Hotel Industry Analysis – Page 2
Even today, frequent flyer programs loom over their hotel-industry counterparts in
terms of overall membership. For example, American’s AAdvantage program has
passed the 45 million-member milestone. The largest programs among the hotel chains
have less than half as many members; the 3 largest are estimated to have approximately
20 million members each.
Hotel chains began to promote their own loyalty programs to woo and wean travelers
from the airline programs. Part of this strategy included the use of cash to purchase
awards - - rather relying on free hotel nights as a primary award benefit. To compete,
many frequent guest programs now offer awards such as airline tickets, airline miles,
retail merchandise, and gift certificates from national restaurant chains. For example,
the 6 frequent guest programs offering no-annual-fee credit cards also allow cardholders
to exchange hotel points for airline miles.
The development of co-branded credit cards was a natural evolution for the larger
frequent guest programs. The addition of a point-earning credit card allows a
cardholder to accrue points more quickly and increases the value of a frequent guest
program to the member.
Overview of Co-Branded Hotel Credit Cards
Co-branded credit cards accrue frequent guest points for charge activity. Fee-based and
no-annual-fee credit cards are currently offered by 9 of the frequent guest programs
included in the survey. Hyatt Gold Passport and TripRewards are among the larger
hotel companies that don’t offer a credit card. TripRewards is the loyalty program
associated with these hotel brands: Amerihost Inn, Days Inn, Howard Johnson, Knights
Inn, Ramada, Super 8 Motel, Travelodge, Villager and Wingate Inn.
Unlike the airline industry, the majority of hotel co-branded credit cards do not assess
an annual fee. This is part of the strategy to attract cardholders from the same pool of
travelers that are candidates for the mileage-earning cards offered by the airlines.
“The most frequent of flyers, often called “mileage junkies,” are likely to remain loyal to
the airline credit cards,” said IdeaWorks president Jay Sorensen. “But the lure of no-
annual-fees and a diverse choice of awards will likely steal fee-adverse consumers from
the airline programs. At a certain level, all of these programs are competing for the
same consumer.”
The 7 no-annual-fee credit cards available to program members are compared on Table
1. Among the 6 frequent guest programs, Hilton HHonors is unique because it offers 2
no-annual-fee credit card choices: American Express and Visa. The amount of charge
activity required to earn 1,000 airline miles or a free hotel award night has been
calculated for each program to allow easy comparison. Table 1 also lists the airlines
participating in mileage exchange offers associated with each of the frequent guest
programs.