conversations with a lot of different chains" about offering similar arrangements, says Melissa Maher, SVP of its Global Partner Group. She added:
"We don’t anticipate we’ll do it with all chains. But we expect many chains that don’t have large marketing budgets will find it valuable as a way to help them to grow membership in their loyalty programs."
Ordinarily hotels do not receive the name and email address of customers from online travel agencies (OTAs). Expedia's test is notable for passing along those identifying details after a customer agrees.
Right now, Red Lion is exclusively offering its loyalty rates via Expedia, Inc., brands, though that's partly a function of Expedia being the first to offer such an option.
Red Lion CMO Bill Linehan told Tnooz he would consider a similar offer from a comparable marketing channel "depending on the potential volume and capture opportunity."
He said his brand is too small to go it alone and needs Expedia to reach a range of customers.
A tale of two strategies
Large hotel chains invented loyalty programs and discounted rates for members as ways to encourage repeat and direct bookings.
Many large and small hotel chains (though not Red Lion) built their loyalty programs to tell travelers that the best value they can get, such as an inducement of free wifi, can only be obtained by joining their programs and by booking direct.
Expedia lets consumers rack up rewards in its own rewards program for a booking, while also participating in a hotel chain's program. For some consumers, the chance to double-dip may make booking via Expedia or Hotels.com more attractive than booking direct with a hotel.
So does Expedia's effort step on the direct-booking message? Linehan said:
"I don’t think it’s stepping on the direct booking message.... The direct booking message is stepping on consumer preference.... Because consumers are clicking around....
When you look at the research, consumers shop multiple channels, even when they have a preference for a past brand they've used."
Reflecting that perspective, Red Lion's program offers guests a free night after every seven stays regardless of where the consumer books the stays.
Linehan explains that consumers don’t like being told what they can or cannot do. So limiting qualifying stays to direct bookings would run counter to consumer desire. He added:
"Consumers can find the key bits of information that they want at the OTA in an efficient package. That’s why when you look at research from sources like Forrester or Hotel Horizons, they mention that Millennials and other consumers are more likely to book on an OTA than at brand.com because they find that the OTAs provide more transparency into the key criteria....
What’s changing is how consumers funnel their decision process. It typically starts at location, then changes to persona. Is their persona a time-pressed business traveler? A harried parent dropping a kid off for college?...
The decision funnel goes from persona to a value set. Consumers increasingly want brands to authentically mirror their values....
Then it gets to a value proposition, meaning price versus reputation....
Brand.com can't offer the same level of information for comparison-shopping as an OTA can....
The way we'll truly earn loyalty and repeat bookings as a hotel is by knowingly recognizing the consumer every time, regardless of where he or she booked.
It's also by surprising and delighting the consumer.... At Red Lion, for every loyalty member's stay, we try to provide a perk. It may be a free breakfast or a cocktail in the lounge. It could be an Amazon gift coupon."
Industry debate
Expedia's project is a countermove in a year-long dance between online travel companies and hotel companies.
Last winter, Hilton and Marriott negotiated new contract terms with Expedia that made clear they would be allowed to offer lower rates to the members of their loyalty programs than the most competitive rates they place on Expedia and other non-brand sites.
The move sparked a lot of industry discussion about publicly available loyalty rates.
Last spring, Expedia published a whitepaper that outlined a mathematical model that suggested that hotels could lose revenue overall by not offering their most competitive rates to its marketplace. A key passage in the whitepaper explained a critical factor:
"A hotel’s visibility on the Expedia Marketplace is calculated by offer strength, quality score, and compensation. Therefore, when a hotel is, for example, not offering its most competitive rate to consumers shopping and booking via Expedia, those consumers are more likely to book a room at a hotel that is offering its most competitive rates. Expedia’s algorithm recognizes this natural shift in consumer preference and adjusts the visibility of these hotels in the marketplace accordingly."
So what happens to hotel chains like Red Lion that participate in its new program?
Maher said that participating hotels will have "better visibility in the Expedia marketplace, on average," than those who offer publicly loyalty rates on their own brand.com sites but not on Expedia.
In response to Tnooz queries about how the company's position on loyalty rates appeared to have shifted somewhat since the spring, Expedia offered this statement:
"Many partners find value in building loyal relationships with consumers who found them through Expedia. We wanted to have an option for those hotels and chains that still believe permanent and publicly advertised member rates are a good way to build the loyalty base.
Promoting loyalty rates through OTAs is a positive for consumers in that it empowers consumer convenience and limits price confusion.
It also is a positive for those hotels and chains, because when they add to their value proposition for Expedia consumers, they can compete more effectively in the marketplace with their peer hotels looking to attract those same Expedia consumers."