Marriott, Hilton, and Hyatt are modernizing their loyalty programs in a bid to enhance direct bookings. According to the Financial Times, while these efforts aim to cut the 15-25% commissions typically paid to platforms like Booking.com and Expedia, there’s a deeper motivation: preparing for a future where AI agents handle travel bookings.
Why This Matters
Control over customer relationships is paramount, especially as AI becomes more prevalent. Historical precedents exist across various industries:
- This mirrors the e-commerce domain, where businesses that sold directly were disrupted by the Amazon Marketplace.
- Many bloggers transitioned from their personal sites to platforms like Substack, trading independence for reach.
- Software developers began relying on the Apple and Google stores instead of selling directly, losing control over their distribution.
- Similarly, traditional media outlets lost their distribution power to tech giants like Google.
The Current Landscape
To bolster their loyalty initiatives, major hotel chains are initiating several key strategies:
- Marriott Bonvoy recently hit 260 million members, an 18% increase from the previous year.
- Hilton is simplifying access to higher membership tiers and exploring ways for members to use points beyond their own ecosystem.
- Marriott’s CFO indicated that AI-powered booking might turn out to be less expensive than traditional online travel agencies (OTAs).
In essence, these companies would prefer to pay commissions to AI providers like OpenAI rather than OTAs, but their strategy hinges on maintaining customer data and relationships.
Understanding Loyalty Programs
The emphasis on loyalty programs is strategic. By securing 260 million “Bonvoy members” with detailed preferences and accumulated points, hotel chains position themselves advantageously for the impending onset of AI agents. However, this leap assumes that these agents will prioritize specific brands.
Challenges Ahead
AI agents may not inherently value brand loyalty. A sophisticated conversational AI will evaluate various options, compare prices, and sift through countless reviews before making choices, all without needing to rely on interfaces that highlight specific brands. The focus will shift toward optimizing for price, location, and reviews, potentially overshadowing brand loyalty.
When customers interact primarily through AI without brand visibility, years of brand recognition could quickly dissipate.
The Trust Dilemma
A pressing concern arises: who will we trust more? Established platforms like Booking.com are transparent about their commissions, allowing users to see their payment structures. In contrast, AI agents may operate opaquely, leaving users uncertain about their motivations in service recommendations.
Broader Implications
This trend will not be isolated to the hotel industry. From insurance companies to restaurant reservations, any sector relying on digital intermediaries will similarly face disruptions from AI agents, challenging their customer relationships.
The arrival of AI-driven agents isn’t a distant future. The first iterations are already here, albeit in a rudimentary form, but they improve continuously.
As hotel chains and other companies begin fortifying their loyalty walls, a significant shift in how consumers engage with brands looms on the horizon. Preparing for this transformation is essential, as AI’s evolution is accelerating faster than many industries anticipate.
In conclusion, the ongoing reshaping of loyalty programs in hotels reflects a broader trend driven by the rise of AI. Companies must adapt to maintain their relevance and hold customer loyalty in a rapidly changing digital landscape.
Featured image | Michael Mrozek