The loyalty market is constantly evolving, with each industry experiencing unique challenges and trends. At Kobie, we view loyalty as a dynamic relationship that deepens as brands adapt to their members’ changing needs. Today’s travel loyalty programs are facing new challenges as digital transformation, consumer experience expectations, and market saturation reshape the landscape. A forward-thinking, flexible tier strategy helps brands stay connected with consumers by responding to these shifting dynamics.
Dynamics Impacting Travel & Hospitality
The loyalty market is changing at an unprecedented pace, especially in travel. Understanding these dynamics is vital for brands seeking to stand out, and so is responding appropriately. Are you building your program around what matters most to your consumers today, or clinging to an outdated model?
Digital Disruptors:
The travel and hospitality industry has seen a rapid rise in demand for seamless, digital-first experiences, from mobile apps to digital wallets. This demand has made the “seamless experience” the new standard, and brands must now create a frictionless journey from booking to check-out. However, as more travelers become tech-savvy, there are still segments that prefer traditional experiences. The challenge lies in balancing these expectations – engaging the tech-forward members while remaining accessible to those who prefer a simpler, less tech-intensive journey.
To meet these diverse needs, brands should also intentionally engage strategic partners as an extension of their ecosystem. By doing so, brands can retain consumers’ attention, ensuring their programs stay relevant and accessible regardless of where or how travelers interact.
Rise of Premium Tiers:
For today’s travelers, experiences can hold higher value than traditional rewards. Younger demographics, especially Gen Z, show a preference for unique, memorable experiences over traditional benefits. The ability to offer experiential benefits becomes a critical way to differentiate and creates an opportunity to tap into the emotional connection a consumer has with a brand. Tiers can create this exclusivity, where loyalty members feel connected, valued, and rewarded.
Behavioral psychology principles validate that humans have a much deeper motivation driving how and why they engage with a brand and that when they can see their value and progress within a program, they are more likely to remain engaged. Tiers are one of the main levers in which brands can create a sense of status and create an understanding of the value of a relationship with a brand. Brands that motivate consumers to engage with attainable premium experiences drive deeper emotional loyalty, resulting in increased engagement and long-term retention.
Concerns Over Data:
The travel and hospitality industry relies on vast amounts of consumer data, but analyzing and activating this data effectively to enrich loyalty programs is an ongoing challenge. As airlines and hotels navigate complex regulations around consumer protection, data privacy, and anti-trust laws, their flexibility in enhancing loyalty offerings can be limited.
Increasingly, consumers are aware of the data they share as part of loyalty programs, and with this awareness comes a rise in expectations. Members now look to brands to use their data responsibly and transparently, creating an added layer of trust within the loyalty relationship.
Ways of Travel & Shift in Consumer Expectations:
As remote and hybrid work reshape business travel, loyalty programs must adjust to changing consumer patterns across tiers. Today’s travelers expect personalization, choice, and flexibility – not one-size-fits-all rewards. This shift challenges airlines to engage a diverse audience, balancing immediate rewards with long-term value. Additionally, economic fluctuations and growing awareness of air travel’s environmental impact influence travel behaviors, prompting consumers to reconsider frequent flying and loyalty participation.
Competition & Market Saturation:
With many travel and hospitality brands offering similar loyalty programs, market saturation has made it easy for consumers to switch brands, weakening overall loyalty. Non-travel programs, such as those from credit cards and retailers, often provide more flexible and valuable rewards, making it challenging for travel and hospitality brands to differentiate themselves.
The Way to Truly Differentiate
In addition to building a tier strategy that aligns with market dynamics, we believe the way to truly differentiate is to tap into the emotional loyalty one feels towards your brand. Tiers are one of the best levers to pull on emotional connections.
In Part Two of this series, we’ll explore how brands can take their tier strategies a step further by tapping into behavioral psychology to strengthen emotional loyalty.
Written By: Lauren Stinson
As a Sr. Product Manager, Lauren drives innovation at Kobie, leading product strategy and management across the Kobie Alchemy Loyalty Cloud product suites. Her cross-functional expertise and expansive influence within Kobie and the market empowers the product organization to deliver end-to-end, best-in-class solutions across industries.
