There are plenty of debatable issues in the hospitality industry these days. For example, is capital truly ready to jump back into the game? Are we ever going to be able to raise rates to pre-recession levels? When will development begin again in earnest?
However, the seemingly mundane topic of loyalty programs has been the subject of much debate in the industry of late. At last month’s Carlson conference, one of the company’s key initiatives revolved around a revamped loyalty program called Club Carlson. The company’s efforts were centered around faster redemption for guests and the obvious tie-in to the Carlson name that its previous iteration, goldpoints plus, didn’t have.
Candid conversation
During a candid discussion with owners at the event, an interesting point was raised. Thorsten Kirschke, COO, Carlson Hotels, and president, Carlson Hotels, The Americas, noted that the company was not making money on its loyalty program. He pointed out that while countless other brands are taking profits from points “breakage” and putting it in their respective pockets, Carlson is reinvesting that into the program.
On the surface, you might think most owners would appreciate this fact but at least one owner, Vinay Patel, president and CEO of Fairbrook Hotels—which operates a Country Inn & Suites Washington Dulles International Airport—actually suggested otherwise. He commented to Kirschke, “maybe you should make money on it,” noting it would give the company incentive to do a better job.
While Patel’s point is well taken, I suspect more owners would be in the camp of having the franchisor’s not profit from the loyalty programs.
As an example, Wyndham Hotels & Resorts and Choice Hotels International have been both singled
out by disgruntled franchisees in a class action, $485 million suit over alleged “misappropriated funds” garnered from the loyalty programs.
The suits claim that the company’s respective programs, Wyndham Rewards and Choice Privileges, are automatically enrolling guests in their programs through an online system of “proactive matching” and in many cases the guests have not indicated a desire to join the program and have no intention of taking advantage of any points accrued.
Nevertheless, both companies collect loyalty fees from franchisees to the tune of up to 5% of gross rooms revenue generated by program guests. The brands argue that guests booking their rooms online are given an option to “opt out” of the loyalty program.
I know the opt-in/opt-out debate has been a topic of conversation within the Wyndham family of brands for a number of years and there doesn’t seem to be a perfect solution.
While it may not seem fair to franchisees that guests are being enrolled without their knowledge, only enrolling them upon being asked seems somewhat unfair as well. If you were the consumer wouldn’t you want the opportunity to be included in the program after making a purchase and let it be your choice as to whether or not you take advantage of it?
Whether it’s the issue of point leakage or whether or not to provide the opt-in/opt-out option, there is enough technology available in 2011 that we as an industry should be able to figure out a way for loyalty programs to do what they are intended to do, and that is to benefit all involved, from the franchise company to the franchisee. And let’s not forget about the guest.