LOS ANGELES — Welcome to the era of experiential travel.

The “revenge travel” boom of the past two years may have abated, but while the sheer volume of leisure travel is normalizing, what those travelers want and are willing to pay for is only growing.

“People are excited to travel and will continue to shift their spending from products to services,” said Danielle Bozarth, senior partner at consultancy McKinsey & Company on a “State of the Travel Industry” panel at the Americas Lodging Investment Summit.

As a result, hoteliers around the world are “obsessed with finding growth in new and nontraditional revenue streams,” she said. “People are talking about how to grow their share of experiences, how to get more early revenue from guests and how to reach customers who love their brands in new ways.”

Those hoteliers are looking to their counterparts in the cruise and gaming industries for ideas — two sectors known for cultivating loyalty and driving guest spend around experiences.

Gaming: All About Omni-Channel

Bill Hornbuckle, CEO and president of MGM Resorts International, saw the gaming industry hit hard during the pandemic. While 2023 brought business back to “best year ever” levels for MGM and Las Vegas, he said international business and overall occupancy are not back to pre-pandemic levels, and convention business is only just back.

He recognized early on that all of Las Vegas’ business mix was changing. In a typical year, 40% of Las Vegas’ room nights and 65% of the bottom line were tied to tech companies and their events and conventions — business that dipped quickly and hasn’t totally returned with tech companies still not fully back in the office or traveling.

But in its place, “leisure demand has been at an all-time high,” and Hornbuckle said MGM leaned in hard to the leisure segment, adopting a strategy of omni-channel outreach.

“The typical age of our customer went from 46 to 42 years old in just a few years,” he said. “For the first time, millennials — because of time, energy and money — got into gaming in a meaningful way.”

Add in the advent of online gaming and sports betting, and Hornbuckle said MGM’s loyalty program has grown.

“Yes, we have frequent visitors, but most [loyalty members] only come to Las Vegas every two years,” he said. “With sports betting, we create an omni-channel of, ‘do this today and come see us tomorrow,’ and it’s been working meaningfully.”

The influx of new entertainment and sports venues to Las Vegas also entices people to travel and encourages more total spend.

Cruise: Pursue Pre-Stay Revenue

That idea of constant guest awareness is also a strategy the cruise industry is using, said Christine Duffy, president of Carnival Cruise Line.

Following total shutdown during the pandemic, the cruise industry “has certainly come a long way,” Duffy said.

Carnival comes into 2024 with two-thirds of all business for the year booked, leading the company to push out the booking curve and open up more inventory earlier.

That means guests have more time between booking their cruise and taking it — time Duffy said the company uses to help guests personalize their trip experiences. They want it and are willing to pay for it, she said.

“We have a website just for booked guests so the moment you book your cruise, we’re in contact to find out what you want to do, like spa visits, casino visits and shore excursions,” Duffy said.

As a result, about 50% of Carnival customers spend onboard revenue before they even get on the ship.

Once they’re on board, guests use an app to order food and drinks delivered to their exact location on the ship at any time. It’s an easy experience, which in turn typically increases overall spend, Duffy said.

“It’s all about serving customers in a way that reduces friction,” she said. “They don’t have to wait in lines and it gives them a better experience overall.”

Loyalty

Travel industry loyalty programs have been caught in the crosshairs as travel behaviors changed after the pandemic. With more people taking leisure trips, membership in travel loyalty programs boomed, but that created issues, McKinsey’s Bozarth said.

“Customer satisfaction has dropped dramatically for travel rewards programs. Dilution of benefits is very real. We’ve seen tiers get reset to raise the bar, and there are a lot more programs out there like credit card programs trying to take share from travel loyalty programs,” she said.

Hornbuckle and Duffy said that while loyalty rewards for lower-tier customers are definitely parts of their programs, most of their attention is on rewarding their best customers with experiences.

In recent years, MGM has been able to home in significantly on its top-tier customers and offer them high-stakes rewards, such as tickets to last year’s Formula 1 race and this year’s Super Bowl, Hornbuckle said.

Carnival’s approach to loyalty also is about recognizing its best customers. Duffy said loyal cruisers want the experience of “getting faster to the fun.” That takes the form of early boarding and early cabin access.

But now Carnival is looking at retooling its loyalty program because so many people have joined and have status that “if everyone is special, no one is special,” she said.

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by Stephanie Ricca | Hotel News Now | CoStar