U.S. Travel Loyalty Slips below Credit-Card Rewards in 2008: Colloquy

For the first time, airline frequent-flier clubs are no longer the most highly subscribed category in the U.S. loyalty industry.

The latest annual Loyalty Census from market researcher Colloquy finds that the airlines’ programs had 277.4 million American loyalty members in 2008, up 9% from the agency’s census which looked at 2006 data. But that number was surpassed by the 422 million members who took part in financial services loyalty programs in 2008—primarily credit card rewards programs. That total was up 77% from the 238.8 million who took part in financial rewards programs in 2006.

Airline-based loyalty programs make up part of the travel and hospitality sector in Colloquy’s study, along with hotels, gaming, and car rental and cruise companies. Those other sectors also showed membership growth for 2008:

• Hotel rewards programs were reportedly up 26% from 2006 to 2008 to reach 161.9 million, after a revision of previous census data.
• Gaming rewards programs grew 37% in that period to encompass 106 million members
• Cruise line and car rental loyalty clubs, tabulated for the first time in this current Census, had 10.7 million members in 2008.

Overall, U.S. membership in travel- and hospitality-related loyalty programs hit 556 million in 2008.

That means that just as frequent-flyer programs lost out to finance rewards as the most prevalent loyalty group in the U.S. in 2008, travel and hospitality—credited with founding the loyalty marketing industry with the American airlines’ AAdvantage program in 1981–is no longer the leading sector in the U.S. Colloquy’s research found that while travel and hospitality accounted for 31% of all U.S. loyalty memberships in 2008, the sector was eclipsed by retail rewards programs, which made up 39% of subscriptions.

“The travel industry pioneered the modern loyalty program, Colloquy partner Kelly Hlavinka, a co-author of the 2009 Census, said in a release. “As first movers, they have the accolades, and the bruises as constant reminders of what was started in 1981.”

One problem for travel loyalty programs is that they now face competition from new sectors. The new study found that the average U.S. household now belongs to more than 14 separate loyalty programs and actively takes part in only about six of those.

As for the long-term prospects for travel and hotel loyalty programs, the Colloquy Census foresees that while bad travel times may have lodging CFOs scrutinizing hotel loyalty programs in the short run, “the industry is united in its belief that rewards programs continue to offer the best platform for retaining profitable customers.”

Gaming companies, however, will have to be content with the membership they now have in gaming loyalty programs, because consumers will be cutting their leisure spending in this field for some time while image-conscious companies get skittish about travel to Las Vegas or Atlantic City.

“Since travel loyalty programs were launched in another acute recession, it’s fitting that this current recession should present another major turning point for the future of airline and hotel loyalty programs,” Hlavinka said.