Hotel Loyalty Programs: What Actually Works for an Independent Hotel

The Marriott Bonvoy loyalty program has around 200 million members. Their points can be spent in thousands of hotels in almost any city a guest might visit around the world. You have one hotel, if not a couple properties. So why even talk about loyalty programs?

That’s where most independent hotels make the mistake. The aim is not to build a smaller "Bonvoy", but to create an incentive program, tailored to your hotel size and demand. There are different kinds of loyalty programs designed to nurture a positive and lasting guest relationship. In fact, most boutique hotels will have a few guests who regularly come back. Setting up a simple reward system for them is already a great place to start.

This tactical guide gives you a quick test for whether a loyalty programme is worth running in your hotel, the four main to choose from, the associated costs, and how to set one up easily.

Ready to boost your guest relationships with a loyalty program? Book a free demo of Noovy’s hotel management system to see how you can track guests preferences, automate marketing campaigns, and explore the results all from one dashboard.

Table of Contents

What Is a Hotel Loyalty Program?

Why Major Chain Loyalty Programs are Different

Should Your Hotel Have a Loyalty Program?

Loyalty Program Costs and Suitability for Independent Hotels

Hotel Loyalty Program Examples For Small Hotels

How to Launch a Loyalty Program

Hotel Loyalty Program: Wrap-Up

Frequently Asked Questions

What is a Hotel Loyalty Program?

A hotel loyalty program is designed to give repeat guests rewards for booking directly and coming back to your hotel. The incentives could be lower rates, points to save up and cash in, a status level with perks, or standalone rewards like complimentary breakfasts.

Most independent hotels already do a version of this in the form of hotel packages, but a program helps make it official. It also gives guests an added incentive to track their rewards by gamifying their loyalty. For example, when guests earn points and save up to a big reward, it fuels the guest experience with an exciting new incentive.

The key concept to remember is that a loyalty program provides rewards in return for loyalty. This is a trade, not a simple thank you. Therefore, it’s important to first decide what the aim of a loyalty program is for your hotel. Is it more direct bookings? Repeat stays? Not all programs are built for the same purpose, and identifying the goal helps refine your strategy.

Typically, there are four main types of loyalty programs for hotels:

• Points: Guests collect points by booking directly, upgrading their room, or spending on hotel amenities. They can then spend them for discounted stays and services.
• Tiers: The benefits a guest is offered get better the more often a guest stays at the hotel. This is very ideal for business travellers.
• Member Rates: Also called hotel membership programs, guests get a lower price for joining the hotel (through account or email) and booking their stay directly.
• Coalition: Collected points can be used with other businesses. This could be other branches of the hotel, or other businesses they are in agreement with, such as taxi services, theme parks, or local tourist activities.

In all four cases, a loyalty program in hotels is designed to recognise hotel customer loyalty, not create it. Guests come back to a hotel because they were happy with it. A loyalty program simply makes coming back a bit more appealing, and lets you measure the results.

Knowing who your repeat guests are and staying in touch with them is a separate job entirely, generally managed by a modern guest management system.

Why Major Chain Loyalty Programs are Different

Vast hotel chain programmes work on a scale that no independent hotel could replicate, nor should it. To better understand why that is, we can look at the reason why chain programs work. Here are three key reasons which set them apart from independent hotels:

• Points Coverage: Guests from big chains can spend their points almost anywhere. A Bonvoy member earning points in Rotterdam can use them in Lisbon, Seoul, or Cairo. That is what makes collecting them worth the effort; the scope. In an independent hotel, a guest earning points can only spend them at your hotel.
• Unused Points: Points that guests don’t use are free money for a large chain. Since plenty of members never redeem rewards, a chain can predict how many across the millions of members they may save. An independent hotel cannot predict that across less members. A guest claiming a free night in a quiet month is a real cost.
• Bank Deals: Chains can earn money from credit card deals. A big slice of major chain program income comes from private deals with banks on co-branded cards. That money is not available to independent hotels.

The purpose of a loyalty program in an independent hotel is to incentivise returning guests, not directly earn more money. Think of it as a delayed discount that the guest can cash in when they want. One fair exception, if your independent hotel owns three or four spots in different cities, guests still get a real choice about where to spend their points.

Should your Hotel have a Loyalty Program?

Before initiating a hotel loyalty program, it’s worth asking if it adds value to your hotel operations. There are six key questions that can help determine whether running the wrong program will cost your hotel more than running no program at all:

1. Do you have returning guests? A program is designed to boost repeat guest behaviour that already exists, but it rarely creates loyalty from nothing. If almost none of your guests return, then the actual hotel experience needs improving first.
2. Is your demand repeatable? Hotels in urban centers or popular destinations such as summer coasts have something to build on and can see the value in having a loyalty program. Hotels serving once-in-a-lifetime trips would likely not need one.
3. Could a guest realistically come back within a year? Many factors affect this, but if most guests are unlikely to return, then they will never cash in points. This reduces your loyalty program to just a mailing list, which would be cheaper to do anyways.
4. Can your systems recognise a member? In the absence of a modern hotel management system, keeping track can be a nightmare. Spreadsheets and sticky notes at reception won’t help, and could cause friction if a hotel forgets its member.
5. Can the perks be explained simply? Loyalty programs should make their offer clear. If it needs a lengthy printed card to explain what you earn, guests are unlikely to mention it. If nobody mentions it, nobody joins.
6. Are you offering something guests want? A common mistake hotels often make is to offer a benefit nobody values. It’s important to understand what hotel guests look for. Offering something undesirable can be worse than offering nothing at all.

Loyalty Program Costs and Suitability for Independent Hotels

Whilst most guides tend to only focus on point systems, there are actually four key types of hotel loyalty programs at your disposal. These loyalty programs mainly differ on direct and indirect costs; direct being the value of the perk a guest is receiving, and indirect being the extra labour a loyalty program produces. Let’s take a look:

For an independent hotel, member rates stand out as the strategy that deserves most attention, because it helps skew the OTA to direct booking balance to the hotels favour. This is because it’s designed to generate more guest loyalty by encouraging direct bookings. In addition, avoiding OTA commissions of up to 30% leaves more revenue with your hotel.

In the European context, coalition programs don’t get enough attention, despite being a great option for independent hotels seeking more local collaboration. Instead of facing the market alone, local restaurants, activity centres, transport services, and sightseeing spots can coordinate with your hotel to create a mutually sustainable hospitality economy.

In fact, some initiatives in the US - such as Stash Rewards - run coalition programs with a collection of unique boutique hotels across the entire country, allowing point earning guests to cash in their rewards across all participating properties.

Hotel Loyalty Program Examples For Small Hotels

Hotel loyalty program examples that work best are the ones that are easy to understand. Complicated schemes and stacked tiers require staff to administer and management to track. It’s best to avoid them as a small independent hotel and instead try these:

• Straight Member Rates: Offer guests to join your hotel program at the booking or check-out stage. From then on, get a set percentage off these direct bookings (e.g. 15%). There's nothing to track, nothing expires, and there’s no ambiguity.
• Perks Only, No Discounts: Offer returning guests a late checkout and their preferred room type if it is free. This costs the hotel almost nothing most nights, and guests still feel more special than you would expect.
• A Multi Stay Benefit: Once multiple visits have taken place, offer a guest something specific. For example, on the third visit, a guest gets a free night, dinner for two, or a room upgrade. The offer is quick enough that people actually reach it, and the reward is a real thing that guests can be incentivised by.
• Local Coalition Networks: If your hotel needs a point system, but you don't want to run it entirely alone, this could be a good approach. It also provides guests with a local network of businesses they can benefit from.

The reason why these programs work for smaller hotels is because they are not trying to emulate a loyalty program a large corporate chain would use. Effective small schemes should be designed to add benefit to your hotel operations, not strain your staff and budget.

How to Launch a Loyalty Program

Now that we’ve covered the types of loyalty programs that exist and the costs associated with them, it’s important to put together a solid launch program to avoid unnecessary roadblocks. Here’s our seven steps to make sure your loyalty program is up and running smoothly:

1. Decide Your Goals: Do you want more direct bookings? More repeat stays? Longer stays? It’s good to pick a clear goal and direct your program to achieving it.
2. Choose A Simple Method: Unnecessary complexity added at the start of a loyalty program is often detrimental to an independent hotel. Keep it clear and simple.
3. Calculate The Costs: Having a rough estimate of what running a loyalty program can cost your hotel is crucial. At the end of the day, there is an exchange taking place between the hotel and the guest, and this exchange needs to benefit your hotel.
4. Make Clear Rules: What is the benefit? Who qualifies? Does the program expire?, Can be given to someone else? How can members opt out? While it’s time consuming, making the rules clear helps skip arguments in the future.
5. Create A Joining Flow: The most ideal place for this is during the booking process, or at check-out when a guest leaves. Keep the opt-in process as simple and frictionless as possible to make it even more enticing.
6. Get Consent Right: Running a programme means holding guest details and using them for marketing, which has rules attached in the EU. Guest data privacy is important, and should be clear before launching the program.
7. Track The Results: Two numbers matter most; sign-ups and repeat rate. While sign-ups are easier to grow, they prove nothing on their own. What matters is whether members actually come back, so it’s important to keep both figures in mind.

Finally, a modern hotel booking engine designed to welcome guests and entice direct bookings ensures the highest conversion rate. A member rate that is invisible online will not help, as over 80% of travelers seek online hotel booking methods (Hilton, 2024).

Hotel Loyalty Programs: Wrap-Up

The most important takeaway is to remember that major hotel chains should not be copied. Their points systems work because their guests can spend them all over the world. For an independent hotel, a more strategic approach is necessary.

To put it simply, give guests something real and tangible, give it straight away, and give it to guests who book directly and keep coming back. This is a top small hotel management tip that nurtures a guest relationship built on loyalty.

Why Noovy?

Noovy’s state of the art hotel management system is designed to support independent hotels in their growth; every step of the way. Here’s how:

• Fully Integrated System: With a channel manager, booking engine and PMS that work together, recognising loyal guests has never been easier. Your booking engine recognises a repeat stay and pulls up the guest profile instantly to the front desk.
• Centralised Guest Records: Spotting a returning guest is one part of the equation. Do you remember their preferences? Noovy’s integrated CRM does. Centralised guest details ensure that loyalty programs are tailored to specific guest preferences.
• Frictionless Processes: With a unified design language, and a simple sign-up process, guests can be offered to become members right in the booking flow, or while they check out from the front desk or one of Noovy's self service kiosks.

Noovy is built for independent hotels from the ground up. Designed to work for you, without the need of a dedicated marketing team.

Ready to see how a modern booking engine turns returning guests into direct bookings? Book a free demo with a Noovy expert today!

Frequently Asked Questions