Who Broke the Loyalty Reward Promise? Investigating Members’ Reward Redemption Behaviors in Hotel Loyalty Programs
Paper and supplemental PowerPoint were presented at the 2012 Annual ICHRIE Conference, Providence, Rhode Island, August 1-4. Copyright © 2012 the authors. All rights reserved.
Loyalty programs are prevalent in hotel industry. Ever since the first loyalty program AAdvantage introduced by American Airlines in 1981, major hotel brands such as Hilton, Marriott, InterContinental, and Best Western all have developed loyalty programs and the hotel industry has accumulated around 92 million memberships in these programs in total (Dekay, Toh, & Raven, 2009). The rationale of hotel loyalty programs is to attract and retain customers through rewarding members’ repeated purchases (Lewis, 2004). However, rather than rewarding members instantly after their purchases, hotel loyalty programs introduced a medium such as loyalty points and/or airline miles between purchases and rewards. Because of such purchase-medium-reward structure, it may take the companies and members extra efforts to complete the reward redemption process. For example, on one hand, hotel companies need to ensure the points to be issued when purchases are made and the rewards to be available when redemptions are made. On the other hand, members need to make necessary amount of purchases to achieve the required points for rewards and spend additional effort in understanding how the mechanism works.