Loyalty programs prove their value: CBRE

A record 21 brand launches and partnerships in 2024 attracted new guests and a variety of new use cases, driving loyalty program membership and hotel occupancy. Membership surged 14.5% in 2024, outpacing room growth and pushing members per room up by 7.4%.

Average member contribution to occupancy rose to 52.8% but room nights per member dipped. More members are staying, but each one is staying less often, likely due to the influx of credit card members and the dilution of the traditional “road warrior,” according to CBRE, who added that the challenge is to convert these “retail” travelers into repeat guests.

Members are redeeming points as fast as they earn them, with liability per member falling by 5.3%. CBRE said hotels should focus on maximizing redemptions that fill shoulder seasons and drive ancillary revenue through incentives like food & beverage credits, spa perks and exclusive experiences.

Loyalty fees increased by 4.4% last year, outpacing 2.7% revenue growth, but at just $5.46 per occupied room or 1.6% of total revenues, up from 1.58% in 2023. Overall, program costs remain modest.

Loyalty programs have evolved beyond just rewarding frequent travelers. Total members grew by 14.5% in 2024 to more than 675 million, outpacing room growth of 6.7%. Members per available room increased by 7.4% to 137, reinforcing the importance of these programs in maintaining occupancy and revenue stability.

The rapid expansion of these programs and the standardization of perks (e.g., free water, free Wi-Fi, early check in/late check out, etc.) have resulted in margin headwinds for owners but have helped maintain guest satisfaction scores since 2016, based on data from a major national hotel guest satisfaction survey.

Total Loyalty Program Members & Members per Room

Source: Marriott, Hilton, Hyatt, Wyndham and Choice public filings

For the first time in years, increases in loyalty program revenues and liabilities were balanced in 2024 at 8.3% and 8.4%, respectively, reaching post-pandemic highs of $1.2 billion and $2.4 billion. However, liability per member fell by 5.3%, to $17.85, or 11.3% of ADR, down from 21.9% in 2016. CBRE said this indicates that each member had a relatively small savings of points—just a fraction of a room night—to encourage future redemption travel.

Loyalty members accounted for 52.8% of occupied rooms in 2024, a 2-percentage-point increase from 2023 that far outpaced overall U.S. demand growth of 1.2%. Loyalty programs delivered 12% more room nights year-over-year despite the average room nights per member declining by 4% to 1.0 from 1.1. This shift suggests a growing proportion of members are either dormant, overlap in multiple programs, are infrequent travelers or are earning points through credit cards and partnerships rather than frequent hotel stays.

Loyalty Member Contribution to Occupancy

Source: Marriott, Hilton and Hyatt public filings

According to data from CBRE, loyalty program fees grew by 4.4% in 2024, outpacing total revenue growth of 2.7%. The cost per occupied room increased slightly to $5.46, making up 1.6% of total revenue (up from 1.58% in 2023). The fee/revenue growth ratio rose to 1.6, above the pre-pandemic peak of 0.9. While costs are rising, these programs still serve as cost-effective “occupancy insurance,” ensuring steady room demand even during low seasons.

Loyalty Fee Growth Rates Outpace ADR & Total Revenue Growth in 2024

Source: CBRE’s Trends in the Hotel Industry

The broad base of membership diversifies demand sources, insulating against economic cycles. The lower number of room nights booked per member (1.0 vs. 1.8 in 2016) reflects the success of credit card/affiliate partnerships. The proliferation of infrequent guests may make it harder to appeal to high-value guests. CBRE said brands will need to work hard to demonstrate they can convert the one-time guest into a more frequent high-value member. The growth in credit card and program fees primarily benefits hotel owners.

CBRE concluded that owners, asset managers and developers should benchmark total program ROI against alternative distribution channels. It said by measuring the value attribution of loyalty programs, brands can demonstrate their loyalty program’s ROI, owners can avoid overpaying for programs that don’t outperform OTAs and investors can assess whether loyalty-driven assets deserve premium valuations.

By Jeffrey Weinstein