Required Reading for Frequent Flyers
Required Reading for Frequent Flyers
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[Jul 2010 Issue]
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Our annual review issue. We speak with ezRez, Cathay Pacific, GHA Discovery, Hyatt Gold Passport and Stash Hotel Rewards.


ezRez is the company behind several recent and innovative award offers from major loyalty programs such as United Mileage Plus, Delta SkyMiles and IHG Priority Club Rewards. We recently caught up with John Swanciger, Senior Vice President, Sales & Marketing of ezRez in their offices in San Francisco. Swanciger is responsible for product marketing, sales, business development and partner relations for ezRez. Prior to joining the company in 2006, John was Vice President of Marketing and Business Development for Starwood Hotels & Resorts Worldwide, Inc. where he oversaw global Web strategy, online marketing and Web partnerships for all Starwood brands. From 2000 to 2004, John was with Hotwire.com, an Expedia company, where he served as a member of the Web site's launch team and held various management roles in which he was responsible for spearheading a number of new product lines. Visit http://www.ezrez.com to learn more.

InsideFlyer
InterContinental Hotels Group Priority Club Rewards recently introduced Hotels Anywhere powered by ezRez. Can you tell us more about this new option?
John Swanciger
Hotels Anywhere allows Priority Club Rewards members to redeem points for any hotel, including those managed by IHG's competitors. ezRez provides the technology, including hotel inventory connectors, search functionality and the points-to-cash conversion capability. IHG configures and manages the system to meet their needs.

They set the points-to-cash conversion ratio, determine the look and feel of the Web site, control any customer segmentation rules and handle all the marketing. It's the first program of its kind and a true win-win for everybody involved. Between Hotels Anywhere and Flights Anywhere, Priority Club Rewards points have become a universal currency for travel redemption, just like dollars or euros. There are no blackout dates and members can book travel with any major airline or hotel in the world. That is a big benefit for members and we expect it will drive significant business for IHG.

IF
Can you share with us how long this project was in the works before it launched?
Swanciger
We don't disclose information that specific without permission from our clients. I can say that we have a longstanding relationship with IHG, and they were interested in Hotels Anywhere from the very start. That should not come as a surprise to anybody who has followed IHG the past few years. They have done a lot to increase customer satisfaction, from upgrading properties, to aggressive sales promotions, to innovative loyalty programs such as Hotels Anywhere.

IF
Priority Club is not the only travel company ezRez works with. Can you tell us a bit more about your other partnerships? What does ezRez do for these companies?
Swanciger
We are fortunate to work with some of the biggest and most innovative travel loyalty programs in the world. ezRez powers SPG Flights, which was the first hotel loyalty program to allow point redemption for flight awards, and United Mileage Plus Hotel and Car Awards, which was the first frequent flyer program to allow mileage redemption for hotel and car awards.

We also have a longstanding relationship with American Express, where we integrate with Membership Rewards for travel redemption and Delta SkyMiles for hotel and car redemption. These companies use us for three reasons. First, our technology provides full online travel agency functionality, including access to over 200,000 inventory providers, which can easily be configured to match their existing sites' branding and messaging.

Second, we have a unique points redemption engine that can convert any loyalty program point into any currency in the world. This engine also allows users to pay for travel with a combination of points plus cash, which is a very popular option.

Finally, our platform includes a fully-built administrative back office that allows clients to easily manage suppliers, set markups, define customer segmentation and control all system-wide business rules without costly custom development.

IF
Are you looking to expand to work with other travel companies? Any news regarding new partnerships you can share?
Swanciger
We are in discussions to launch new site and functionality with both new and existing customers. Client confidentiality limits what we can disclose, but next week we are attending the official launch of AirAsiaGo.com, which is AirAsia's newly-created online travel agency, in Malaysia. We also recently launched Azul Viagens in Brazil, making it the third time we partner with a David Neeleman-founded airline (the other two being WestJet and JetBlue). These partnerships do not include a loyalty component, but the functionality is there should either airline decide to switch to a points or points-plus-cash payment model in the future.

IF
Can you give us a bit of a background for ezRez? How and when was the company formed?
Swanciger
ezRez was founded in 2003 in Honolulu. In 2006, we moved to the San Francisco area and in 2007 we raised over $15 million in venture capital, which allowed us to develop the technology we use today. From the start, our management team understood the need for a global travel platform that could be managed in a simple and cost-effective manner.

At first, we approached clients to promote our product. But over the past year the tide has turned and now many of our sales prospects seek us out because they are looking for proven technology that won't take years or millions of dollars to develop.

IF
How do you ensure each client that the product you give them will reflect their particular needs?
Swanciger
Having a highly configurable product is key to meeting the needs of such a diverse client base. In order to be successful, any global platform needs to be localized for each particular market where it is used. Hence, we developed multiple business rules and display options that can be individually configured for each client. And beyond that, we have very powerful segmentation capabilities, so each client can tailor our product to fit their own customer segments.

IF
Do you think the trend in loyalty programs to offer a wider variety of non-flight and other types of awards will continue?
Swanciger
Yes, we expect this trend will continue because it is a big differentiator in a very competitive market. Frequent flyer and hotel loyalty programs capitalize on a virtuous cycle where the most valuable customers (those who spend the most) have the most points and are more likely to take advantage of multiple award types, which in turn drives loyalty and increases spend. These programs help airlines and hotels to differentiate themselves from each other, as well as from online travel agencies and meta-search sites that don't even have loyalty programs.

IF
One major complaint of frequent flyers is the inability to book flight awards on partner airlines online. Why do you think so many airlines do not offer this capability? Is it primarily a technological hurdle?
Swanciger
This is definitely not a technological hurdle for ezRez. We could easily power a setup similar to the one used by SPG Flights or IHG Flights Anywhere. Both have access to hundreds of airlines all over the world, and swapping Starpoints or Priority Club Reward points for airline frequent flyer miles is quite simple on our system. So the reason has to be more of a business decision. You would have to ask an airline executive why that is the case.

IF
The IdeaWorks and ezRez survey on the disparity in airline award seat availability generated a lot of media buzz. Why do you think there is such a large variance in award availability among airlines?
Swanciger
Every airline is aware of the tradeoff between filling seats with paying customers versus loyalty awards. Beyond that, each airline is faced with different factors that impact where they stand on that tradeoff. You would have to ask each airline what those factors are in order to get a true answer as to why there is so much variability.

IF
What do you feel the lowest-rated airlines such as US Airways and Delta need to do to improve their ranking?
Swanciger
I think Delta had its hands full with the Northwest integration. The combined airline flies 160 million customers each year, so it's natural to expect a few problems with reward availability as they figure out customer demand. The recent launch of the SkyMiles Marketplace--where ezRez powers Delta's car and hotel redemption--is a big benefit for Delta customers and a clear indication the airline sees value in its frequent flyer program. I have no doubt they will continue to offer broad redemption options to their members.


Cathay Pacific's Asia Miles was launched in February 1999 and has since grown its membership base to 3.7 million members worldwide. The U.S. has the third highest number of members in the program following Hong Kong and Taiwan. We recently caught up with Paul Loo, General Manager, Cathay Pacific Loyalty Programs.

InsideFlyer
Cathay Pacific offers the Marco Polo Club and Asia Miles. Can you tell us how they differ and why you have two separate programs?
Paul Loo
The Marco Polo Club is Cathay Pacific and Dragonair's customer loyalty program and recognizes the airlines' most frequent flyers by offering special benefits, services and recognition. The more a member travels with us, the more privileges he or she will be offered. Asia Miles is a neutral travel reward program. Asia Miles has 20 airline partners, including Cathay Pacific and Dragonair, which are only two of the very reputable air partners we have on board. In addition to airlines, members can earn miles with finance and insurance partners, hotels, retail, etc. There are nine categories in total.

IF
The Asia Miles Web site states that the program has 400 partners in nine categories. Can you tell us what you look for in a partner?
Loo
Yes, in fact by the end of 2010, we will have over 500 partners. We feel the variety of partners we currently have sufficiently covers a wide range of attractive earning and redeeming opportunities for our members and we are not looking to expand the number of categories at this point. In considering a partner, we evaluate everything from the reputation of the brand, the services that are offered, geographical coverage, etc. Any new partner must also complement the current line-up. We don't want to grow Asia Miles in terms of the number of partners just to play the numbers game. Depth and breadth are important in offering an attractive and valued proposition to our members.

IF
What do you see as some of the most compelling Asia Miles benefits for business travellers?
Loo
Asia Miles has an extensive range of partners to earn from and we have over 600 items available for redemption. There are numerous air earning and redeeming opportunities for our U.S. based members with the wide selection of American and South American carriers such as American Airlines, Alaska Airlines, LAN and Mexicana.

For our Marco Polo Club, of course there is the added benefit of recognition from our oneworld partners. One of the obvious attractive offerings for our U.S. based members has to be the chance to redeem miles for upgrades on Cathay Pacific and Dragonair flights. This is unique to Asia Miles only. Of course, the major hotel chains are also partners and then there are the car rental agencies throughout the U.S. and across Asia. These are all compelling Asia Miles benefits for business travellers.

IF
Cathay Pacific recently celebrated 20 years of serving the U.S. Can you tell us how the airline celebrated this milestone?
Loo
In celebration of this huge milestone for us, we are offering 20,000 bonus Asia Miles for first class and 10,000 bonus Asia Miles for business class when U.S. based Asia Miles members travel roundtrip from New York (JFK), Los Angeles (LAX), San Francisco (SFO) and Vancouver (YVR) to Hong Kong between June 15 and Aug. 15.

IF
Why should someone based in North America consider earning miles in Asia Miles?
Loo
Asia Miles is very much an 'international' travel reward program that is welcomed by many business travellers. Asia Miles offers numerous earning opportunities worldwide with its 400 partners. Asia Miles iShop is also very appealing to many members because you can earn miles with everyday purchases. At Asia Miles iShop, members can purchase everything from home appliances to electronic gadgets. Our selection of lifestyle redemption items is also very compelling. There are over 600 items available at http://www.asiamiles.com Members can redeem for everything from NBA team logo basketballs, to golf clubs or iPods. There are even Macy's gift cards available!

IF
One of the latest developments for frequent flyer programs are mobile sites for frequent flyers. What does Asia Miles offer?
Loo
http://www.m.asiamiles.com takes advantage of the latest mobile technology and offers members many features on their mobile device. Members can use online mileage calculators and award finders, browse the latest offers and lifestyle awards, and learn more about partner details. It has never been easier or more accessible for people on the go. m.asiamiles.com has a lot of graphical presentations also so it facilitates a better user experience. The newly refurbished Asia Miles mobile site is easy to navigate and can be accessed by our members anytime, anywhere. Members just need to enter m.asiamiles.com into their smartphone's browser or iPhone and bookmark it.

IF
How else do you keep in touch with your members?
Loo
Many ways and predominantly through e-channels. A monthly Account Summary is emailed and includes the member's Asia Miles account balance. (Members can also check their own balance any time at www.asiamiles.com.) www.asiamiles.com is very user friendly and we do encourage self-servicing by members. We also have eNews and eSummary which broadcast various news and promotions and we have something called e-Solus which is a more personalized message or offer based on the members' travel behavior and preferences.

We also keep in touch with our members in a more direct way when our front-line staff interact with passengers. We have a sophisticated CRM--customer relationship management team, and we proactively recognize members' special occasions.

Everything from birthdays, milestones and anniversaries are acknowledged. This is actually a huge logistical and technological undertaking as the right message has to be delivered to the right person at the right time to have the intended surprise and delight impact on the member.


GHA Discovery launched end of June 2010 as a guest recognition program for the Global Hotel Alliance (GHA). Based in Geneva, GHA is the world's largest alliance of independent hotel groups with 12 hotel brands worldwide. GHA Discovery offers "Local Experiences" for its members. We spoke with Folker Heim, Director of Loyalty Marketing, Global Hotel Alliance about the new program. Heim came to GHA from Kempinski Hotels as the Director of Customer Relationship Management.

InsideFlyer
Can you tell us a bit about the history of the Global Hotel Alliance?
Folker Heim
Through a network of like-minded CEOs, encouraged by a common technology partner, Micros-Fidelio, an initial meeting took place in London at the end of 2003 and rapidly developed into the realisation that there was an enormous business opportunity for all parties to join forces. A commitment was made immediately and in three months a business plan was put together to launch an Alliance. The Global Hotel Alliance (GHA) was launched in March 2004 and Kempinski, Pan Pacific, Rydges and Wyndham Hotels and Resorts were the founding members. Today, it's the world's largest alliance of independent hotel brands. GHA currently includes Anantara, Doyle Collection, First, Kempinski, Leela, Marco Polo, Mirvac, Omni, Pan Pacific, PARKROYAL and Tivoli, encompassing over 260 upscale and luxury hotels with over 60,000 rooms in 47 different countries.

IF
How do individual hotel brands benefit from being a part of the Global Hotel Alliance?
Heim
GHA is designed to enable small to mid-size brands to compete more effectively with the larger chains in distribution, marketing and sales, while enabling member brands to retain their independence and individuality. The alliance provides its member brands with global market reach, increased revenue opportunities, cost savings, global partnerships and brand recognition.

IF
Why did the Global Hotel Alliance decide to launch its own loyalty program, GHA Discovery?
Heim
Loyalty programmes are often mistaken with pure incentive programmes, which merely reward repeat customer stays by offering points and discounts. GHA has made the strategic decision not to compete in the points-driven market. GHA Discovery, our innovative guest recognition program, was designed to enhance the emotional bond between customers and our member brands. Customers will receive enhanced service and recognition, while earning experience-based awards across all our hotels. Our objective is to increase the number of repeat stays in our members' hotels, the number of multi-hotel stays within our member brands and cross-brand stays within GHA. Cost saving is also a factor--by joining forces our loyalty scheme is more attractive for small hotel brands.

IF
How is the GHA Discovery program similar to the airline alliance loyalty model?
Heim
Global airline networks and alliances offer customers seamless travel as well as status and recognition on all member airlines. Member transactions can be consolidated in one loyalty account and rewards redeemed for free flights on all member airlines of the alliance. GHA takes a very similar approach.

Using a sophisticated customer relationship management (CRM) system, specially customised for multiple brands by our technology partner Micros-Fidelio, GHA Discovery will enable our customers to receive enhanced service and recognition, while earning experience-based awards across all of our hotels. Modelled on the airline alliances' successful philosophy of providing reward and recognition across multiple brands, GHA will enable customers' membership status and personal preferences to be recognised in all hotels, regardless of the brand they choose.

IF
Will GHA Discovery replace individual hotel loyalty programs such as Omni Hotels Select Guest or will the new program offer additional benefits?
Heim
GHA Discovery will replace all current existing loyalty or guest recognition programmes of our member brands. In certain markets, however, we will begin with dual-branding, as programs such as Omni's Select Guest are well established in the domestic marketplace.

IF
How will the program work and what types of recognition and awards will members receive?
Heim
GHA Discovery is not a points-based traditional loyalty program. We provide our customers with unique Local Experiences at each tier level, as a reward for their loyalty. The GHA Discovery program is based on three tiers of membership (Gold, Platinum and Black). The hierarchy in the tiers of membership is driven by the number of nights spent in a GHA member hotel. The more nights members spend with us, the more exciting and impressive are the membership benefits and Local Experiences awarded. Each of our tiers is more aspirational and more exciting than the last one. Providing Local Experiences ensures that even on reaching the highest tier level members continue to be intrigued and excited by the product.

IF
What kinds of customer research did you conduct as part of the development of the program? And what did you discover?
Heim
In Spring 2009, GHA conducted customer research by inviting six customer groups (two in New York, two in London and two in Hong Kong) to round-table discussions. The groups consisted of frequent travellers, who travel at least five to six times a year for business or leisure, who stayed in four and five star hotels and were part of loyalty programs for hotels and others. The objective was to identify the needs of customers to create a robust guest recognition programme validated by consumers.

This research has shown that customers value recognition more than points collection; surprisingly few are really interested in the collection and redemption of points. Another finding was that customers are more likely to talk to friends and colleagues about their experiences (local and cultural) rather than points collected. Redeeming of points is sometimes viewed as hard to achieve and subject to many conditions.

IF
Can you give some examples of the types of "Local Experiences" members may receive?
Heim
Local Experiences are about providing GHA Discovery members with the opportunity to discover the world outside of the hotels--giving them access to activities they would not normally be able to do and to bring the discovery element back into travel. Some examples: Gold members at the Omni San Antonio can get early park entrance to Sea World, dine with 'Shamu' and his trainers and get backstage access to shows. At The Doyle Collection, The Westbury, in Dublin, Gold members can tour the famous Guinness Gravity Bar and learn the art of pouring the perfect pint. At the Omni Berkshire Platinum members can enjoy preferred seating at Wicked, the Broadway Musical and meet the cast after the show. At the Anantara Desert Island Resort and Spa in Abu Dhabi, Black level members can radio-track cheetahs in the Abu Dhabi Desert Islands (not accessible to regular tourists) or have lunch or dinner with a famous Bollywood celebrity in Mumbai. Members in GHA Discovery can earn Local Experiences in two different ways: Based on their tier, where one "Gold Level" Local Experience award will be issued after the first stay and then during each upgrade to a higher membership level (a Local Experience award is issued corresponding to the respective level). Also for cross brand stays, where members earn access to further Local Experience in their tier level when they stay at an additional Member Brand for the first time.

IF
Will guests need to sign up for GHA Discovery or will they automatically receive benefits as part of their membership in a GHA member hotel loyalty program?
Heim
From launch date onwards all customers can sign up for GHA Discovery on http://www.gha.com the individual member brand's Web sites or directly in the hotels. Members migrating from existing programs have already been informed about the change taking place and will automatically become GHA Discovery members and receive member benefits.

IF
Who do you see as your main customers--business travellers? And why would a business traveller choose the Global Hotel Alliance and GHA Discovery?
Heim
GHA Discovery is focused both on business and leisure travellers. Generally the more frequent travellers belong to the business traveller segment. As our industry has set best practice standards for loyalty programs, and our guests have come to expect these, we also provide upgrades, complimentary Internet, late check out, early check in, etc. This is a critical success factor dictated by the market. But we differentiate ourselves by going above and beyond and providing every benefit in a generous, surprising, personalized and authentic way. And most importantly, everything we do adds to a unique Local Experience for our members, through exceptional service and recognition.

Hyatt Gold Passport has made innovative changes in the hotel loyalty program industry since Jeff Zidell was appointed Vice President of Hyatt Gold Passport in June 2008. Jeff's thirteen years with American Airlines AAdvantage gives him an inside perspective to both frequent flyer and frequent guest programs. While Hyatt Hotels at 400 hotels globally is a small hotel chain compared to Hilton, IHG and Marriott, the Gold Passport loyalty program is a big time player. A steady stream of lucrative loyalty promotions like the perennial two stays to earn a free night, large airline miles bonuses and industry leading enhancements including annual Diamond member confirmed suite upgrades and free internet for all elite members at properties worldwide has propelled Gold Passport to 10.2 million members. Hyatt Hotels is a potent challenger to the bigger hotel chains vying for frequent guest share in the upscale hotel market segment. Ric Garrido, BoardingArea.com blogger who writes the Loyalty Traveler: Hotel Value for Frequent Guests column, conducted this interview with Jeff.

Ric Garrido
You were involved in American Airlines AAdvantage before Hyatt. What are some of the differences between running a hotel loyalty program vs. an airline program?
Jeff Zidell
I loved the airline business, and I learned so much from working at American Airlines. The businesses are actually quite similar; however, hotels don't have all the "baggage" that airlines do--pun intended. At the end of the day, both airline and hotel loyalty programs work better than loyalty programs in other industries because of the perishable nature of the product. The hotel loyalty business differs from the airline loyalty business in two fundamental ways: hotels operate in a decentralized fashion, which makes internal communication very important and hotel loyalty programs actually buy inventory from the hotel, so we have to carefully balance the needs of properties and customers.

Garrido
What level of increase in Hyatt Gold Passport membership has occurred in the past year with all the promotions and elite fast-track offers?
Zidell
We have experienced double-digit growth in our member base, and we are particularly excited about the increased activity we have seen from our most loyal members.

Garrido
Is there anything you can share about the new Hyatt Gold Passport credit card? When will consumers see it and is there any information you can provide about its earning rate or other Hyatt Gold Passport benefits?
Zidell
We are thrilled to partner with Chase and Visa for the new Hyatt credit card, which will likely launch in the third quarter. The value proposition will be very strong, and we are confident that our customers will find good value in the product. We're not quite ready to announce the specific features and benefits at this time.

Garrido
There is a belief among some Hyatt Gold Passport members that the hotel award changes were implemented prior to Hyatt Gold Passport launching a cobranded credit card as evidence that Hyatt Gold Passport program points will devalue with a credit card and an influx of new members earning points without hotel stays. What is your response to that sentiment?
Zidell
The award chart changes and the pending credit card launch are independent of one another. The award chart change reflects our ongoing need to balance the economics of the program while delivering industry-leading benefits to our customers. We believe that our award chart is extremely competitive compared to other hotel loyalty programs.

Garrido
What are Hyatt's goals for the next five years? The company is on pace for a 10 percent hotel growth in 2010. Is rapid growth the plan? Any new brands in the works?
Zidell
Our goal is to be the most preferred brand in each customer segment that we serve for our associates, guests and owners. We believe that the scale of our presence around the world is small relative to the recognition of our brands and, therefore, we have a unique opportunity to expand. We will focus our expansion efforts on under-penetrated markets where we have an established presence and locations where our guests are traveling but where we do not have a presence. These locations include, but are not limited to, the United Sates, Brazil, Russia, India, China, the Middle East and Europe.

Garrido
What was the methodology used to determine the hotel award changes for June? For example, the Grand Hyatt San Francisco went from category 3 to category 5 and leaped over the Hyatt Regency San Francisco that remains a category 4. I follow the San Francisco rates rather closely and I seldom see a higher rate for the Grand Hyatt. I was glad to see so many hotels go to category 1. Again, what was the reasoning for dropping so many hotels in award category?
Zidell
Creating the right award chart is both art and science. We thoroughly analyze occupancy, average daily rate, award demand, cost per occupied room, geography and competitive offerings. We strive to maintain the proper balance between value for our guests and covering operating costs for our properties.

Garrido
I have seen Hyatt free nights being given away on numerous travel blogs these past couple of months. One blogger referred to herself as being a "Hyatt Insider blogger". Can you share some insight on Hyatt's social media strategy?
Zidell
Relationships with travel and loyalty bloggers are extremely important to Hyatt. These trusted sources provide travelers with candid insights into our industry and Hyatt. As part of our relationship with this community, we often engage them in specific promotions and offerings, many of which are geared towards Hyatt Gold Passport members.

Garrido
Yatt'it was discontinued last year. Is there a plan to launch a customer forum site more in line with Marriott Rewards Insider or Priority Club Connect where members can communicate directly with each other?
Zidell
Yatt'it was an experiment and the social networking landscape changed dramatically between the time that Yatt'it was conceived and launched. Social media is a great way to connect with our guests, and we will soon be launching a blog to help us communicate more quickly with our customers and reporters on breaking news and events. You will see us become more active in existing online communities while we continue to look at new ways to extend our dialogue with customers.

Garrido
In a recent Flyertalk discussion, members said that some hotels (e.g. Hyatt Maui) are setting aside standard room inventory as part of package deals, thereby making rooms unavailable for free nights in a stealthy move around no blackout dates. Any comment?
Zidell
When we relaunched the Hyatt Gold Passport program last year, we removed all blackout dates and/or capacity controls on award inventory for standard rooms. As long as the hotel is selling standard rooms then these rooms are available for award redemption. Occasionally, award inventory will not be available because all standard rooms are sold or the hotel is only selling packages, which cannot currently be booked with Hyatt Gold Passport points. Overall, we have received very positive feedback regarding the availability of our award inventory.

Garrido
Hyatt has offered a free night after two stays promotion for years. Last year more hotel loyalty programs jumped on the free night promotion strategy and in 2010 it seems like every hotel loyalty program has adopted this strategy. Is this the new norm for hotel loyalty? Is Hyatt Gold Passport influencing the behavior of the larger hotel chains' loyalty programs?
Zidell
Over the last two years, we have tested a variety of free night and bonus point offers. We have found there are groups that prefer free nights and groups that prefer points. We are constantly analyzing the data to determine what drives the best customer lifetime value. Obviously, there has been a lot of noise in the market, and it's not clear what the new norm will be at this point.


Stash Hotel Rewards is a unique type of loyalty program that launched on May 20 with 65 independent hotels in over 50 cities. The program expects to feature more than 200 hotels by the end of the year. Stash Hotel Rewards members can earn and redeem points at participating properties in key travel cities in the U.S., such as San Francisco, Boston, Chicago, Los Angeles, New York and Seattle. Visit http://www.stashrewards.com to learn more about Stash Hotel Rewards. We spoke with Jeff Low, founder and CEO of Stash Hotel Rewards, about the new program.

InsideFlyer
How did you come up with the idea for Stash Hotel Rewards?
Jeff Low
I've been a frequent traveler and I was with Expedia for four years and built their program--the first online travel agency loyalty program--and developed a unique understanding of this space.

There is a hotel in New York where I stay whenever I travel to New York and I was thinking of the trade-off that frequent travelers often make. They say, I'd love to stay at a unique independent hotel that feels like I'm really in Atlanta or Seattle because it's an antebellum mansion or built on a pier, but I can't earn any points when I stay at that property.

I started talking to frequent travelers, and I kept hearing the same thing, 'asking me to stay at a property where I won't earn points is like asking me to stay at a property where there's no Internet access.' There's a core set of travelers who are on the road all the time and points are very important. And if you're a frequent traveler as I've been, you think of those points both as a way to mark your progress in life, and also that's how you're going to pay back your wife and kids for missing all that time with them while you've been on the road. You're also going to pay back yourself. A hotel asking me to not deliver that value back to my life is a big trade-off. And that tradeoff is something we're trying to solve with Stash.

To answer your question, I went to this great independent hotel, the Affinia 50, and emailed the head of marketing, John Moser, and said, I love your hotel, I stay here all the time, I'm probably one of your best guests and you've never given me any points. You may give me a discounted room or free parking but that's not really as relevant because I can't take it back and give it to my family. He said 'we'd love to give you points but there aren't any. We don't have any points to give away.' And that began a very long process and hundreds of conversations with some of the leading thinkers in hotels and rewards, and hotel leaders at independent properties across the country, to talk about this idea. How would it work, what would need to happen and how would it need to be different? And that ultimately is what led to Stash.

IF
Why haven't we seen more programs like Stash?
Low
Because the cost of technology has been prohibitive. You'd have to raise $10 to $20 million dollars to build the software itself--actually more than that. When Hotwire launched, the venture group that funded Hotwire I think raised $60 million--it was a huge expense to build something like that 10 years ago. Software, the cost of technology, the cost of servers, the cost of bandwidth have all come down in a huge way, in the same way that you can get a laptop that would have cost $5,000 five years ago for about $500 now. You see the same dynamics play out in technology overall. That provides an opportunity to build something like this more efficiently than having to go and say to every member, 'hey it's going to cost you a quarter of a million dollar to participate.' The other thing is that you really need a set of visionary hotel leaders who can look beyond their sense of well ... they are my competitor across the street and I don't want to be in a program with him. And realize that by working together, they can create something of significant value that neither of them have right now. They aren't competing more with each other, they are just more competitive in the marketplace.

IF
What other loyalty programs did you look at when designing the Stash Hotel Rewards program?
Low
There are some great case studies on Hilton HHonors; Nectar, which is a coalition program in the U.K.; Harrah's program, which is one of the most well known programs for connecting consumers with an organization; Tesco in the U.K. We spent even more time looking at companies that deliver great customer experiences. Companies like Costco, Virgin America, Zipcar and Netflix. What is that magic element that makes you want to tell your friends, 'Oh my god you have to try this.' Virgin America is a great airline. They've thought through everything in a way that is unexpected and yet perfect at the same time. That's what a lot of great independent hotels do too. They deliver an experience that is thoughtful and well-designed but it doesn't feel contrived. So we're inspired by the hotels themselves. How do they make those great experiences? That has been more of our focus than looking and modeling this off other loyalty programs.

IF
How long have you been developing the program?
Low
Formally developing under a year. The whole notion of Stash jelled as an idea 10 to 11 months ago. What we would do is take the prototype and meet with a bunch of hoteliers and talk with them for two or three days. From these discussions, we locked down something that was workable and would almost guarantee new value for them. We focused on what the customer wants. For us, the customer is the Stash Rewards member and all the independent hotels we work with. We also talked with lots and lots of travelers. Sometimes we would go into airline lounges and just hang out. People love to talk about these programs. They are really important because they create value. We heard some common frustrations. And we recognized that there hadn't been significant innovation in this space for a while.

IF
Why the name Stash Hotel Rewards?
Low
We sort of stumbled upon that name. As we talked to consumers we heard them talk about their points as something that was saved up and hidden away and precious to them. Something we commonly heard was, 'I've got 89,000 points and I'm going to do something with them. I don't know what.'

When I was a kid, we would go trick-or-treating and my brother and
I would take all of our candy and we wouldn't eat it at first. First, we'd organize it in a hidden drawer and just go look at it every once in a while. We called it our "Stash."

We thought about the name Stash for the program and liked that it was different than the standard name and had some resonance. And it was a nice alternative to the sameness of some of the other
brand's names.

IF
How do you determine which hotels to approach to join the program, and what benefit do the hotels get for being in the program?
Low
We started by approaching the hotels we love. The folks at Affinia 50 were one of the first groups I talked to because I found myself staying at their hotels. They are located on 50th Street and are surrounded by literally, in a two-block radius, 20 other hotels. And I tried them all since I was often there for meetings. And I asked, what is it that makes that hotel unique and why was I drawn to it? Part of it was that it was small and different and had a sense of place unlike an anonymous big chain that has a guaranteed consistency. That is the promise of some of the chains where they'll say, 'we've recreated our rooms and you can be guaranteed that wherever you go in the world the room will be exactly the same.' Certainly you want that at a level of quality, as in I want a nice bed, a coffeemaker and Internet access. But every hotel is providing that these days, if they are a three star plus hotel. Independent hotels offer something beyond that--distinctive design and a memorable experience that you want to tell others about. The hotels that participate in Stash are all similar in one way: they each are one-of-a-kind. And they all reflect and are relevant to the place that you're visiting. That's very powerful. For example, Willows Lodge, a great property in the Northwest, only makes sense in the Northwest. It's a lodge with a spa area, wine tasting and there's a great stone fireplace and that wouldn't make any sense in Atlanta or Dallas. We also found that once a chain hits a certain size they start to stamp out the same thing, so we seek out hotel groups of no more than 70 or 75 properties under a single name. Anything more than that and you get some of the corporate efficiency, which is not what we wanted to be a part of.

When I go to a hotel, I love if they can provide me with some level of recognition that says 'hey, we know you're coming back often and we'd like to share something back with you,' which is the currency, and it's a meaningful currency. Before Stash, an independent property couldn't really do that and even small chains struggled with it because the technology is complicated, and takes people to build and manage, and you literally need that geographic scale to make the program relevant. With Stash, we create the benefits of a chain program for independents without requiring them to be part of a chain. As part of that, we make these great hotels more relevant to frequent travelers and provide them with other marketing efficiencies that might be hard for them to develop on their own.

IF
Why would a business traveler choose to stay at a Stash Hotel Rewards hotel? Do participating hotels have business centers? WiFi?
Low
Every hotel that participates has WiFi and a business center. Why I would choose these hotels is because they are also unique to the place that I'm visiting. And they provide value above and beyond what a chain can provide. For example, Cedarbrook Lodge is arguably the world's greatest airport hotel. It's as if Bill Gates' house has been dropped five minutes from SeaTac. It's a beautiful Northwest lodge with a great room, stone fireplace, a billiards room. In the common area there's a freezer full of little Haagen Dazs ice cream that you can take. There's regional art that fits with the space and snacks available throughout the hotel. There's free Wifi and a business center where printing is free. They've taken the standard expectation of the business traveler and made it into a place that's so comfortable--people are just hanging out, playing pool and I would guess it's the leading cause of missed flights in Seattle. That actually happened to me. Two minutes from SeaTac is a band of typical big-box airport hotels stacked along the road offering the same bland experience you would expect. The Cedarbrook Lodge experience is entirely unexpected, and yet it's priced the same as those chain hotels.

IF
Right now, Stash Hotel Rewards hotels have a TripAdvisor "Recommend" rating of over 80 percent. What would happen if a member hotel's rating went down significantly? How do you ensure the quality of participating hotels?
Low
We don't use TripAdvisor ratings as a criteria--it's not causation but correlation. These hotels are so well managed and provide an unexpected and interesting experience that people are recommending them to others at a rate that I think is unmatched by any chain program's hotels. That is a function of the independent spirit of these impassioned independent hoteliers. They love to go and do things because they want to--not because there's a chain mandate that says you must offer Haagen Dazs ice cream. That independent spirit is part of what resonates with travelers. We will have a quality standard that will be established by hotel leaders who are part of our advisory board.

IF
How do member hotels determine which rooms are available for award stays. Do they set aside a certain number of rooms per night? Are there blackout dates?
Low
This is what we think of as one of the truly innovative aspects versus a chain program. One of the things that we pioneered at Expedia was the dynamic pricing of travel awards in real time. Until then, if you had earned miles or points, you would know it was a fixed number of miles or points to get a flight across the country or hotel room. But fixed pricing doesn't really work.

When you think about it, in every area of your life, and particularly in travel, you expect prices to change, as they should, as supply and demand reach equilibrium. The notion that there's a fixed redemption value is actually counterintuitive. It's 10,000 points for a free night at a chain property or it's 25,000 miles to fly across the country. We found that people don't consider fixed pricing to be critical and would prefer that prices float if it means no blackout dates or hidden restrictions that can be so frustrating. When you have dynamic pricing it unlocks value both for the hotels and consumers. For example, I may want to stay in New York City the night of the New York marathon and all the hotels would be filled. It makes sense that it should be more points for that night than the next day. Most consumers get that. And it's a much better alternative than to have a fixed rate where the hotels only get paid a certain portion of the true value of that room on the retail side, which means that they are not eager to have that room redeemed for points. So they'll black it out or find ways to make it unavailable.

We've heard people ask whether that means Stash Rewards points won't be competitive with other rewards programs--but our data shows that's not the case. Because we unlock value through dynamic value pricing, you'll have a consistent redemption value that is very good, and you'll have pockets of
incredible value. In fact, we just sampled five cities with Stash partner hotels vs. chain hotels and on average, Stash hotels redemption value was as good or better than any other program. Often it was much better.

IF
How do you determine how many points are needed for an award night? Does it change every day?
Low
It does. Hotels have expert revenue managers who understand the marketplace, the seasonality, the pricing and they manage the channels through which they sell rooms all the time to optimize supply and demand. They are able to do that through our system. If they have an extra room for the night they'd love to price it in Stash points so you will exchange points for that room. And we employ what we call our "underlying magic" to ensure that the redemption value will be very competitive with other chain programs. We don't mandate what a hotel has to offer a room at. We think that's counter to allowing smart revenue managers do their jobs well. Instead what we do is put into the marketplace efficiencies that can best be unlocked by the hotel if they make many rooms available for redemption at a great value. It allows them to decrease the total cost of operations in the program.

IF
Are you looking into adding any partnerships?
Low
We've heard from consumers that credit cards are critical to driving velocity to earn. More people earn miles with their American AAdvantage card than actually through flying on American. That's the accelerant that makes the currency more relevant. We know that's critical and we've talked to a number of the leading card issuers and all are very excited about Stash. We are going to continue those discussions and we think this is an interesting and very different offering. It's not just another co-brand for a chain because of the dynamic pricing on the redemption side. In terms of other partnerships, it's hard to deliver value for hard goods like coffee makers. Our focus is on one thing--creating extraordinary value for Stash members for their stays and redemptions within a network of hotels ... not coffee makers.

IF
What kind of future developments do you see for Stash Hotel Rewards? Are you planning on expanding to other countries?
Low
We've only launched five days ago and have already heard from hotels all around the world. We will take a measured approach to building out. We know that great redemption destinations in places like Europe, the Caribbean and around the world are critical. Our next steps will be the rest of North America--Mexico and Canada. We're in discussions and we'll probably have some news soon about partners in those areas, likely by the end of the year. And from there into Europe and Asia.


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