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Evolution of customer loyalty in the travel and hospitality industry, post COVID-19

26 May 2021

The 2020 COVID-19 pandemic caused a worldwide reduction in international travel; -74% on the previous year, as everyone was told “stay home, save lives”. As a result, the once burgeoning business of travel and hospitality lost an estimated $1.3 trillion dollars.

The 2020 COVID-19 pandemic caused a worldwide reduction in international travel; -74% on the previous year, as everyone was told “stay home, save lives”. As a result, the once burgeoning business of travel and hospitality lost an estimated $1.3 trillion dollars, with repercussions felt throughout the industry. Key players like STA travel went into administration and Virgin Atlantic, amongst a host of otherss, unfortunately made huge redundancies.

Strategies to survive

For many travel and hospitality brands to survive the pandemic, they quickly worked on strategies to stay open and reduce the loss of existing bookings. With promises to operate in the future, many provided vouchers to keep their valued customers’ bookings open. But, as the pandemic continued and with no end in sight, it became evident customers required the cash previously invested in getaways; by mid-May IAG’s British Airways had processed 921,000 cash refunds.

In  USA many airlines looked to their loyalty programs as collateral, borrowing money from the government to ensure they can provide customers with services in the future. Loyalty programs are easily underestimated, but for their owners and operators they can be worth more than the brand itself. The world’s largest airline, American Airlines is valued at roughly $6 billion, whereas its passenger loyalty program, ‘AAdvantage’ has an estimated worth of $24 billion.

Other strategic measures included making the most of  owned estates, repurposing them to support the local clientele rather than relying on tourism as they had once before. Delta airlines offered medical volunteers free round-trip flights to areas in the USA that were hit hardest. In London, luxury hotel Claridge’s opened its doors and welcomed 40 key workers and NHS staff to stay at the hotel.

Some pivoted offers through innovation like Airbnb, who  offered experiences at home. This launch became their fastest growing product and while it may not make up for the loss of tourism, it provided a way to keep customers engaged during a time of uncertainty and may have contributed to its survival.

A more unconventional approach saw a number of ‘flights to nowhere’, some reportedly selling out in 10 minutes . These roundtrip flights took passengers on sightseeing tours from the sky: an Australian airline sold a flight lasting 7 hours, while in Japan a small scenic flight lasting 1 ½ hours was piloted.

Surviving and thriving post COVID-19

Fast forward to 2021; with the release of multiple vaccines , the time is right for brands to concentrate on their customer engagement and loyalty strategies to make up for the time lost. For customers the fallout of the pandemic has led them to review their needs in relation to travel, so addressing this up-front will be a great place to start for any company lost in the mire of a new post-pandemic world.

Firstly, it’s safe to assume a reluctance to travel due to restrictions on boarders, travel passports and testing. Therefore, ‘staycations’ may become the more popular and appealing option this in turn is brilliant for the likes of ‘local’ or domestic hotels and travel providers. Staying local and creating innovative content promoting the benefits of exploring ‘unknown, known’ areas, will pique interest making previously uninspiring destinations more inspiring. With local destinations being top of the list, this can provide opportunity and benefit multiple industries as a result: train and rail travel, petrol stations due to increase in leisure driving, hire car companies and small businesses as the country opens small stores, pubs and restaurants.

Customer loyalty after the pandemic is going to be ‘up for grabs’ as loyalty schemes or points expire, the opportunity to travel is vastly reduced due to travel corridors, (therefore the ability to collect points is minimised) and companies who have shut down have created a void in their past customers list of preferred brands. It will be key to get in front of these loyal prospects by reviewing existing loyalty schemes and the marketing strategies employed. Promoting benefits to your existing customers and values to new customers, will reenforce engagement and validate the role of a loyalty program to new customers who are in the market for a ‘new favourite’.

Past loyalty rewards, ‘old’ benefits and values of the schemes themselves provide an opportunity to reimagine these for the new normal. Rather than providing your customers with the usual travel related rewards – if the pandemic taught us anything, it forced us to think about and value our ‘self-care’, especially when we were unable to get away for a relaxing holiday. Opportunities for cross-brand collaborations providing ‘added experiences’ may be worth considering in a post pandemic world.

Lastly, when thinking back to the beginning of 2020 and the chaos COVID-19 reaped, it was evident that many businesses were not well enough equipped to cope with a sudden rush of communications from their customers. Being on hold was a common occurrence or not even being able to contact brands directly had a big impact on customer satisfaction. Customer contact lifecycle strategies are therefore going to go through a state of evolution as we adapt to new travel regulations, rules and an increased awareness of health and wellbeing during travel. In this regard multiple touchpoints, pre, during and post travel, provide opportunities to engage with your customers (and visa versa), that reenforces a brands status in a customer’s mind. Services once considered and promoted to luxury travellers due to cost, may now find they have a wider audience, as more customers realise their benefit in an alternate way. For example, upgrades to different classes where there may be less people, access to lounges where there are less people in a larger space than departure halls, or upgrades to larger rooms where they have more space to work/exercise during their stay.

Reimagining loyalty post COVID 19

The post pandemic world will kick start a new reimagined approach to the ways in which travel and hospitality brands engage with customers and inspire loyalty. To be successful is to know your customers, what they want and need by listening to them – especially when it comes to gaining new loyalty ambassadors and providing them with coveted rewards. This is especially true when analysis (referenced above) of a loyalty scheme can result it being 4 times more valuable than the brand.

Knowing where to start can be overwhelming, so choosing the right technology to support you will be vital. As leaders in this area we at Capgemini can help empower  you to re-imagine your travel and hospitality loyalty strategy, journey, and positioning to answer the challenges and evolved consumer behaviours in the post COVID-19 world, along with the right technology needed to support your vision. In our next blog we’ll explore some of these recommendations and our view on what technology can help your organisation to deliver a best in class loyalty program.