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Mileage Insights: Loyalty Can Pay Dividends

Mileage Insights: Loyalty Can Pay Dividends

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Even before the global spread of COVID-19 was categorised as a pandemic by the World Health Organization, companies in the travel and hospitality industries were badly hit by falling bookings and cancelled events. Travel restrictions imposed by countries have further reduced load factors on most airlines, and accordingly, depressed hotel occupancy rates. F&B establishments have not been spared either, with patrons opting to dine at home to reduce the risk of virus transmission.

According to a survey by the Global Business Travel Association, an industry body for the business travel trade, the global business travel sector is expected to take a revenue hit of about US$820 billion as corporates curb travel plans in the wake of the COVID-19 epidemic. Business travel to Asia has been the worst hit, with at least three out of every four companies reporting that they have cancelled or suspended all or most business trips to China, Hong Kong, Taiwan, and other Asia-Pacific countries.

Business travellers provide airlines and hotels with a significant chunk of their revenue, but with companies telling executives to avoid travelling for work, these high-value travellers who have accrued loyalty points or miles are finding it difficult to retain their hard-earned card statuses. The mass cancellation of conferences, meetings, trade shows, exhibitions, and other events have also made it very unlikely for business travellers to clock significant travel mileage over the duration of the calendar year. For many airlines and hotels, access to different membership tiers depends on how much money is spent within a set period. This had led to much anxiety for business travellers who may lose their coveted perks as a result of the COVID-19 disruption.

Some airlines and hotels have chosen to proactively offer certain members elite status and benefit extensions. These companies include AccorShangri-LaBest WesternCathay PacificWorld of HyattSingapore AirlinesUnited AirlinesIHGHilton, and Marriott. For instance, Singapore Airlines has reached out to their most loyal passengers, extending their time-dependent elite status by a year. The airline has also unveiled a “book with confidence” policy, allowing bookings made before 31 March 2020 to be postponed, or the route changed, without paying a date change fee.

However, many of such incentives are only offered to a limited number of customers in various localities, and airlines and hotels are generally not providing a blanket offer to all business travellers. In addition, there are many other hotels and airlines who have not acted upon the concerns of their revenue-generating business traffic, for they have not even moved forward to proactively offer elite status and benefit extensions.

Increasingly, credit card companies have also come up with new cards tailored to the business traveller that offer bonus miles and reward stays at hotels. Through such offerings, airlines and hotel chains have found novel ways to monetise their loyalty programmes. For airlines, there is significant money to be made by what is basically selling mileage points through credit cards. In the highly cyclical nature of the aviation industry, the offering, or lack thereof, of such “perks” can cause a spillover effect that may either lead to an increased customer base or significant customer attrition. Some business travellers may choose to cancel airline mileage programme-linked credit cards, and by extension, their membership in the airline’s loyalty programme, if they do not see the benefit in retaining their elite statuses. For these travellers, the logic is that if they are not going to be flying, there is no point in using these cards to earn points that would be put towards upgrades. In addition, as frequent flier miles often expire after two to three years, there is an incentive for customers to utilise their earned miles before the expiry dates. If airlines do not extend the validity of these miles, travellers may choose to expend them quickly instead of retaining their loyalty to the airline.

While many hotels and airlines are understandably trying to protect their bottom line, many of their marketing and revenue management executives are forgetting about cultivating the loyalty and goodwill of their long-standing customers.

But little things matter. If the hotel or airline does not grant business travellers status extensions or extensions of their mileage validity, many of these customers may be left with a bad impression of a company that they had spent so much of their money on. Ironically, high-flying business executives who may lose their elite statuses because of this are likely to be the same people who will have the most to spend on corporate travel when they regain their travel budgets after the COVID-19 panic ends.

Waive the requirement for this year. A simple gesture which costs nothing will score points with one’s loyalty base. Only then will loyal customers become more loyal to one’s brand.

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