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Choice Hotels Looks to Grow Burgeoning Loyalty Program Even Bigger

In Choice Privileges, Choice Hotels has a staggeringly successful loyalty program that eclipsed the 25 million-member mark this year.
In an intriguing interview with Loyalty360, Robert McDowell, SVP, Marketing and Distribution for Choice Hotels, talked about bigger and better things to come for the loyalty program.
You have made some pretty significant changes to the program. We’d love to hear about that at a high level and find out what brought about those changes?
McDowell: The first thing is that our program hit a milestone this year with our 25 million members. We’re really looking at that hospitality and loyalty space and, in our view, a lot of programs are clawing back things from their guests or customers. But, we looked at it and took a different approach to say how can we actually invest in those guests, so that research helping to guess what they wanted really led to a lot of the changes.
The high level is earning special extra rewards for weekly travel, earning free nights faster, instant digital gift cards, and the elimination of the expiration of points. They were key to what our guests were telling us. This is shaped for our overall membership, but some of these features and functionalities that we have added are really targeted at the up and coming millennial generation, which is looking for faster instant redemption.
Your Extras provides the weekday traveler, someone that checks into our hotel between Sunday night and Thursday night, with a little something extra cordial or extras. But right when they check in, they are eligible to receive a special reward. They can get either additional bonus miles from Choice Privileges; they can get discounted gas through Shell; a credit to Amazon.com; or credit to Starbucks as well. The guest can pick and choose that option each and every time they want or they can set it and forget it and continue to receive the same extra each time they check in. We think that is a first in the industry in really appealing to that millennial that is looking for that instant reward.  
So why change the program?
McDowell: We are looking to grow it. We continue to grow it by one to two million members a year. We really want to grow the program faster. We want to actually compete more effectively with other loyalty programs, not only in hospitality space, but also across the board so that we make our guests much stickier and we’re their first option when it comes to hotel space.
How are you measuring customer loyalty?
McDowell: We use several benchmarks and one of them is obviously the Net Promoter Score and we have measured NPS for the past several months. We will obviously track how these changes impact the NPS and track the number of members that we are signing monthly and annually. But also the shared wallet. How many of our members are now spending more of their hotel nights with us on an annual basis and triangulate around those key metrics on how effective the program is.
Are they giving you feedback that they might be giving 10 shares to Choice and five to Marriott and six to Hilton Honors? Or is that an assumption based on their increased year-over-year transactions with you?
McDowell: More about increased transactions year-over-year. We don’t have the ability to get into the granular level that you talk about, but we do surveys and they give us directional guidance of what percentage of their shared wallet they are giving to us versus other hotel suppliers.
Are others in the industry measuring customer loyalty in the same way? I know that there are some metrics within the hotel industry like lodging, loyalty redemption nights, and occupancy rates. Are those other metrics being used across the hotel industry?
McDowell: There are other metrics like loyalty contribution. What percentage of our room nights are driven by loyalty members, I think, is a key metric across the industry that we all measure as well.
You talked about the customers changing. What does that mean to you and how are you keeping up with that?
McDowell: That is part of the changes that we have made as the workforce and the baby boomers go to retire and you get more millennials. With the growing presence of our brand, we are expanding into the business market with our Cambria product. There is a big focus on driving midweek business and that is really where the Your Extra targets, that midweek traveler who is going on travel, and when he checks in, he wants additional points for Choice Privileges. Whether he wants a gift card to Starbucks or Amazon, he gets that choice and he can let those benefits accumulate in addition to the typical points that he would get for staying with us through Choice Privileges. So this is above and beyond what they would typically receive.
Can you describe what your typical customer is across the franchise or are they pretty diverse?
McDowell: By each brand, the guests are a little different in terms of their makeup demographics, income, learning, etc. so each of the brands is targeted at a different consumer set.
If someone stays at a Comfort Inn or Comfort Inn Suites, are you seeing them stay at those properties and then redeem for the more upscale properties? Or are you seeing them mix their allocation depending on their type of travel?
McDowell: Earn and redemption is earned based on business travel, but also where they are interested in going on leisure travel, and then what brands we have available in those markets. We talked about Cambria. It is opening a lot of new markets for us in city centers. We now have a Chelsea property in New York and we have a brand new Times Square property, which has seen significant redemption opportunities for our members. A property down in Miami has done quite well, as well as D.C. You get a range for where they are traveling whether it is leisure or pleasure or business during the week, and then those redemption options fluctuate depending on the type of trip and the location they are going.
Some programs such as airlines are taking benefits away. Are you seeing that in the hotel space?
McDowell: We think that is not the right direction and we have pivoted to how do we invest in that guest, how do we give them more, how do we make it easier to work with us.
There is this challenge for brands to be able to hear and understand their customers, how did Choice Hotels address that challenge?
McDowell: We worked closely with our research group. We obviously do a lot of market research so I don’t see it as a challenge I see it as a great opportunity. Marketers today have many tools at their disposal across the board in how they can listen to their guests and get feedback whether it is reviews on our hotels or through FlyerTalk, focus groups, or other things. We use them to get a really good feel for where our guests are today, but also for where they want to go. We also want to know what program, features, and functionalities are going to get them more loyal to Choice and that is some of the market research that we have done over the past 12 to 18 months.
Is some of that market research internal or external?
McDowell: It is both. We also partner with these focus groups and some other research firms in the field as well.
How does employee loyalty/employee engagement fit into the customer loyalty discussion that you are having?
McDowell: We have just rolled this out and it has been a significant effort across the enterprise and this follows a lot of the work that we did last year rebranding the company in terms of a new logo and brand identity. This follows in that evolution of bringing Choice to the right customers and the right market. I would say that the associates are very engaged. We are having them do a lot of user testing as we launch this on a soft launch internally and the feedback has been tremendous. We have a lot of enthusiasm from not only the customer that is staying with us, but the associates that work with us, as well as our franchisees. We think that we have hit a home run with the three core groups in terms of where we are going with the program.
Are there facets that are unique to your business that make it easier or more difficult to create brand loyalty?
McDowell: In the hospitality space, it is very competitive. What we have done with the features and functionalities actually set our program apart from our competitive set and really make it what we believe is the leading hospitality loyalty program out there today.
What brand do you think has the best customer loyalty and why would that be?
McDowell: Other than Choice Hotels? In the hospitality space, I don’t think that there is anyone else that can match up to our program. I think that you get brands like Southwest Airlines that does it well, Amazon does it well, Starbucks has a great following. Those are some iconic brands that have great customer loyalty. The changes that Choice made with our program have set us on that path to become an iconic brand as well.
If someone happened to book a reservation through the OTAs, is the goal then to have such great service and great engagement that they will come back to you going forward?
McDowell: The purpose of everything that we do is how do we get Choice Hotels and each of our brands top of mind. When a guest stays with us, we want to enroll them in the Choice Privileges program. We want to get them loyal so they come back and book directly with ChoiceHotels.com so they are guaranteed to get the lowest price. They are going to get a seamless interaction on all of our devices, and they are going to get access to the best loyalty program in the hospitality space with some key wins and functionality that we have just rolled out.
Are there new medias that you are using as you focus on the millennials and the changing expectation of your customer that you are leveraging that you feel can increase the impact of your new efforts?
McDowell: We actually allocated a significant advertising and marketing spend toward this and are really going into different channels to acquire new guests as well as to re-engage with guests that we have to grow that shared wallet. We put a big marketing push around online videos. We’ve got a spot in USA Today as well as other digital assets that we are using to engage with guests.
Is there a technology or process that you see is going to be big over the next five years that you think may have the secret sauce potential?
McDowell: Right now we are in the right channels and obviously mobile is big and evolving rapidly. How can consumers continually engage and how do we actually expand that capability on our mobile devices through the entire experience? We think that is a huge opportunity for us to engage and keep in touch with our guests, not only when they are planning and booking, but also while they are on property and, ultimately, when they leave the property. We want them to close that loop on their stay ensuring everything went well and providing their loyalty points as well. It is a continuous evolution on the device that will help hotel suppliers continuously maintain communication and personalization with guests over a lifetime.
Why are customers loyal to your brand and your brand promise now?
McDowell: Right now we have got a great mix of hotels. We have over 5,500 hotels in the U.S. that meet a lot of our customer demographics and needs. That was the basis. We have obviously continued to grow the program over the past couple of years. We did a really good job of that. The question was how do we actually celebrate that and that is where the research came in. Listening to the customer and then making an investment back in the program to accelerate not only the number of new members, but increasing that shared wallet of existing members as well.
How do you make investments in your customer loyalty strategies?
McDowell: We looked at the program and where it was going and said that it is a very strong program, but how do we actually make it better. At that point, we started to engage and listen to the customer and that is how we got to these four or five key areas that we wanted to invest in. We pressure tested them, plus the cost, and figured out what believe the ROI was going to have to be and got very comfortable making this investment. We expected to see a significant return on loyalty back on Choice given where the program would stack up in the hospitality space against all of our peers.
Are there trends that you are seeing in customer loyalty or loyalty marketing? And how are you keeping up with those trends?
McDowell: We continue to look at what our peers are doing and at what other disruptors are doing in the space. The trends that we have seen... a lot more fallback on guest benefits and that’s one of the trends that we saw. It didn’t sit well with us. We thought there was a spot for us to reverse and pivot and go against what our peers were doing, whether it is in the hospitality space or the airline space, and really sort of embrace that guest and frankly invest in them because they are looking for what is loyalty. They want to be rewarded for their stays and the things that we laid out are increasing that rewards benefit for staying with Choice Hotels and our brands.

About the Author: Mark Johnson

Mark is CEO & CMO of Loyalty360. He has significant experience in selling, designing and administering prepaid, loyalty/CRM programs, as well as data-driven marketing communication programs.

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