Loyalty rewards go a long way toward ensuring customers continue shopping with a certain brand or family of brands. Everyone from grocers to clothing stores to restaurants, and beyond are aiming to reward returning consumers with enticing reasons to continue purchasing their goods and services.
The travel industry is one of the biggest purveyors of loyalty programs, and for good reason. The industry is currently worth $8.27 trillion. In 2017 alone, it recorded direct online sales of $630 billion and is projected to reach $817 billion by 2020. So, it only makes sense that each and every brand in travel wants to get as big a piece of the pie as they possibly can.
Some customers choose to be loyal to an airline, hotel chain, or rental car agency because they seek the perks that come with an elevated status in the loyalty programs.
Certain hotel brands, for example, offer late checkouts for customers with a certain status level. Other customers participate in loyalty programs purely because they can receive points, and potentially, a discounted or free service or stay. Regardless of the reason, loyalty rewards serve their purpose in driving sales and boosting feelings of goodwill toward brands.
The average consumer signs up for multiple loyalty programs for the purpose of obtaining points whenever they must purchase from a specific brand. In 2016, U.S. consumers alone held 3.8 billion loyalty reward memberships, a 15 percent increase over 2014’s 3.3 billion. The irony, though, is that a consumer may be earning loyalty rewards from brands they use infrequently. As a result, $360 billion worth of loyalty reward points go unredeemed each year, which is equal to 48 trillion points, according to Global Loyalty Insights. Part of the challenge with having multiple travel loyalty reward programs is that many consumers cannot keep track of who they have rewards with, how many points they have, and when they expire.
Numerous pain points are also to blame for redeeming loyalty rewards, particularly in the travel sector. A recent J.D. Power study found half of the respondents said they don’t understand how to earn or redeem their miles from frequent flyer programs. In addition, nearly three-quarters of airline loyalty program members prefer to save their points or miles to redeem larger rewards, but it can take years to secure enough points for a dream trip due to fluctuating reward prices. Some loyalty programs allow transfer of points to a travel partner, such as a hotel chain to airlines, however, the systems in place are typically complex and require customers to call customer service to transfer points. Certain airlines also allow miles to be booked with their alliance partners, however, these allowances are also murky at best.
With so many headaches facing consumers at every turn in travel loyalty rewards, it only makes sense that the industry is in need of a revamp. Blockchain has the potential to revolutionize such programs, as it has done with so many other industries. Using blockchain technology, we can make all travel loyalty rewards trackable, tradable and potentially convertible into other crypto or fiat currencies – all at the benefit of the consumer.
A primary advantage of blockchain integration is that it opens the travel market to the crypto space with tokenized value transfer. Wallet holders can send and receive tokens and other cryptocurrencies, alongside holding their travel loyalty rewards, even if they’re not already using blockchain technology. Furthermore, blockchain can allow users to convert travel loyalty rewards into tokens, and then into any other supported cryptocurrency, token or fiat currency, if so desired.
While some credit cards allow for cash back as a form of rewards, it has typically been limited in nature; blockchain enables this type of freedom in leveraging travel loyalty programs through a decentralized hub, encouraging users to consolidate all their points into a single wallet. The travel loyalty rewards industry may be complex, but blockchain technology shines new light on obsolete processes to refresh them for 21st-century consumers.