Travel invented loyalty as we know it. Now it’s time for reinvention.
Members of travel brands’ loyalty programs have become increasingly disloyal. What will bring these straying customers back?
Travel brands didn’t invent loyalty programs, which have been traced to as far back as the 18th century. But ever since the first major airline frequent flier programs appeared in the early 1980s—soon to be followed by similar programs from hotel chains—the travel industry has become known for letting customers accumulate redeemable “miles” and “points.” Modern-day voyagers are deeply familiar with loyalty-related concepts such as status tiers, members-only lounges, and point-earning credit cards.
Travel loyalty programs were originally designed to influence travelers’ behavior. By offering rewards such as free flights and hotel rooms to frequent customers, a company might convince power users to consolidate their travel spending with its brand. Why fly airline X when you’re halfway to earning a free perk for remaining faithful to airline Y?
Over time, many travel loyalty programs became wildly successful—not just as a way to boost sales or strengthen customer relationships but as major profit centers in their own right. Travel companies found they could sell loyalty points in bulk to, for instance, banks, which in turn offered the points to their credit card customers as rewards for spending. In 2019, United’s MileagePlus loyalty program sold $3.8 billion worth of miles2 to third parties, which accounted for 12 percent of the airline’s total revenue for that year. In 2022, American Airlines’ loyalty program brought in $3.1 billion in revenue, and Marriott’s brought in $2.7 billion. 3 Many loyalty programs have evolved into discrete divisions with their own profit-and-loss ledgers.
Along the way, however, some travel players have shifted their focus away from the original purpose of these programs. As loyalty programs have become powerful bottom-line enhancers, companies have sometimes been tempted to view them first and foremost as revenue generators instead of tools to sway customers’ behavior or to improve customers’ experiences. The postpandemic resurgence of travel demand has also pressured companies to shore up their loyalty programs’ viability by devaluing members’ points and miles and enacting rule changes that have at times caused customer frustration. At the same time, innovative loyalty programs in other industries are raising the bar, opening customers’ eyes to the value that loyalty programs can offer.
As a result of these factors, travel loyalty program members have become increasingly disloyal. For some customers, reaching the top tier of a loyalty program is still almost a facet of their personal identities—“Just a couple of more flights, and I’ll reach elite status!” But many loyalty program members now seem more inclined to play the field. The warm feelings at the heart of loyalty, which lead travelers to show allegiance to a brand and trust that their faithful behavior will be noticed, seem to fade when brands let their focus drift away from rewarding their most valuable and consistent customers.
Loyalty is about more than a program, a department, or a tangible redemption offer.
Loyalty is about more than a program, a department, or a tangible redemption offer. True loyalty is won through a genuine desire to forge bonds with customers and thereby maximize each customer’s lifetime value to the brand. Travel brands, therefore, should consider rethinking and reinventing their loyalty programs in ways that frame loyalty as something more than points and miles. A mindset shift, coupled with three practical actions, could help restore the luster of loyalty programs while bringing straying customers back into the fold.
A mindset shift, coupled with three actions, could restore the luster of loyalty programs while bringing customers back into the fold.
How we got here: Disruption, devaluation, and dissatisfaction
When travel came to a halt as a result of the COVID-19 pandemic, many travel brands—hoping to keep customers happy—“froze” the loyalty program status levels of members who might have otherwise lost perks due to a lack of travel activity. When travel spending was slow to resume, brands changed their program rules to make status tiers significantly easier to reach and maintain. These moves made sense in the face of an unprecedented disruption, with far fewer miles and points being redeemed.
But as travel recovered, loyalty programs became burdened by increased redemptions and overpopulated high-status tiers (evidenced, for example, by the lines outside the doors of airport lounges). Some major travel brands have responded by adjusting loyalty program rules. They’ve ended the status extensions that were granted during the pandemic, and they’ve devalued points and miles—raising the bar to redeem them for free flights and rooms.
All these changes have, understandably, been made with an eye toward programs’ profit-and-loss statements. But collectively, they’ve resulted in widespread customer dissatisfaction. Program members have chafed at having their points devalued and benefits clawed back. Meanwhile, successful loyalty programs in other sectors have opened customers’ eyes to other types of value that these programs can provide, such as better customer experiences, richer communities, more tailored personalization, and exclusive access to events or offers.
Loyalty surveys conducted by McKinsey in 2021 4 and 2023 5 revealed a steep decline in the likelihood that a customer would recommend airline, hotel, and cruise line loyalty programs to a friend or colleague—even though the likelihood that customers would recommend the airline, hotel, and cruise line brands remained relatively steady (Exhibit 1).
