In this case, Starwood Hotels and Resorts Worldwide Inc., one of the biggest hotel chains in the world, decided to expand its Preferred Guest Program by offering new features - no blackout dates, no capacity control, paperless rewards, and hotel reimbursement- that might increase operating costs and lead to higher staying costs. The problem for Hilton is whether to compute point for point or take a different approach to its existing reward program in order to be distinct from Starwood.
Instead of matching with Starwood's new strategy, Hilton should take a different approach to its existing loyalty program and focus on how to make it more attractive in order to maintain its current customer base and to attract new ones. There are two reasons why this solution is the best:
• Starwood has been trying to develop the Starwood brand. On the other hand, Hilton HHonors guest reward program has a competative advantage over Starwood's program because Hilton's loyalty program has been successful compared to others in the hotel industry. The most important feature of the program that distinguishes itself from competitors is Double Dipping which lets guests earn milage for the same stay in partner frequent-flyer programs. Hilton is the only hotel chain that offers this opportunity. Additionally, becoming a loyalty program member gives another advantage to Hilton's program. In as little as 4 stays per year, or 10 nights, membership is granted to HHonors. Customers have to stay 25 room nights or have 10 stays per year to become a member of Starwood's loyalty program. Consequently, if the customer chooses Starwood, he or she has more waiting time to use his or her points while paying very high staying cost because of its new frequent-guest program.
• Currently there is no available data whether or not Starwood's new aggressive frequent-guest program is going to be successful in attracting new customers. Giving more rewards does not necessarily mean the program will attract more customers because the new program reduces the cost-effectiveness and increases staying costs.
Hilton should look at certain areas that would make its loyalty program more attractive:
• According to the program research, Hilton lost more than half of its loyal customers annually due to its relatively limited network size and distribution. For this reason, the management should implement a new strategy that allows to expand the number of partners, such as airlines, rental car firms, restaurants, casinos, etc. Sponsoring to convention centers and big conferences will also help Hilton extend its network size.
• Hilton should create a unique stay experience that cannot be imitated by other chains. In order to do that, every hotel management should invest in its employees by training them on how to make customers feel that they are treated special. With mass-personalization strategy, employees are able to identify each customers wants and needs. For example, one customer might like to be served a coffee in his/her room in the morning. This information can be found on database. Even though this seems simple, it makes customer feel unique. Once customers leave happy with the service at Hilton, they will come back no matter what other loyalty programs offer because most customers tend not to change their habits when they are satisfied.
• Hilton should offer a clearly understandable referral bonus program to its loyal customers. A loyal guest can earn extra points because of referring Hilton to other qualified prospective customers.