Travel comfort continues to rise as inflation pressures persist

Travel comfort continues to rise as inflation pressures persist
Mar 22, 2023

Amid spring break travel and with summer travel season rapidly approaching, suitcases are getting dusted off across the country and it’s time for brands to key in on their consumers’ top needs. U.S. travel demand may have reached 2019 levels last year, but recovery and growth in the industry continues to be impacted by inflation, staff shortages, and the challenges of meeting digital transformation needs. All of these outweigh any lingering concerns about COVID-19 for the general public.

Despite the current hurdles facing the industry, traveler comfort continues to climb after the stunt from the onset of the pandemic. According to Morning Consult, 72% of respondents are comfortable staying at a major hotel chain and 52% are comfortable flying domestically. And even with the possibility of a recession looming, the U.S. Travel Association expects leisure travel to remain resilient.

Business travel recovery remains uncertain.

Initially, the Global Business Travel Association expected business travel to recover by 2024. However, citing “inflation, energy prices, supply chain challenges, labor shortages, and regional developments," it pushed its expected recovery out to 2026. Of the existing business travel, 58% is blended with leisure purposes—however, Morning Consult notes that blended trips have been declining.

Travelers booked less in advance in 2022 than in 2021.

Consumers are craving flexibility and are increasingly wanting to get up and go. In 2022, the number of travelers who booked accommodation less than a month in advance compared to 2021 rose by 3%, and 2% more said they were less likely to book a stay between seven and 12 months in advance.

Keep in mind the booking window will differ depending on the type of stay. According to Morning Consult, those who plan on staying at a hotel were more likely to book closer to their trip, with 29% saying they’d book within a month of traveling, compared with 19% of those staying at a vacation rental who said the same.

As the world continues to rebound from the COVID-19 pandemic while simultaneously heading into a recession, we see four key trends that will impact travel and hospitality loyalty:

  • (Re)introducing programs with greater value and flexibility
  • Facilitating trip planning and preparation
  • Improving in-flight and on-site experiences
  • Partnering for relevance and more utility
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(Re)introducing programs with greater value and flexibility

Noticeably within the last couple of years many brands across industries have introduced or relaunched loyalty programs. While some are adjusting earn structures to account for inflation, a common theme among programs is increased flexibility with new earning and redemption options. Adding flexibility increases the value to customers by giving them more control over their loyalty member experience while offering observable behavior and insights on how to deliver personalization for brands. In addition, some programs are also offering greater recognition and exclusivity to top-tiered members.

Loyalty program members know what they want, and they aren’t afraid to leave your brand and find it elsewhere. According to Mintel, 37% of respondents who belong to a frequent travel program said they would leave it if the brand “limited travel reward options,” and 48% said they would leave if the brand “made it harder to earn travel points.” Balancing the ROI your brand needs from the program with the right earn/burn structure and relevant experiences that both retain and grow your membership is key.

How this is playing out with brands

  • Rewarding business travelers sooner. The new IHG One Rewards includes the addition of Milestone Rewards, enabling travelers to earn benefits during stays every 10th night, starting at 20 nights, in addition to points. Rewards include a choice of meaningful (business) options including bonus points, food and beverage credits, suite upgrades, and even an Annual Lounge Membership.
  • Incentivizing members to plan (months) in advance. MSC Cruises revamped MSC Voyagers Club with the launch of the Voyagers Exclusives feature. In addition to an expanded number of discounted itineraries, members will also be able to save more, plus earn a $50 shipboard credit at six months out and double points if they book at least 12 months in advance.
  • Helping frequent fliers save. Alaska Airlines introduced Flight Pass, a subscription add-on to its loyalty program. In exchange for $49, $99, or $189 a month, frequent fliers of routes between Arizona, California, and Nevada could benefit from additional savings, with flights starting at $0.01. All Mileage Plan members earn miles and elite members retain their tier-specific benefits.

Opportunity: Focus on what drives value for your customers.

Loyalty programs are often refreshed or revamped in response to member feedback. Connect with customer service teams to find out what members have been saying about your program and adjust accordingly. We’ve been seeing a lot of brands add flexibility to their programs by layering memberships or subscriptions on top of existing programs to provide extra value to members—empowering them to personalize their own experience.

Facilitating trip planning and preparation

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To help relieve stress, many brands are automating or streamlining aspects of travel planning—leaning into digital transformation to streamline the traveler’s journey from the very beginning. But, as inflation and financial uncertainty continue, travel remains nonessential for most. Although consumers are still planning trips, they’re adjusting details to offset costs. Some brands are even taking it a step further—offering friendly cancellation policies and travel insurance options to improve the booking experience and provide peace of mind.

When it comes to booking accommodations, flexibility is key for both younger and higher-income travelers. According to Morning Consult, 52% of U.S. adults are willing to pay more for a hotel or vacation rental booking that offers free cancellation, and up to $100 to ensure they have that flexibility. This is also true for frequent travelers.

For transportation, Gen Z and millennial passengers are willing to pay more for flexible policies across the board. Per Morning Consult, Gen Z and millennials are 20% more likely than Gen X and baby boomers to be willing to pay extra for plane fares offering free cancellation with more than a third of Gen Z and just over a quarter of millennials saying they will pay $50 or more for that flexibility. Considering these sentiments and how booking windows have shortened, offering flexible policies could help travelers feel more comfortable planning farther in advance.

How this is playing out with brands:

  • Facilitating on-the-go road trip planning. Wyndham’s Road Trip Planner app helps travelers plan stays before and during road trips. They can curate their itineraries by searching for locations using filters such as drive time, distance, preferred brands, and pet-friendly locations. Multiple reservations can be viewed on one screen and bookings can be settled via the app with points, cash, or both.
  • Helping travelers collaborate on trip planning. To help encourage and support group planning, Expedia expanded Vrbo’s Trip Boards co-planning feature to the Expedia website and Board creators can invite other people to save, like, comment on, and vote for hotels, activities, and flights to book together.
  • Speeding up baggage check-in. Alaska Airlines released the industry’s first electronic bag tags last fall. Passengers can now register their luggage before they leave for the airport by using an app on their phone to transfer flight information to the tags. The airline estimates a 40% time savings to passengers dropping off checked luggage before their flight.

Opportunity: Make the booking process as easy as possible.

Whether it’s group or solo travel, the discovery and booking process is your chance to deliver (and redeliver) a good first impression. If someone else can do it better, they may be more likely to get the ultimate conversion. Consider your user experience across channels, when and where you communicate booking information and purchase add-ons, in addition to the effectiveness of your search functionality.

Improving in-flight and on-site experiences

Brands continue to leverage technology to improve travel journeys both in-air and on-property. Improvements include creating smoother journeys, delivering on personalization where possible, and offering increased entertainment options. In some cases, the technology employed is a catch up to traveler expectations and in other cases, it is testing out how new technology might be applied in the travel and hospitality industry to bring additional value to consumers.

Inadequate technology in the industry has become painfully obvious for both travelers and brands alike. According to Skift, 32.6% of travel executives rank “legacy/outdated technology” as the most likely business disruption in (2022 and) 2023. And the digital transformation trend doesn’t stop there, with 43.3% of travel executives listing automated customer service and 33.2% listing contactless and self-serve options as top digital strategies for customer service initiatives.

How this is playing out with brands:

  • Modernizing the in-flight experience. Southwest Airlines announced it is spending $2 billion to add much-needed upgrades to its in-flight experience. Changes include up to 10X the current Wi-Fi bandwidth, a wider movie selection, and USB A and C ports on the backs of each seat, among others.
  • Gamifying the stay using augmented reality. Marriott’s Moxy hotel chain launched a gamified “Moxy Universe, Play Beyond” experience this summer that encourages guests to explore their hotel using their smartphone and win prizes. Guests can customize a digital avatar, and activate their experience by scanning a QR code at check-in.
  • Allowing members to pay with points. MGM Resorts recently revamped its rewards program, now MGM Rewards, to benefit both gamers and non-gamers alike. Now, members can use their points, valued at 1 cent each, to pay for on-site dining and other services, in addition to hotel stays, entertainment, and gaming, directly with their rewards account.

Opportunity: Test and learn with new tech.

Brands that continue to invest in innovation and learn more about their customers and their experience position themselves to stay competitive. It’s important to update technology before it gets so outdated that it causes service disruption, as Southwest Airlines 2022 holiday travel case illustrates. To evolve with consumers, it’s also critical to test new technology that has the potential to improve the customer experience either directly or through better operating efficiencies. As with all new tech implementations, make sure to test them in controlled environments before deploying them across your business and market portfolio.

Partnering for relevance and more utility

The trend of partnering with everyday brands has continued even as leisure travel has returned to pre-pandemic levels. With the increasing complexity seen in travel and hospitality loyalty programs, it’s no surprise that companies are marketing loyalty programs (versus individual brands in the case of hospitality) as lifestyle brands. These programs offer a range of value outside of points redeemed for flights or room nights. Primarily through partnerships, these loyalty programs also offer day-to-day savings on food and retail, as well as access to once-in-a-lifetime aspirational experiences—and they’re doing so through partnerships.

How this is playing out with brands:

  • Delivering value daily. Delta SkyMiles and Starbucks Rewards members may now link membership accounts to earn extra value. Members earn one mile per dollar spent with Starbucks and double Stars on days that they fly Delta. Additionally, members earned 150 Stars and 500 miles if they had linked their accounts by the end of 2022.
  • Refreshing exclusive events and opportunities. Hilton Honors announced in September an abundance of new “once-in-a-lifetime” experiences offering members the chance to meet some of their favorite artists and celebrities. Among the events offered later last year were a private lunch by celebrated chef Nancy Silverton in Singapore and an exclusive singing lesson with Pentatonix in Los Angeles. Marriott Bonvoy, IHG One Rewards, and Accor Live Limitless have also announced similar updates to unique experience offerings.
  • Offsetting fuel costs. Sonesta Travel Pass members can save at Shell locations when they join the Fuel Rewards program. Last summer, members had the one-time chance to save 30 cents per gallon and this year, they will have the chance to save $1 per gallon after completing a two-night stay by the end of March.

Opportunity: Assess existing partnerships.

Consider the goals of your existing partnerships and how success is defined and measured for each. While some partnerships are long-term and others are limited campaign-based, it makes sense that your partnership mix will change as business needs and customer expectations evolve. Don’t forget how important it is to clearly communicate upcoming program changes, including partnerships, to members and highlight what the changes mean for them.

Brands are starting to make real changes.

Even amid ongoing inflation, leisure travel appears to have rebounded to pre-pandemic levels in the U.S. and brands should prepare for steady travel demand. As consumers react to financial pressures by staying closer to home, shortening trips, and booking closer to their trip dates, brands should revisit their roadmaps and multi-year strategic plans to adjust for changed expectations and current-state realities.

Travelers are much more tech-literate than three and a half years ago, and they expect brands to be more tech-savvy as well. To support better UX across multiple channels and touchpoints, brands may need to update or sunset outdated systems. Leveraging more sophisticated technology platforms and integrations that protect consumer data while also delivering more personalized experiences is key to maintaining relevance and connection with evolving consumers.

The program of the past won’t cut it when it comes to delivering value to loyal members. As they look to stay fresh, many brands are redesigning or launching entirely new programs in order to stand out in a highly competitive landscape. Members expect to see a fair value exchange and flexibility with brands, particularly with how they earn and redeem—increasing point utility and optimizing partnerships lets members drive their own experience with your brand. And tapping into customer data to learn what makes customers excited and how to package benefits in a way that works best for delivering value cannot be overlooked—utilizing it appropriately can translate to increased trust and perceptions of reliability.

Changes in the travel and hospitality space are continually reaching towards a better overall traveler journey. Brands acknowledge they aren’t the only player across a traveler’s journey, but they can help smooth transitions between their brand and others—demonstrating empathy for the challenges that can arise along the way. By demonstrating commitment to a better travel experience overall, brands build deeper, more emotional connections with their customers, drive increased loyalty and Participation with their brand, and reap the optimal ROI from their loyalty efforts.

Meet the author
  1. Lauren Sutherland, Senior Strategist, Customer Strategy, Insights + Research

    Lauren is an expert strategist with nearly 10 years of brand development and customer marketing experience. View bio