Published On: Tue, Aug 18th, 2015

The Sharing Economy And The Remaking Of Loyalty

A 25-year-old named Ben Schlappig was in a news recently since he trafficked around the world for an whole year — for free. People like Schlappig outmanoeuvre loyalty programs all the time, racking adult visit flyer and hotel prerogative points in mind-boggling volumes. And while this competence sound neat, your business is substantially subsidizing his travel.

For each transport “hacker” like Schlappig who flies free, dozens of businesses overspend on each flight, hotel and let car. Indeed, loyalty programs are designed to make business travelers less cost sensitive, that creates a dispute of interest, since CFOs and transport managers apparently wish to revoke expenses.

This is a large problem for tech startups, generally those with flourishing sales and doing teams. Travel is typically a company’s third largest responsibility after lease and salaries. And while there seems to be some-more income than H2O issuing in Silicon Valley, this will be short-lived.

As Marc Andreessen warned in one of his famous Twitter storms, “New founders in final 10 years have ONLY been in sourroundings where income is always easy to lift during aloft valuations. THAT WILL NOT LAST … When the market turns, and it will turn, we will find out who has been swimming but trunks on: many high bake rate co’s will VAPORIZE.”

To equivocate vaporizing, startups are branch to the sharing economy to revoke transport costs. Airbnb, Uber, Lyft, RelayRides, etc. roughly always cost reduction than their normal competitors (though they can poise correspondence issues, as I’ve discussed previously).

At my association Rocketrip, we find that travelers now select Airbnb 7 percent of the time, that is a sizeable share if we consider of Airbnb as one hotel. Their program for businesses grew 700 percent in the final year alone.

However, distinct all the hotel groups, airlines and let automobile companies that take a lion’s share of the $310 billion that U.S. businesses spend on travel, Airbnb and a kin don’t offer rewards programs. Why would they? With Airbnb’s revenue projected to stand 55 percent, from $423 million final year to $675 million in 2015, there is no need to woo guests.

Yet transport managers place a lot of weight in rewards programs. The Global Business Travel Association reports that “Two-thirds (66 percent) of Corporate Travel Managers determine hotel loyalty programs play during slightest a ‘slightly important’ purpose in their negotiations with hotels and one in 5 acknowledge they play a ‘very important’ or ‘extremely important’ role.”

Loyalty programs can boost correspondence with association transport process and expostulate employees to chosen vendors (i.e., those with which the company has negotiated rates and perks).

Travel managers are right: Some perks matter to highway warriors. VIP airport lounges, giveaway room or cabin upgrades, dedicated patron service, priority confidence lines and late checkout do improve the quality of life on the road.

Thus, rewards programs should give hotels and airlines an corner against the sharing economy. However, there’s good news for Airbnb and a destiny “Uber of blurb airplanes” — airlines and hotels are creation rewards programs less attractive for travelers and more expensive for businesses.

Back in 2013, The Points Guy reported that all the major hotel bondage (Starwood, Marriot, Hilton, Hyatt, etc.) had devalued their rewards programs, definition travelers had to spend some-more at the hotel or spend some-more with point-bearing credit cards before earning giveaway nights.

Hilton, for instance, had lifted the points-per-night on some hotels by as many as 90 percent. The best part: The Points Guy wrote the piece from a two-bedroom Los Angeles bungalow that he rented possibly on Airbnb or VRBO (he didn’t mention which) for reduction than a tiny customary room at one of the elite chains. The assets were value some-more than the progress he’d make towards chosen standing and giveaway nights.

Most of the airlines, too, have degenerate their rewards programs. Frequent-flyer gain used to be formed on the distance and magnitude of travel.

The more we flew, the more we earned. This authorised highway warriors to shelve adult points and acquire chosen status, even when they picked inexpensive flights. The incentive to be loyal was clever because the experience on airlines was always the same, unless they had chosen status.

Unfortunately for businesses, many airlines have switched to a revenue-based system, usually like the hotels. This means that a more you spend, the more points we earn; the amount of drifting doesn’t matter.

The salesperson who travels from San Francisco to New York weekly during $350 a cocktail earns fewer miles in one month than someone who books one round-trip moody from Chicago to Moscow during $1,500, even though the salesperson commutes some-more than double the distance.

Airlines have also combined some-more levels of chosen status, while lifting smallest eligibility mandate to revoke what The New York Times reporter Josh Barro calls “elite bloat.” As Delta put it, “When everyone’s an chosen flier, no one is.”

If highway warriors wish to reach the top tiers of chosen status, their inducement is to book some-more costly flights — the exact opposite of what CFOs and transport managers want.

Airlines are effectively saying, “Max out your transport bill if we wish to go Platinum.” And, distinct in the past when each prerogative moody was value a prosaic volume of points, prerogative flights are now boldly labelled formed on direct and dollar cost. Points are value whatever airlines contend they’re value today.

Consider the full situation: All companies, and startups in particular, need to rein in transport costs. Free-flowing try collateral is going to disappear. But, airline and hotel rewards programs give travelers an inducement to spend as many as probable on a company’s dime, since they need some-more points to get chosen status, giveaway hotel nights and giveaway flights.

At the same time, a lot of business people (Millennials, in particular) have shifted spending from hotel bondage to Airbnb since they get a improved knowledge during a improved value, usually like The Points Guy did in LA.

Two-thirds of transport managers hold rewards programs important, nonetheless Airbnb has no rewards program and is still winning over business people in droves. Hotel rewards programs usually aren’t good adequate to keep travelers divided from Airbnb.

In other words, the sharing economy is disrupting the concept of loyalty. There is no inducement to be loyal to a hotel organisation if Airbnb can get we a cheaper room in a improved plcae with improved amenities.

Ironically, a highway soldier could save his association money, transport some-more comfortably and still amass giveaway hotel nights by charging all his Airbnb stays to a Hilton credit card. Sharing economy travelers can still find ways to accumulate points and perks.

However, in the airline arena, where all the players offer identical products, loyalty programs will be some-more volatile — during slightest until someone creates the “Uber of blurb airplanes.” Companies will usually be means to revoke moody losses if they make it some-more appealing for employees to save income than to book top-dollar flights in the pursuit of chosen standing perks.

Overall, turmoil in the travel and liberality attention presents opportunities. To the extent that someone like Ben Schlappig can penetrate airline rewards programs, we consider companies can “hack” transport government to yield improved perks during a reduce cost to a company.

The airlines, hotels and let automobile companies seem unresponsive to how much the current prerogative structure hurts their customers’ bottom line. Sharing economy businesses will force them to rethink this proceed to loyalty. Elite standing and saving income shouldn’t be jointly exclusive.

Featured Image: Ruslan Guzov/Shutterstock

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