Travel loyalty in 2023: subscription models, data and gamification

7 December, 2022

Airlines will look back more favourably on 2022 than the two previous years, but they are still having to deal with a public that has profoundly changed its traveling behaviour.

People want booking flexibility in case COVID-19 - or anything else for that matter - interrupts their plans. Some will still drive farther and forgo flights, reserving airline travel for must-do long-distance trips. That is all before we even start to consider sustainability.

This has changed the ways that companies have started looking at the power of loyalty.

Customer loyalty programmes reward customers who repeatedly interact with a brand. It's a customer retention strategy that encourages customers to continue buying from a brand rather than competitors. The more a customer buys or engages with the brand, the more rewards they earn.

However, in the post-COVID era, traditional travel rewards have lost their appeal in large part because the concept is no longer sustainable. Analysts have described a process that has 'de-escalated travel rewards programmes to an earlier lifecycle stage'.

The power of loyalty - what are travel rewards?

Travel rewards programmes are a catch-all term for the loyalty programs run by various travel businesses, including frequent flyer programmes, railway loyalty programmes, travel agency reward systems and cruise line reward programmes, etc.

The goal of a travel rewards programme is to provide extra incentives for customers to travel with a specific brand. Loyalty programmes usually allow members to travel for lower fees based on the number 'miles' or points the member has collected. Access to VIP lounges, complimentary drinks and upgrades to baggage allowance are also key components.

The challenge of slower business travel recovery

Loyalty programmes originally gained currency among frequent business travellers with deeper pockets, but business travel has yet to see a full recovery.

That means airlines are now upping the ante on their loyalty programmes to attract a wider range of members - even those who don't even travel that often - and to deliver the kind of engaging, timely experiences that the digital-savvy consumer has come to expect, reports Mastercard.

The payment processing specialist has identified some key trends for loyalty programmes in 2023. At their best, airline loyalty programs will emerge as "something of a life hack," it says, with programmes that can enhance shopping experiences, expedite travel and even align our lives with our personal values.

This will mean "consumers will view their membership as a necessity," it adds. Ultimately that's what brand loyalty is all about.

Subscription models will continue to grow

Low-cost airlines have long been fans of membership subscription models, offering priority boarding or dedicated bag-drop facilities. Lured by the promise of more revenue, full-service operators are piling on too, notes Mastercard.

It highlights UAE carrier Emirates Airline and US carrier Alaska Airlines has examples.

Emirates Airline offers Skywards+, a three-tiered paid subscription, through its Skywards programme. Each level comes with perks like a 20% bonus on miles, coveted lounge visits and an increase in baggage allowances.

Meanwhile, Alaska Airlines is bundling flights within California, Nevada and Arizona - for a monthly fee, travellers can buy a set number of flights for as little as one cent (plus taxes) each way.

Data becomes paramount to creating personalised customer experiences

Airlines will increasingly harness data from bookings, email engagement, loyalty transactions and social media engagement to give customers the experiences they want, identifies Mastercard.

By tapping into data from a customer's flight booking and loyalty member profile, it observes, that an airline could remind a passenger to renew her passport before an upcoming international trip or offer day use of nearby hotel facilities when travellers are facing long layovers.

Airlines will zero in on less frequent travellers

Smart airlines have already taken steps to generate traffic from infrequent travellers, such as lowering requirements to qualify for elite status, acknowledges Mastercard.

Now, it notes, airlines are hunting for more ways to deepen those relationships, such as perks through a co-branded card or using data to send discounted mile redemption offers to a customer's preferred locations.

More gamification - with a focus on sustainability

Gamification "creates excitement and keeps people engaged through a mix of social collaboration and healthy competition," says Mastercard. One of its partners reports that applying gamification to its loyalty marketing campaign drove engagement up tenfold.

In addition, some airlines are tying sustainability efforts to gamification by offering miles redemption for carbon offsets or green rewards, it says, helping the companies reach their own sustainability goals while appealing to the growing number of consumers who connect their values to their wallets.

Everyday earn and co-brand opportunities will grow

Airline loyalty programmes are increasingly focusing on opportunities for members to earn points in between flight purchases.

Mastercard highlights a recent Harvard Business Review study shows that, even now, more than 50% of airline miles aren't earned on flights.

That may increase, it says, as airlines invest in co-branding opportunities beyond travel, such as new ways to benefit from e-commerce rewards platforms that let customers redeem points for popular brands.