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Frequent Travel Programs - US - June 2015

The travel loyalty market has seen steady membership growth between 2006 and 2014 as consumers look for ways to reduce their travel costs and earn special perks and rewards. The market is expected to continue growing as consumers gain confidence in the expanding economy and spend their disposable income on experiential categories such as travel and entertainment.

This report looks at the following areas:

  • Loyalty programs successfully acquire members, but fail to fully engage them
  • Popular programs risk reward dilution
  • Average members not getting enough from their rewards programs
  • Comprehensive program changes may lead to member attrition
  • Loyalty members may be bargain hunters at heart

Travel is expected to increase at the end of 2015 and into 2016. As Americans plan their trips, rewards programs become all the more relevant. Offering personalization, a better variety of redemption options, and program simplicity can help members truly engage with a travel rewards platform instead of abandoning the program shortly after sign-up.

The travel loyalty market has seen steady membership growth between 2006 and 2014 as consumers look for ways to reduce their travel costs and earn special perks and rewards. The market is expected to continue growing as consumers gain confidence in the expanding economy and spend their disposable income on experiential categories such as travel and entertainment.

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

          • Figure 1: Total US travel loyalty program memberships and fan chart forecast (millions), 2010-20
        • The issues
          • Loyalty programs successfully acquire members, but fail to fully engage them
            • Figure 2: Engagement rate for loyalty program memberships in the US, 2010-14
          • Popular programs risk reward dilution
            • Average members not getting enough from their rewards programs
              • Figure 3: Attitudes toward travel rewards programs, March 2015
            • Comprehensive program changes may lead to member attrition
              • Loyalty members may be bargain hunters at heart
                • Figure 4: Commitment to travel rewards programs, by all versus hotel/flight loyalty program members, March 2015
              • The opportunities
                • Targeting specific audiences can drive engagement
                  • Transparency and education can help ease program transitions
                    • Figure 5: Attitudes toward travel rewards programs and member behaviors, March 2015
                  • Surprise and delight members with unique redemption opportunities
                    • Partnerships can expand program reach
                      • Figure 6: Preferred types of rewards and rewards redeemed, March 2015
                    • What it means
                    • The Market – What You Need to Know

                      • Travel programs comprise large segment of overall loyalty market
                        • Membership grows in all travel segment programs but airlines
                          • Travel spending drives market
                            • Domestic travel remains steady; foreign travel growing
                              • Hotels respond to positive travel outlook
                              • Market Size and Forecast

                                • Travel loyalty program memberships predicted to increase
                                  • Figure 7: Total US travel loyalty program memberships and fan chart forecast (millions), 2010-20
                                  • Figure 8: Total US travel loyalty program memberships and forecast, 2006-20
                              • Market Breakdown

                                • Travel programs a major player in the loyalty market
                                  • Figure 9: Total US loyalty program breakdown by category 2012-14, and active memberships 2010-14
                                • Airline programs stall in light of recent changes
                                  • Figure 10: Total US airline loyalty program memberships and fan chart forecast (millions), 2010-20
                                • Hotel rewards program memberships are growing fast
                                  • Figure 11: Total US hotel loyalty program memberships and fan chart forecast (millions), 2010-20
                                • Cruise and rental car programs show robust acquisition
                                  • Figure 12: Total US cruises and rental cars loyalty program memberships and fan chart forecast (millions), 2010-20
                              • Market Perspective

                                • Airline program memberships dip in 2014
                                  • Figure 13: Frequent flyer program membership, by major US airline, 2009-14
                                • Drugstore programs exhibit above-average engagement
                                  • Rewards cards dominate new credit accounts
                                    • Travel spending outpaces overall spending growth from 2009-14
                                      • Figure 14: Total US vacations and tourism market value ($billions), 2009-14
                                  • Market Factors

                                    • Domestic travel remains steady
                                      • Figure 15: Domestic travel in the last 12 months, 2009-14
                                    • A strong US dollar encourages travel abroad
                                      • Figure 16: 1 US dollar to 1 Euro exchange rate, weekly, not seasonally adjusted, May 2010-April 2015
                                    • Positive outlook for business travel
                                      • Hotels raise rates in response to heightened demand
                                        • Figure 17: US hotel occupancy rates, 2004-15
                                    • Key Players – What You Need To Know

                                      • Persistent growth in frequent travel memberships
                                        • OTAs pursue the leisure traveler
                                          • Ease of redemption is key program benefit
                                            • Partnerships provide members more accrual and redemption opportunities
                                              • Major airlines restructure loyalty programs, to members’ dismay
                                              • Overview

                                                • Strong membership growth in travel loyalty programs
                                                  • Figure 18: Frequent travel program memberships, by segment, 2012 versus 2014
                                                • Engagement is key challenge
                                                • What’s Working

                                                  • OTA travel sites make it easier for casual travelers to redeem rewards
                                                    • Hotel loyalty programs improve satisfaction scores
                                                      • Figure 19: Hilton HHonors loyalty email- earn bonus points through dining, May 2015
                                                    • Point aggregators streamline plan management
                                                      • Partnerships strengthen program offerings
                                                        • Figure 20: American Airlines loyalty email- earn AAdvantage miles through cruise bookings, May 2015
                                                        • Figure 21: United Airlines Mileage Plus loyalty email- earn miles through FTD purchases, May 2015
                                                      • AAdvantage and Rapid Rewards boast multiple 2015 Freddie Award wins
                                                        • Subprograms target niche segments
                                                        • Facing Challenges

                                                          • Program rewards diluted by too many elite members
                                                            • Changes to airline programs dampen growth
                                                              • Loyalty programs vulnerable to hacking
                                                              • What’s Next

                                                                • Unique rewards provide more value to members
                                                                  • Universal cards may keep rewards top of mind
                                                                    • Coalition programs could increase engagement and redemption
                                                                      • Dynamic prices replace redemption charts
                                                                        • Programs embrace customer convenience via technology
                                                                        • The Consumer – What You Need to Know

                                                                          • The majority of Americans are enrolled in a travel rewards program
                                                                            • Members prefer discounts to perks
                                                                              • Email is the desired communication channel
                                                                                • Program members are likely deal seekers
                                                                                  • A third of program members favor exclusivity
                                                                                  • Rewards Program Enrollment

                                                                                    • More than half of Americans belong to some type of travel rewards program
                                                                                      • Figure 22: Loyalty rewards program enrollment, March 2015
                                                                                    • Rewards programs popular with 25-34s and high-household-income groups
                                                                                      • Figure 23: Loyalty rewards program enrollment, by age, March 2015
                                                                                    • Men more likely to be program members
                                                                                      • Figure 24: Loyalty rewards program enrollment, by gender, March 2015
                                                                                  • Rewards Program Member Behaviors

                                                                                    • Members use rewards programs to reduce travel costs
                                                                                      • Little support for dollar-based accrual of points
                                                                                        • Figure 25: Attitudes toward travel loyalty rewards programs and member behaviors, March 2015
                                                                                      • Men aged 55+ getting the most out of travel rewards
                                                                                        • Figure 26: Agreement that points translate to rewards, by gender and age, March 2015
                                                                                    • Preferred and Redeemed Rewards

                                                                                      • More than half of program members interested in flight rewards
                                                                                        • Perks and upgrades remain relevant rewards for members
                                                                                          • Figure 27: Preferred types of rewards and rewards redeemed, March 2015
                                                                                        • Loyalty members have higher expectations for business travel
                                                                                          • Figure 28: Very important business travel amenities, by all versus hotel reward members, March 2015
                                                                                      • Preferred Engagement Tactics

                                                                                        • Program members more willing than nonmembers to engage
                                                                                          • Figure 29: Engagement tactics of travel rewards programs, by all versus hotel/flight loyalty program members, March 2015
                                                                                      • Attitudes towards Travel Rewards Programs

                                                                                        • Loyalty program members aren’t necessarily loyal
                                                                                          • Figure 30: Attitudes toward travel rewards programs - commitment, by all versus hotel/flight loyalty program members, March 2015
                                                                                        • Privacy concerns and program complexity may deter membership
                                                                                          • Figure 31: Attitudes toward travel rewards programs – trust, by all versus hotel/flight loyalty program members, March 2015
                                                                                        • Program education and transparency benefits members and nonmembers
                                                                                          • Figure 32: Attitudes toward travel rewards programs – transparency and understanding, by all versus hotel/flight loyalty program members, March 2015
                                                                                        • One in three program members looking for more exclusivity
                                                                                          • Figure 33: Attitudes toward travel rewards programs – exclusivity, by all versus hotel/flight loyalty program members, March 2015
                                                                                      • Consumer Segmentation

                                                                                          • Factors
                                                                                              • Figure 34: Travel loyalty program consumer segments, March 2015
                                                                                            • Segment 1: Unwitting Participant (38%)
                                                                                              • Demographics
                                                                                                • Characteristics
                                                                                                  • Opportunity
                                                                                                    • Segment 2: Inclusive Traveler (32%)
                                                                                                      • Demographics
                                                                                                        • Characteristics
                                                                                                          • Opportunity
                                                                                                            • Segment 3: Loyalty Guru (30%)
                                                                                                              • Demographics
                                                                                                                • Characteristics
                                                                                                                  • Opportunity
                                                                                                                  • Appendix – Data Sources and Abbreviations

                                                                                                                    • Data sources
                                                                                                                      • Fan chart forecast
                                                                                                                        • Consumer survey data
                                                                                                                          • Direct marketing creative
                                                                                                                            • Abbreviations and terms
                                                                                                                              • Abbreviations
                                                                                                                              • Appendix – Market

                                                                                                                                  • Figure 35: Total US airline loyalty program memberships, 2006-20
                                                                                                                                  • Figure 36: Total US hotel loyalty program memberships, 2006-20
                                                                                                                                  • Figure 37: Total US car rental/cruises loyalty program memberships, 2006-20
                                                                                                                              • Appendix – Key Players

                                                                                                                                  • Figure 38: Domestic travel in the last 12 months, November 2009- December 2014
                                                                                                                                  • Figure 39: Enrollment in frequent flyer programs, November 2009- December 2014

                                                                                                                              Companies Covered

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                                                                                                                              Frequent Travel Programs - US - June 2015

                                                                                                                              US $3,995.00 (Excl.Tax)