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Guest LoyaltyIn the Fall 2006 issue of Hospitality

Upgrade, Mark Haley described many of business drivers for both points-

based and recognition-based loyalty programs. This article describes

the evolution of the basic systems infrastructure used to support these

loyalty programs.

In the mid-1970s, property management sys-tems retained a property-based hotel guest history database. This property database was

used to track a limited number of guest stay histo-ry fields such as room type preference and agent entered preference information. It was also used to track a limited number of stay transactions. Its purpose was primarily for guest recognition, for direct mail (cards from the general manager), and pre-populating name and address informa-tion for hotel direct reservations.

As an example, let’s look at the customer life cycle of Ms. Lauren Schott, a fictitious 25 year-old guest in 1977. Having spent four nights at the hotel, the general manager would send Ms. Schott a thank you card and invite her to return. When Lauren calls the hotel to make a future reservation, the agent would check the property management system for Lauren Schott and then welcome her back to the hotel. Her address would be pre-populated in the system and confirmed.

Over the next 20 years the amount of data fields grew to include personal preferences and other information useful to increasing the personalization of reservations and stays. In ad-dition, basic database analytics enabled better market segmentation and profiling. Red Lion, Signature Inns and other smaller chains offered programs such as stay 10 nights get one night free. So in 1992, Ms. Schott was now recognized as a frequent guest and offered a free night after her tenth night.

When the database was property-based, guest information resided on a minicomputer and later, as technology evolved, on a PC server. All the business rules were built within this system. Large hotel companies gathered stay information from the property-based systems and sent it to a corporate-based enterprise data warehouse (EDW) which resided on a main-frame. Smaller chains used minicomputers to store the centralized data.

As airline point programs became more

By Paul ManleySystems Supporting

popular and ubiquitous in the 1990s by offering miles for flights, hotel companies recognized the potential benefit of increasing guest affinity by offering points for hotel stays. As pointed out in the previous article, large multibrand companies could leverage their broad distribution so guests could earn points at many different locations. In addition to offer-ing points from stays at their own hotels, they also offered points from partners such as rental car and flower companies. Redemptions were expanded from their own hotels’ room nights to gift cards, merchandise sometimes direct or through a partner such as SkyMall.

Now in her forties with a family, Ms. Schott is carrying two or three airline frequent flyer cards to earn miles and two to four hotel cards to earn points. So her spend is divided among a small set of airlines and hotels as she accumulates miles and points to take her family on a free flight or hotel stay.

In the last few years, these programs began to offer the soft benefits of recognition programs from room upgrades, to concierge level services to guaranteed availability and more. In addition, the data collected from the loyalty program enhanced the database marketing function by providing additional insight to segmentation, behavior, trends and other analytics resulting in more effective marketing.

Loyalty Systems of TodayLoyalty programs, whether points-based,

benefit-based or a combination of both, are a component of a chain’s overall customer relationship management (CRM) strategy where the goal is to maximize a customer’s lifetime value. The technology components of these systems – whether used by large inter-national chains or small regional chains – can be broadly grouped into database, application and integration technologies.

DatabasesWithout speaking to any specific archi-

tecture the focus here is to a logical view of the data. At the core of the system is a loyalty member database. It keeps data associated with member address, tier status, points transac-tions, partners and data associated with busi-ness rules. This system needs to know which

rates qualify to earn points so that a member does not get points for a non-qualified stay. Yet the system also needs to be flexible so if the hotel wants to give points for a non-qualified stay, there is a function to enable this requirement.

In addition to the core loyalty member database, there is a transaction database of hotel stays. The consumed stay records containing the member number, the base dollar amount (either room revenue or total net folio amount), the ho-tel identifier and other relevant data which goes through a number of steps to ensure the data is accurate. The stay records are then loaded into the loyalty database.

Additionally, data marts are created (a data mart is a database that serves a specific group, such as the marketing department, so they can more easily and effectively analyze data that may be stored in the EDW and other internal or exter-nal databases). Data marts are used to support the various marketing campaigns to acquire new members and activate existing members. These campaigns comprise seasonal promotions, e-mail campaigns and direct mail. Hotel companies ac-cess a variety of databases which identify market segments, campaign success and filter opt outs or do-not-contact attributes.

Assuming Ms. Schott hasn’t opted out of marketing communications, she now receives e-mail or direct mail with targeted offers that are driven by her behaviors based on factors that include when she books, where she lives, how much she travels and so forth.

ApplicationsApplications support the business require-

ments of a loyalty program. These requirements can be broadly grouped into three groups. The first group, member profile management, covers the enrollment of new members and maintenance of demographic data. Accounting is the second group which covers the earning and redemptions of points, source transactions, financial liability, franchisee billing for points given to members as well as reimbursement of free hotel nights, and partner billing. Lastly, member services cov-ers the call center and Web applications for the member profile management noted above, han-dling of customer service requests, fulfillment of member kits or cards, fulfillment of redemptions, and the issuance of online (e-mail) and off-line (postal delivery) member statements.

H O T E L L O Y A L T Y

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H O T E L L O Y A L T Y

These applications may run on different servers and access various databases. For example, to bill franchisees, the current franchisee statement process may be enhanced by adding the billing and reimbursement amounts. The billing application creates the billing and reimbursement transactions for the statement from the relevant monthly transaction data.

If Ms. Schott were to enroll at a hotel in the TripRewards program of the Wyndham Hotel Group, she would receive a member kit containing a welcome letter, member card with her name and TripRewards number encoded on the cards magnetic stripe on the back, a member guide that explains the program and a copy of the terms and conditions. For Ms. Schott to get her card her data is passed from the property management system to the loyalty database. The loyalty database then sends the member number back to the property system so it can be tracked with her stay so she can earn her points. Another application pulls her basic enrollment information and passes it to the kit production application. Each record in the kit file identifies the member number to put on the card, the hotel brand through which the member enrolled (each card has the logo of the brand through which the member enrolled), and other attributes which indicate to the production house which language to use on the welcome letter, which member guide insert, and other information necessary for the kit production and mailing.

The kit file is PGP-encrypted (pretty good privacy – a common method to secure data that is transmitted) and uses a file transfer protocol (FTP) file transfer on a weekly basis to the mail house which runs an application to pull the right kit components (i.e., welcome letter, card, member guide, envelope, etc.) together. In this process the welcome letter text is lasered onto standard paper and the member’s name, number and logo of the brand through which he enrolled is lasered onto the card. So there are three different IT shops running no less than a combination of four applications to get new member kits sent to new members.

IntegrationIntegration has two meanings depending on whether the

context is technically oriented or user oriented. In the techni-cal orientation it is the capability for one system to pass data to another. There are a variety of transactions that need to be trans-mitted between the core loyalty database and various systems. In Wyndham Hotel Group’s case this includes the sending of hotel stay transactions from the hotels to the corporate database over a private network. However, between the corporate database and the core loyalty program the Hotel Group leverages its TIBCO-based enterprise application architecture (EAI). Stay transactions, hotel site IDs, property and call center enrollments and other transactions go over the TIBCO bus. The advantage of using EAI is that as the Hotel Group adds new partners, it can leverage the existing TIBCO messaging services to accelerate the integration of the new partner’s systems. For some partners, instead of using EAI, the Hotel Group uses a real-time XML transaction between the partner and the loyalty database for member enrollment into the loyalty system. For partner billing, the Hotel Group uses PGP-encrypted FTP.

Another flavor of technical integration is found on the loyalty program Web site (in the cases of Starwood and Wyndham) or on the brand site (in the cases of Marriott and Hilton). In either scenario, logging into the site creates a personalization of the Web page with the member’s name, point balance and other relevant information. In addition, some earn partners are integrated in such a way that they take the logged in membership number and pre-populate the purchase checkout process with the number.

In the user orientation, integration is more closely aligned with business process engineering. It is how the processes work together and with the technology to deliver program value. If Ms. Schott were to enroll in the Wyndham ByRequest program, she would enter her preferences for soft benefits such as an in-room beverage and snack. The ByRequest application generates a fulfillment report daily that lists the name, room and preferences the guest has indicated on the Web page. So on the day that she checks into the hotel, the Wyndham ByRequest manager will use the fulfillment report to make sure her beverage and snack preferences are delivered to her guestroom in advance of her arrival. Should Lauren report any dissatisfaction with her stay experience, it is noted in the ByRequest system. Because the event is logged, at the guest’s next stay in the same or a different Wyndham Hotels and Resorts hotel, the ByRequest manager is aware of the event and can take steps to ensure it is not repeated.

Loyalty Systems FutureContinuing into the 21st century, programs offer new earn and re-

deem partners based on the profile of their members. They seek to make the scope of the program relevant to their markets. In addition, the on-going market segmentation based on behavior, psychographics and trends enables more targeted marketing promotions and offers that drive cus-tomer share of wallet and leads to franchisee or hotel operations revenue. Lauren is increasingly rewarded for her business at hotels participating in the program with base, bonus points and with soft benefits.

Paul Manley is the director of loyalty marketing for Wyndham Hotel Group. He can be reached at paul.manley@wyndhamworldwide.com.