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  • Dennis#MD

    Managing Loyalty Program Liability: Best Practices for the Hospitality Industry

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    Customer loyalty programs have become indispensable in the hospitality industry, especially when it comes to earning engagement and driving brand loyalty.

    If managed prudently, a loyalty program can be a great way to drum up customer satisfaction and rake in additional revenue.

    However, ensuring a sound loyalty program that delivers value to both your hospitality business as well as your customers means that you must stay on top of your loyalty program liability (the eventual costs associated with future redemption of outstanding loyalty points).

    4 Must-Know Best Practices for Loyalty Programs in the Hospitality Industry

    1. Take A Multi-Campaign Approach

    Campaigns are at the heart of every hospitality industry loyalty program. That’s why loyalty programs managers need to think diversity when it comes to their campaigns.

    In other words, you need to create as many campaigns as you see fit for your loyalty programs. Popular types of campaigns you may want to consider include:

    • Feedback (award points when a customer takes a survey or leaves a review)
    • On-website (e.g., when a customer signs up for an account, shared a blog, birthday points, etc.)
    • Social Media (reward your followers on Instagram, Twitter, Facebook, etc.)
    • Booking (typical campaigns based on reservations, visits, etc.)
    • Referral (customers earn points when they refer their colleagues, friends, family, etc.)
    • Partnerships (collaborate with airlines, credit card companies, etc. to reward loyalty)

    The rule of thumb is to use at least 5 campaigns to create a well-rounded hospitality industry loyalty program. Good thing, you can leverage big data and AI to help inform your choice of campaigns.

    2. Keep It Simple

    Stuffing your loyalty program with too many restrictions, rules, and regulations will do more harm than good. Managers are better off focusing on a few offers they can actually deliver consistently.

    If you include way too many elements and promises that you can’t keep, you’ll ruin your program’s reputation, credibility, and sustainability. It’s easy: keep it simple.

    3. Stay On Top of Referral Marketing

    If you execute well, referral marketing can do wonders for your loyalty program. After all, referred customers provide 16% higher lifetime value.

    How you approach your referral program, however, can make a huge difference:

    • Encourage guests to use multiple channels (social media, email, phone, etc.) to share their referrals
    • Entice both the sender and the receiver with rewards that they’ll actually value
    • Generate on-brand referral messages that are engaging, captivating, and easy to share

    4. Don’t Waste Any Chance to Gain Insight about your Customers

    You can gain more insights into your customers’ needs and spending behavior by offering rewards based on both short-term actions and long-term habits.

    Key Loyalty Program Financial Benchmarks to Measure

    1.  Loyalty program liability: you should measure current and non-current liabilities, both of which will influence revenue metrics such as loyalty program deferred revenue liabilities.
    2.  Loyalty program point expiration: according to Kyros Insights, top hospitality establishments cap their point expirations at 12 months. How you craft your expiration policy can make a big impact on your loyalty program liability.
    3.  Loyalty program membership: this one is a no-brainer. However, you need to benchmark your loyalty program membership against total revenue.
    4.  Loyalty program revenue: a good loyalty program should drive more customer engagement and therefore increase your profit growth and revenue.
    5.  Loyalty program breakage: the percentage of points that will eventually go unredeemed. Identifying breakage is crucial, or else loyalty program liability calculations will be inaccurate.


    Loyalty programs are standard in the hospitality sector. It’s crucial to keep your program simple, ramp up referral marketing, boost customer engagement, and create multiple campaigns.

    When all is said and done, you should use the above-mentioned benchmarks to take stock of your loyalty program liability, revenues, breakage, and ROI.

    Edited by Dennis#MD

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