Travel Tech CEO Series: Points International Aims to Upgrade Airline and Hotel Loyalty Programs

Points

Since 2000 Rob MacLean has been CEO of Points.com, a leading technology player in the travel loyalty sector. Points

Skift Take: Points is trying to diversify beyond being the world’s largest reseller of airlines and hotels points. But this loyalty tech company needs a little more mojo if it wants to produce truly game-changing products.

— Sean O’Neill

travel tech vendor ceo listening series
Editor’s Note: This year we expanded our coverage of the technology companies that do the behind-the-scenes work of powering the technology systems of the world’s major travel companies.

We’re chatting with a handful of industry leaders for our new Travel Tech CEO Listening Series to discover where they think the industry is heading.

In 1981, American Airlines created AAdvantage, the first mileage-based frequent-flyer program, a model that has been copied in a broad way by more than 160 airlines, hotel chains, rail companies, and other travel providers.

Today, loyalty programs, particularly the credit-card programs that generate awards through spending, are contributing to the profits of many travel companies.

A case in point: This spring, Qantas explained how its loyalty program is vital to its finances. More than a third of credit-card spending in Australia is on a Qantas co-branded card.

There may be more mileage in the loyalty concept yet. Thirty-six years on, China, India, and other Asian Pacific countries are only now becoming enamored with frequent flyer and hotel loyalty programs, suggesting there are markets that remain largely untapped.

Points International, a Toronto-based technology provider for travel loyalty programs, has tried to ride the wave.

It does not run any airline’s loyalty program. But it is the biggest miles and points reseller to consumers worldwide.

Its Points.com website and app allow consumers to trade points or miles from up to 70 rewards programs, swap miles and loyalty points between programs, and buy miles and loyalty points to meet the thresholds required for all kinds of redemptions.

Smaller companies such as AwardWallet.com and China-based MilesLife also offer points-aggregation tools.

On the business services side, Points helps travel brands increase customer usage of their loyalty programs. In this, it partly competes with companies like Switchfly.

Points, a public company trading on Nasdaq with a $141 million market cap, touts itself as having the bulk of the world’s largest loyalty programs participating in some way or another, including all of the 10 largest airline programs and nine of the top 15 hotel programs in the world.

But there may be less to that than meets the eye.

The biggest knock against Points is that its business model may be too dependent on four loyalty program partners, who make up three-fourths of the company’s total revenue. Points doesn’t disclose the names of the partners.

To be fair, Points does work with big-name partners. One of its clients is Air France-KLM, which uses Points’s mileage retailing business to sell customers on miles to “top up” their accounts and to use its platform to sell miles to third-party companies as well.

Still, its dependency on four clients for the bulk of its revenue may be a problem.

It doesn’t earn meaningful money from loyalty partners directly. As airlines increasingly see their loyalty programs as a cash cow, Points’ handful of software-as-a-service subscriptions aren’t capturing any significant share of that business growth.

This business model makes it vulnerable to losses.

A few years ago, when American Airlines acquired US Airways, which had been using Points, American decided to drop Points rather than adopt its system across the merged company.

Similarly, in 2009, Delta drastically slimmed down its ties to Points, trimming the company’s revenue dramatically.

Since 2000, Rob MacLean has been the chief executive of Points. He’s guided it from a tiny business to one that last year claimed revenue of $239 million ($321.8 million Canadian).

One of the ways Points is trying to expand is through a marketing partnership, which kicked off a couple of months ago, with Expedia Inc.

The move is not a game changer. But it is notable in the context of competition between Expedia Inc and Priceline Group.

In 2014 Points acquired a company called PointsHound that offers mileage bonuses, typically 5,000 miles, for a hotel stay.

This past winter Expedia signed a deal with Points to help market that offering to travel brands. The goal is to make the bonus miles product more widely known.

That is probably in reaction to moves by the Priceline Group, which bought a similar startup called Rocketmiles in 2015 and which has been also trying to sell the bonus miles product to brands. Southwest Airlines became a customer last November.

The product isn’t a game-changer for anyone yet.

But it could be more impactful if Expedia, via Points, and Priceline, via Rocketmiles, began to routinely offer mileage bonuses to consumers who shop for travel via their household name online brands like Orbitz and Booking.com.

Skift recently spoke with MacLean about the company overall and industry trends. We’ve edited the interview for brevity.

Skift: What’s your vision for Points in the coming couple of years?

Rob MacLean: Our core business will remain the retailing of the world’s largest currency, namely, miles and points.

We sell well north of half a billion dollars of miles annually to individual members of these programs, often to help consumers top off our accounts to meet redemption thresholds.

This is profitable and economically viable for the loyalty programs and a helpful service to consumers. Our five-year performance is well over 20 percent in terms of revenue growth.

We do that for 37 companies around the world, such as United, Lufthansa, and Hilton. About 80 percent of our gross profit comes from that service. We launched five new ones so far this year, so it’s still a growth area.

Then we’ve recently introduced two business lines.

One helps airlines do a better job of monetizing their customers’ interest in hotel and car purchases. We let airline passengers use an airlines’ website to buy hotel rooms at standard rates either with miles or with cash in exchange for mileage bonuses.

We get the rooms from wholesalers like Getaroom and Expedia, we buy the miles from the airline, and then we put together the offer.

The third area of focus is opening up our loyalty commerce platform to enable companies to tap into the 60 or more loyalty programs that we work with. And the platform works both ways: I’m keen for us to be the platform by which smart companies offer their products and services to the loyalty industry.

Skift: In 2014, your company acquired PointsHound, a San Francisco startup that lets consumers earn miles by booking hotel stays. Why did you change its business model?

MacLean: There were a couple of companies that were starting around the same time. Rocketmiles is probably the most successful rival.

The companies created a niche where they could drive consumers in and use these various commissions and margins that were being supplied by hotels to purchase miles to incent consumers to use that channel.

The simplest way to think about it is that the companies took some of the commission for helping a hotel get a booking to buy airlines miles that might lure a consumer. If you get, say, up to 5,000 miles along with a hotel stay, that’s a compelling proposition for some consumers.

Both Rocketmiles and PointsHound, were, in fact, buying their miles through our platform because we had access to these 40 or 50 different loyalty programs and so it was efficient for them.

We really liked the way that business was evolving.

But, the challenge was, to be very frank, it was simply a view that trying to create a consumer brand, whether it’s Rocketmiles or PointsHound or any other, when you’re competing with a Priceline and/or an Expedia for digital marketing, just felt like a very difficult proposition.

So we thought the smarter business model would be to take that same dynamic and customize it on a partner-by-partner basis. So, make it very Lufthansa-friendly by customizing the offer to their specific loyalty program, make it very customized for them.

The last time I checked Expedia was spending approximately $3 billion a year on marketing their brands, so it I thought that was going to be a really tough challenge.

But, in the case of Lufthansa’s Miles and More program, then the airline could market the opportunity to earn miles from booking a hotel room to its own customers via either the confirmation page of a booking or other email communication.

Until our product, when airlines wanted to upsell customers on hotels they typically passed them over to online travel agencies, via affiliate deals, and got commission kickbacks.

That was a largely stagnant business.

We’ve signed seven deals in the first 18 months of the business, and we have a number of others in the pipeline. We have operationalized six. We launched ANA, Japan’s largest airline, with this product, in May.

Skift: You signed a sales, marketing, and product development commercial agreement with Expedia, Inc. recently. What could you share about that?

MacLean: Expedia will help get the word out to airlines about our offering to consumers of miles, say up to 5,000 miles, for making a hotel booking.

What we saw the airlines doing is looking at their hotel and car upsell efforts and saying, ‘Look, this should be and can be a much larger and more engaging business for the loyalty program members and the use of our miles is critical to making that happen.’

Expedia’s view is that Points buys a lot of hotel supply through the Expedia Affiliate Network. Expedia is our largest supplier.

We just feel like it has got the best set of inventory out there in the marketplace and we wanted to work a little more closely together and they agreed.

Skift: You mentioned Rocketmiles before. In 2015, Priceline Group bought it and, since last November, Booking.com has been using that technology to power Southwest Airlines’s hotel offering by offering flight buyers the chance to book hotels and earn miles along the way — similar to your product. How can Points compete in that B2B services sector?

MacLean: We feel very good about it. It is a competitive environment, as you describe, so while we’d love to win every piece of business, I think we’re fairly pragmatic.

We’re going to win more than our fair share, but not everything. As it is, we’re running a bit ahead of where my expectations were.

We would expect that the market, going forward, will be split between two or three players that are offering really good products.

Skift: Will Expedia’s consumer-facing brands integrate the offer? It needs to counter the Priceline Group, it would seem to an outside observer, now that Booking.com began powering Southwest Airlines’ hotel-mileage bonus offer. Expedia attempted to come up with its own version internally, but it hasn’t seemed to do well.

MacLean: As you know Hotels.com has certainly, in many view, the strongest template in the marketplace for a kind of a broader less loyalty-focused proposition.

So I think you’ll see us out there in the marketplace with both offers because we find the airlines in particular have a number of channels that they’re interested in tackling and our view is together we can solve for all of those channels.

Our plan with Expedia is to jointly leverage our strengths.

Skift: How else could you and Expedia jointly leverage your strengths?

I think they see the strengths that we bring to the table in terms of understanding the loyalty industry and these pre-established relationships thanks to our technology being integrated into many of these loyalty programs.

Probably more importantly, Expedia has an understanding of how we could be a data play.

We could say, ‘OK, Sean, is a customer that looks like this. This is what his balance is in the loyalty program. This is his purchasing behavior. Maybe we should provide this kind of an offer for Sean based on his currency balances and his tier status.’

So we’re taking a lot of that data and being able to be very targeted and smart in terms of how we give you hotel and car offers.

We’re also able to kind of market directly into the databases of our loyalty partners, which is pretty atypical for the Booking.coms of the world.

We’re at the very early stages of that, obviously, but pretty pleased that a company as strong and as well respected as Expedia feels like there’s an interesting opportunity to go to market together on a product like ours.

Skift: Any other refinements to the product coming this year?

MacLean: We rely on Expedia Affiliate Network to source hotel inventory today, as I mentioned, but also a number of other sources.

We’re going to continue to add to that portfolio of inventory sources.

We want to be able to see different inventory to find one that has the maximum commission that we can then bring forward and make available to the consumers and our partners. For example, the more deeply discounted hotel rates we can access, the more we can afford to buy miles to use as an incentive for consumers, and the more we can boost conversions.

That’s a pretty unique proposition when we compare to some of the other folks out there in the marketplace.

And that is leading to very, very significant margins that we can share that are generating really good economics for our partners and really good choice for our consumers.

By end of the year, we will unequivocally be in a position to say we have access to more hotel inventory than any other player in the space.

The other thing that we’ll continue to develop, which was something that was kind of an early innovation from us, was how we use that same margin profile and access to hotels to create redemption offers for the hundreds of millions of consumers that are collecting these miles and points.

We’re not only going to go and stay at a hotel and really earn inordinately high amounts of miles and points but then they can also go and spend their miles and points to buy that hotel space. That’s a bit of a unique proposition as well.

Skift: Using miles to incentivize consumers to buy something isn’t that new or special. Lots of companies do it.

MacLean: Again, doing it at scale takes expertise. We also have an edge that comes from our access that where we can go in and debit and credit all these miles and points from our loyalty program partners.

So, Sean, you could go to New York and stay at a hotel and get the hotel you want but if you don’t want to pay cash, maybe you want to pay with your loyalty currency, we provide that all in a single program where you could either earn the miles or redeem the miles and that’s only going to expand.

The feedback from the industry is fantastic on that. They like to give consumers lots more utility with their miles and points and in many cases take it off the company balance sheet at very very low cost and we make it seamless to do with their systems.

Skift: Hilton recently unveiled its new loyalty program at the end of January and they seem to be using a mix of points and cash. If other providers also start wanting to add cash in the mix how does that affect Points?

MacLean: Of all our partners that we do all the retailing and merchandising and miles and points for, about half of them have a cash plus points program that lives alongside ours.

We recognize that they’re another bit of utility that these programs are trying to give their customers and more flexibility is really where the loyalty industry is going.

We’ve got some solutions that we help some of the industry in terms of how they maximize the value and the offering on the cash plus points.

You’ll see us maybe operating some of that for some of our partners on a go forward basis but generally speaking it’s really just a good indication of how loyalty programs are looking at these loyalty currencies as increasingly more fungible.

Skift: There are estimates that there are 15 trillion miles outstanding. Probably more. And that doesn’t count hotel points. What good is this currency, as you call it?

We can create a situation where loyalty program members really see more value to collecting that currency by becoming able to redeem the miles and points for things they want besides travel.

If they can use, say, miles to book a hotel room, then at the end of the day consumers are more engaged in the program, are going to feel it’s more worthwhile to collect more miles and points.

What most average people don’t know is that about 60 to 70 percent of all the miles and points that are in our respective accounts are actually sold by the airlines and hotels to third party companies.

So they’re actually generating economics on the issuance of miles.

If we can give consumers more ways to use their miles and points there’s been a pretty clear track record those same consumers will go earn more miles and points on which these big programs are getting paid for and it becomes a really interesting business model.

Skift: How can Points stay ahead of the pace of innovation, with so much disruption and startups popping up out of nowhere?

There are some great companies in the UK and Israel and in the U.S. that have really begun operationalizing interesting ideas and products that are relevant to the loyalty industry.

So we see a path where, one, we open up our APIs and we open up our platform for some really smart companies that could build on it and then we could be able to deliver those products and services to the 60 odd loyalty programs that we work with.

That’s our pretty straightforward strategy in the sense that if you’ve got a great idea and you don’t have the time or energy or money to go through a very very long sale cycle with all of these big loyalty programs, by connecting to the points loyalty commerce platform and via our APIs you can have access to 60 plus loads and programs.

Now I can’t guarantee that those 60 plus loads and programs are going to say, “Hey that’s a great idea, Startup X. I’m going to turn that one one and I’ll put my billion consumers that are in the touching middle to commerce platform.”

But what I, at Points, can guarantee you is that technically if Avios out of the UK or United out of Chicago, sees we’ve added your product to our platform and says they’re interested in using your product, we can turn it on in a day.

So the utility of bringing some really smart idea to a platform, making them available to our partners, and enabling more ideas and more eCommerce that was really interesting to us.

That was really the concept of the opening up of the platform and the APIs to smart products and smart companies.

Skift: You have your other product, the loyalty wallet program. Would you explain that a bit, Rob?

MacLean: Yeah the Loyalty Wallet provides a bunch of functionalities that in some ways isn’t terribly glamorous but those in the commercial and technical worlds would recognize as being critical and hard to do on the back-end, like debit and credit functionality, fraud management capabilities, member validation, and security functionality, eCommerce transactions.

All of that stuff is just very practical, hard to kind of pull together at the scale of 60 programs around the world.

The Loyalty Wallet takes a lot of the functionality that is in a loyalty commerce platform, packages that up, and makes that available to a number of partners that are interested in taking loyalty and incorporating it in their product, whoever they may be.

Skift: Like Choice Hotels, for example?

MacLean: Yeah, there’s a couple of different flavors of it.

I’ll speak first to the Choice Hotels example you referenced. That functionality that allows the debiting and crediting, the moving of points, the storefront activity,… two of the recent users of that, we would call it our partner branded exchanges.

So Choice Privileges, which historically has had functionalities that allowed you as a Choice Privilege member you could go on to that website and say, “I want to exchange my Choice points into loyalty points in another program.”

So maybe I want to turn the Choice points into Singapore Airlines’ miles.

Until lately, it was a fairly old and outdated user interface and the process took a four- or six-week window before your points or miles could be converted into the airline that you were sending them to.

Just not a great customer experience.

So what Choice said to us is, “Could we use your Loyalty Wallet to put a much more modern technology store front in place that allowed you to do this?”

So we at Points would go out and do all the connections and integrations to Singapore Airlines and all of their partners and use the loyalty commerce platform to make that not a six week waiting period but a real modern interface that I go in now and I convert my Choice points into one of these airline programs and it’s happening on a real-time or 24-hour basis, depending on the airline partner on the other end.

So we see the loyalty industry has a lot of exchange capabilities built into their loyalty offering to their members but most of it sitting on pretty clunky old technology.

The wallet really is an opportunity for them to modernize that and give their members an opportunity to really experience a much faster and much cleaner proposition on one technology platform. We do all the integrations, we do all the on-going management between Singapore, in this example, and Choice so for these guys they can just focus on marketing the benefits and privileges of their program rather than kind of doing a lot of the operational stuff.

The other thing that comes with that is so maybe there are a dozen partners that Choice works with today. Some of those others are not plugged in via the Wallet, but our platform that has connections to 60 other loyalty programs.

We’ll work with Choice, in this example, or other partners, and say, “Hey you already have the technology connections between Choice and 25 other programs via the Points commerce platform. Would you like the offer Choice members the ability to redeem their points into United Miles, or others that may not be partners today?”

And again, we can help them expand their program and do that in a very simple and efficient manner.

So that’s kind of how the industry is using it to improve their current customer proposition but we also see interesting partners like TripCase or others who want to take the loyalty information.

Skift: On a recent earnings call, some analysts talked about how suppliers are trying to drive harder bargains and that the percentage of margins is moving from about 14 percent down to 9 percent on average. Is that right?

MacLean: We have seen opportunities where we’ve been able to lock down longer-term relationships with our partners and in some cases there we may trade up some short-term unit economics for that long-term stability in a relationship.

But our core business lines are healthy.

Check out other articles in Skift’s Travel Tech CEO Series, including interviews with the CEOs of Amadeus, Sabre, Travelport, and SITA..

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Announcing Group Rates For Skift Global Forum

Skift Take: Grab your coworkers and save on Skift Global Forum when you register together.

— Rafat Ali

Skift Global Forum is officially less than four months away on September 26-27 at Jazz at Lincoln Center’s Frederick P. Rose Hall, Time Warner Center NYC! I know, we can’t believe it either. To celebrate its rapid approach, today we’re excited to announce our competitive group discounts when three or more people from the same company register for the hottest event in travel together.

That’s right! No code necessary, just add three or more colleagues to your registration and you’ll see these discounts automatically applied.

  • 3 People — 15% off each ticket
  • 4-5 People — 20% off each ticket
  • 6-9 People — 25% off each ticket 
  • 10-14 People — 30% off each ticket
  • 15+ People— 35% off each ticket

That’s more than $1,200 off each ticket in savings!* You and your team cannot afford to miss the opportunity to network with speakers from Hilton Worldwide, TripAdvisor, Royal Caribbean Cruises Ltd. and Delta, and an audience made up of the top strategists, technologists, and marketers in travel. So, grab your coworkers and register today.

Register and Save Today

And as always, we couldn’t bring this event to life without our incredible sponsors: Button, Criteo, FareportalMapboxSmartlingSojern, and The Points Guy.

Email us at forum@skift.com for any questions or if you’re interested in sponsoring our event.

*Discounts automatically apply at checkout and cannot be retroactively applied to current ticket holders. Group Rates available for a limited time only.

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Dr. Beach Top 10 List Is Great for Tourism — Sometimes Too Great

Jim Mullhaupt  / Flickr

Siesta Beach in Sarasota, Florida, pictured here, was named the top beach in America by Dr. Beach last week and has made investments to ensure it maintains its reputation. Jim Mullhaupt / Flickr

Skift Take: Being named the top anything is usually exciting for any destination and comes with lots of free publicity. But as some tourism boards point out, reviews from travelers themselves often resonate more with consumers than an official ranking.

— Dan Peltier

Being named one of the top 10 beaches in the United States is an accolade any destination would be happy to accept as the summer travel season officially kicks off in the U.S.

Dr. Beach released his annual ranking of America’s top 10 beaches last week and it included some familiar names such as Florida’s Siesta Beach, which ranked number one for the second time since 2011, and Cape Cod, Massachusett’s Coast Guard Beach.

Many beaches that have earned spots on Dr. Beach’s ranking attribute that distinction in part to increased visitation to the beach and surrounding community. Top-ranked beaches also typically have investment and infrastructure projects in the works that add or improve amenities and help protect the beaches’ environments and wildlife.

Siesta Beach, for example, recently completed $21.5 million in renovations which included adding more parking, a playground and picnic area.

But with more publicity and higher foot traffic, beach management and tourism boards are balancing how to maintain their high standards and visitor experience while mitigating environmental impact and educating visitors on how to keep beaches clean.

Many locals who live in destinations with popular beaches also aren’t pleased with more visitors, even if it benefits their communities. “I get emails from people in Sarasota unhappy about the list,” said Stephen Leatherman, aka Dr. Beach. “I get hundreds of emails from people concerned about the rankings. Yes, it does increase the number of people who come and that does make some local people unhappy.”

“Siesta Beach has grown its staff and resources since it appeared on Dr. Beach’s 2011 ranking,” said Carolyn Brown, general manager of parks and recreation for Sarasota County.

“As we move into the July 4 holiday, we’re preparing our staff to let visitors know that they should leave no trace,” said Brown. “We always tell visitors to clean up after themselves. It’s a challenge during holidays but we’re doing our best to educate the public.”

But many travelers probably don’t know the meat of what it means to be the number one beach and don’t consider that it’s tied to the beach’s environmental efforts, said Erin Duggan, vice president of Visit Sarasota County. “But when they hear Dr. Beach I think they do recognize his credentials,” said Duggan. “I think it intrigues them if they’ve never been.”

The ranking is considered one of the most prestigious U.S. beach rankings as Leatherman considers some 650 public beaches across the U.S. He’s done the ranking for more than 25 years and judges beaches on 50 criteria ranging from how warm their waters are to how much parking is available to what color the sand is.

Dr. Beach, however, isn’t the only beach ranking of interest as some beaches that make the list also cite TripAdvisor, for example, as a driver of visitation because those reviews and rankings come directly from travelers.

Siesta Beach was also voted the top U.S. beach in 2015 and 2017 on TripAdvisor.

Balancing Beach and Environment

While many destinations invest their own time and money into maintaining their beaches, Coast Guard Beach on Cape Cod in Massachusetts is maintained by the National Park Service. “Our number one issue that we’ve been working on for many years is wastewater infrastructure because the Cape doesn’t really have much of that,” said Wendy Northcross, CEO of the Cape Cod Chamber of Commerce.

“We’re acutely aware of those kinds of impacts. I think if we were open year-round I think you might see other overt efforts to try to pace visitation but we don’t enjoy it,” she said.

U.S. beaches, however, are typically cleaner and more environmentally friendly than beaches in Southeast Asia or Latin America, for example, said Leatherman. “The U.S. has really high water quality standards and worldwide, I think water quality has gone down a bit,” he said.

“Some beaches try to hide data and have the improper development of waste water management. There are a lot of development in some parts of the world that have decreased water quality and Spanish beaches are one example of this.”

Leatherman has been to all 650 public beaches in the U.S. and limits his ranking to American beaches because he hasn’t been to all of the world’s beaches.

A professor and director of the Laboratory for Coastal Research at Florida International University, Leatherman has penned more than 200 academic journal articles and has edited or written more than a dozen books about beaches. His rankings have appeared annually since 1991.

He said he’s “never found a perfect beach but has found a lot of great ones.” While aesthetics are part of the ranking, Leatherman’s ranking is more concentrated with the environmental health of the beach and quality of amenities.

“Some people don’t like to see buildings when they’re on a beach but others want to stay on a beach and have those creature comforts close by,” said Leatherman. Even with Siesta, I gave them a total score of 241 of 250 and the criteria is set up with rating the resources and what people expect.”

Using Dr. Beach in Marketing Campaigns

Duggan said Visit Sarasota County lets Dr. Beach’s ranking speak for itself but does capitalize on it.

“Last week we immediatly we created a little video about Siesta Beach on our Facebook page,” said Duggan. “Most of our marketing campaigns are also about beaches and they’ve always been the primary focus of our campaigns.”

The Eastham, Massachusetts Chamber of Commerce, which helps promote Coast Guard Beach, consistently makes Dr. Beach’s ranking each year and puts up posters in its information booths to let visitors know that the beach has made the list, said Jim Russo, executive director of the Eastham Chamber of Commerce.

Being able to market yourself as a top beach destination and tag on Dr. Beach’s credentials doesn’t hurt from a public relations perspective. But many destinations also realize that managing the environmental impact from an influx of visitors becomes increasingly difficult when they make these rankings as visitors often leave behind more than their footprints.

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Leveraging Loyalty to Drive Direct Bookings

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Skift Take: Deeming online travel agency fees too high, hotels turn to loyalty programs to push direct bookings.

— Dave Montali

Last week we launched the latest report in our Skift Research service, The State of Loyalty in Hospitality 2017.

Below is an excerpt from our Skift Research Report. Get the full report here to stay ahead of this trend.

While online travel agencies have been instrumental in helping attract new business to properties, hotels have a clear interest in reducing the true cost of guest acquisition, especially when it comes to repeat bookings. As we explored in-depth in our recent 2017 Outlook on Hotel Direct Booking, OTAs take between 10 and 15 percent of room rates in commission from large branded chains and between 15 and 25 percent for independent properties.

While OTAs are certainly a crucial part of the booking ecosystem, most hoteliers across property types agree that OTA fee structures are on the excessive side, with the majority of groups indicating that a commission rate of around six to 10 percent would be more “fair.”
Preview and Buy the Full Report

Source: Skift’s 2017 Outlook On Hotel Direct Booking

A big focus of many loyalty programs is to incentivize direct bookings, aiming to cut the true cost of acquisition. However, establishing what a true acquisition cost is can be challenging, particularly when vast amounts of marketing and ad spend are not counted as acquisition cost, but rather offset as a marketing/advertising expense. For example, Your Rate by IHG Rewards Club offers its members special rates, allowing them to get around price parity agreements with OTAs.

“There’s no question that a loyalty program is the most effective tool we have to defend ourselves against OTAs and the one problem we haven’t been able to solve, as an industry, is that the distribution costs keep rising, and there’s no end in sight,” says David Kong, CEO, Best Western. “I think next year we’ll see an even higher distribution cost for our hotels, so we have to offset that by producing more business through the brand channels, and the loyalty program is a good reason for people to book with a brand directly because, if they don’t, they won’t be able to earn points.”

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After you subscribe, you will gain access to our entire vault of reports, analyst calls, and data sheets conducted on topics ranging from technology to marketing strategy to deep-dives on key travel brands. Reports are available online in a responsive design format, or you can also buy each report a la carte at a higher price.

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Supreme Court Travel Ban Ruling Could Hinge on Trump’s Anti-Muslim Comments

Mark Humphrey  / Associated Press

President Donald Trump speaks at a rally March 15, 2017, in Nashville, Tennessee.
Mark Humphrey / Associated Press

Skift Take: President Trump’s Twitter feed and campaign rhetoric could be his own worst enemy when it comes to what the U.S. Supreme Court ends up doing with what he now acknowledges is a travel ban.

— Dennis Schaal

Now that the U.S. Supreme Court has been asked to consider President Donald Trump’s travel ban, there’s one word you need to focus on: animus.

In legalese, it means an illegitimate prejudice. It was the key to the lower court decisions freezing the ban. And it’s one of the master concepts in swing voter Justice Anthony Kennedy’s jurisprudence. You might even say that animus is the opposite side of the coin to Kennedy’s other great master concept, dignity.

If Kennedy reads Trump’s executive order temporarily blocking immigration from six predominantly Muslim countries as an exercise of anti-Muslim animus, the ban will fall at the court. And that seems highly likely, given that it would be difficult for the justice to downplay Trump’s prejudice without betraying his own legacy.

The origins of the term animus go back at least a couple of hundred years. In Latin, animus just means the soul. By extension, having an “animus” to do something came to mean an intent to do so. Many phrases in legal Latin use the word neutrally to mean an intention that could be good, evil or indifferent.

But gradually,  the legal word for “intent” came to mean something like hostility. This usage was probably influenced by the English word “animosity,” which itself was originally neutral and came to mean hostility as early as the 17th century.

In constitutional law, animus began its path to contemporary importance in Kennedy’s 1996 landmark gay-rights opinion in Romer v. Evans. Kennedy wanted to use the equal protection clause of the Constitution strike down an amendment to the Colorado state constitution adopted by referendum. On its face, the amendment said the state’s legislature and cities couldn’t adopt anti-discrimination laws to protect gay people.

Before the Romer decision, the standard way to strike down laws as violating equal protection was to begin by saying that those laws suspiciously burdened a class of people who could be characterized as a “discrete and insular minority,” classically blacks. Kennedy didn’t want to say that gay people should be considered a discrete and insular minority.

The legal alternative was that, in order to strike down the law, Kennedy had to show that the law wasn’t rational. That’s usually a pretty low bar, because almost any law can be said to have some rational basis.

Here Kennedy got creative. He wrote that the Colorado amendment’s “sheer breadth is so discontinuous with the reasons offered for it that the amendment seems inexplicable by anything but animus toward the class that it affects.”

Given the presence of animus, Kennedy concluded, the amendment lacked “a rational relationship to legitimate state interests.” It was therefore unconstitutional.

This was a quiet constitutional revolution, as Justice Antonin Scalia noticed in a searing dissent that famously accused Kennedy of confusing a culture war over homosexuality with a “fit of spite” against gay people.

Scalia went on to argue that animus didn’t violate the Constitution. “Of course it is our moral heritage that one should not hate any human being or class of human beings,” he wrote acerbically. “But I had thought that one could consider certain conduct reprehensible – murder, for example, or polygamy, or cruelty to animals – and could exhibit even ‘animus’ toward such conduct.”

From the Romer precedent, animus began to make its way into other parts of constitutional doctrine, including religious liberty. In 1993, before Romer, Kennedy had written an important decision called  Church of Lukumi Babalu Aye v. City of Hialeah. In that case, he said, “the free exercise clause protects against governmental hostility which is masked, as well as overt.” Kennedy had then used the word “hostility.” But subsequent applications of the Lukumi principle have substituted the word “animus,” which seems to have much the same meaning.

The courts that froze the travel ban have often relied on the Lukumi precedent while using “animus.”

For Kennedy, animus became a master concept in his 2013 gay-marriage decision, U.S. v. Windsor, which struck down the federal Defense of Marriage Act. There animus came to be paired with Kennedy’s concept of dignity.

In the Windsor case, Kennedy wrote that DOMA sought to injure gay couples who were allowed to marry by state law. The law was therefore motivated by “improper animus or purpose,” Kennedy said, citing his own Romer decision in support. (Scalia, on cue, responded that Congress was motivated not by “animus” but by “stabilizing prudence” in the presence of conflicting state laws on marriage.)

And in the Windsor case, Kennedy also famously made the point, repeated two years later in Obergefell v. Hodges, the right-to-gay-marriage case, that allowing a couple to marry conferred dignity on the partners. Taking away the right to marry therefore produced “injury and indignity.”

By implication, then, to treat a group of people with unconstitutional animus is to deny them dignity — which adds up to a constitutional violation.

Presumably, at least some of the Supreme Court’s conservatives, channeling Scalia, will want to say that Trump’s executive order on its face does nothing to demean Muslims. But Kennedy will be under enormous pressure to pay attention to Trump’s public statements before and after the election, statements that led the lower courts to say that the travel ban was the product of anti-Muslim animus.

There remain technical questions of whether the ban violates the Constitution’s establishment clause, the free exercise clause or even the equal protection clause. But the bottom line for Kennedy is that if he ignores the animus issue that the lower courts emphasized, he runs the risk of undercutting his legacy.

For what it’s worth, I find it almost impossible to believe that Kennedy, at 80, would want to sign an opinion closing his eyes to animus, which he himself did so much to make into a constitutional touchstone. That should be enough to make sure the travel ban doesn’t take effect.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Feldman is a Bloomberg View columnist. He is a professor of constitutional and international law at Harvard University and was a clerk to U.S. Supreme Court Justice David Souter. His seven books include “The Three Lives of James Madison: Genius, Partisan, President” and “Cool War: The Future of Global Competition.”

  1. I think over the course of the 19th century, but that’s not a historically sound conclusion, just an impression.

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Bragging Rights for Shortest International Flight Goes to NorthStar Air Tours

Skift Take: What’s all the fuss about United getting the longest route ever flown, Los Angeles-Singapore, by a U.S. airline? Canadian airline NorthStar Air Tours just got the real prize — the shortest international route, Friday Harbor Airport in Washington to Victoria Canada, in North America. There are only nine seats — none of them lie-flat.

— Dennis Schaal

North America’s shortest scheduled international flight — at less than 20 minutes — will soon leave daily from Friday Harbor Airport in Washington and land in Victoria, Canada.

The Seattle Times reports it took three years, but Friday Harbor Airport received official clearance this week for the flight. Pending FAA approval, a Canadian airline anticipates beginning to book passengers within the next month.

Northstar Air Tours owner Henry Emson says a one-way ticket will start at $49 on a nine-passenger plane.

Friday Harbor, on San Juan Island, and Victoria, on Vancouver Island, are 20 miles from each other but separated by a strait and an international border.

Travelers’ options have been restricted to driving, taking a seasonal ferry or chartering a plane.

___

Information from: The Seattle Times, http://www.seattletimes.com

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Vacation Rentals for the One Percent and 4 Other Hospitality Trends This Week

Oasis Collections

A home in Santiago, Chile that is available through luxury home-rental site Oasis Collections. Oasis Collections

Skift Take: These are the hospitality trends we were talking about this week.

— Sarah Enelow

Throughout the week we post dozens of original stories, connecting the dots across the travel industry, and every weekend we sum it all up. This weekend roundup examines hospitality.

For all of our weekend roundups, go here.

>>This boutique hotel chain’s strategy? Speed wins: Boutique Group Graduate Hotels Finds Its Niche in University Towns

>>When it comes to short-term vacation rentals, a guaranteed level of service is a goal of luxury and non-luxury travelers alike: What Wealthy Travelers Look for in Their Vacation Rentals

>>Swire is an interesting hospitality brand that not enough people know outside of Hong Kong. That is set to change: Interview: Swire Group Brings Its Brand of Luxury to the U.S.

>>Luxury travelers like vacation rentals, too. They just want to make sure they’re well taken care of along the way: Skift New Luxury Newsletter: Vacation Rentals for the One Percent

>>This is especially ideal for guests who (1) don’t want their colleagues (or the general public) to see their sweaty selves in the hotel gym and (2) those rare souls who want to work out 24/7 as if no one is watching: Hilton’s New Design Brings the Gym to the Guest Room

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United Airlines to Suspend Venezuela Flights

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United’s daily Houston-Caracas service will be canceled because of low demand. Kim White / Bloomberg

Skift Take: United was concerned about financial losses on its flights to Venezuela, the currency crisis and the security of its crews in deciding to take Venezuela off its route maps.

— Dennis Schaal

United Airlines Inc. will suspend flights to Venezuela next month, a move that further cuts off access to the Latin American nation engulfed in violent political protests and economic chaos.

The daily service between Houston and Caracas will be canceled because of low demand, United spokesman Charles Hobart said in an email. “Because our Houston-Caracas service is not meeting our financial expectations we have decided to suspend it, effective July 1,” he said.

The Venezuelan government has faced almost two months of anti-government protests. It has drastically cut imports of food and medicine in order to conserve the cash needed to pay bondholders, as oil production declines and international reserves hover near a 15-year low.

United, whose flights to Caracas have been popular with oil executives in Texas and Venezuelans living in the U.S., is the latest in a string of airlines to pull out or cut exposure to socialist Venezuela. Only last month, TAP-Transportes Aereos Portugueses stopped selling plane tickets in Venezuela because it wasn’t getting the money from those sales.

Last year, carriers asked the U.S. Department of Transportation for antitrust immunity so they could discuss ways to retrieve $3.8 billion held hostage by Venezuela’s economic collapse, with the government virtually halting repatriation of past ticket sales made in bolivars, the local currency.

American Airlines Group Inc., which had been the largest carrier by capacity to Venezuela, took a $592 million special charge in 2015 to write down the value of its ticket sales in bolivars. Delta Air Lines Inc. has also written down the value of past Venezuelan sales in bolivars. It has cut flights dramatically since 2014.

Last year, Chile-based Latam Airlines Group SA also suspended its Caracas service from Brazil, Chile, and Peru; Grupo Aeromexico SAB ended flights between Venezuela and Mexico City; and Deutsche Lufthansa AG dropped its flights from Frankfurt. Air Canada left Caracas in March 2014, citing the civil unrest.

–With assistance from Justin Bachman

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Trump Uses London Attacks to Push for Travel Ban

Dominic Lipinski  / PA via Associated Press

An armed Police officer looks through his weapon on London Bridge in London on June 3, 2017. The death toll has risen to seven in the terrorism incident. Dominic Lipinski / PA via Associated Press

Skift Take: The courts have so protected the U.S. Constitution but Trump crudely used the tragic events in London to attack the U.S. judiciary and push for his travel ban. His spokespeople have argued for months it isn’t actually a travel ban, but the President tweeted ‘We need the Travel Ban … ‘ Oh, well.

— Dennis Schaal

President Donald Trump argued in favor of his controversial travel ban as London authorities responded to reports of a string of attacks Saturday night.

One tweet read: “We need to be smart, vigilant and tough. We need the courts to give us back our rights. We need the Travel Ban as an extra level of safety!”

At least seven died Saturday night after a van veered off the road and barreled into pedestrians on busy London Bridge. Three men fled the van with large knives and attacked people at bars and restaurants in nearby Borough Market, police and witnesses said. The attack unfolded quickly, and police said officers had shot and killed the three attackers within eight minutes

Trump began tweeting about the incidents an hour or so after initial news reports. First, he retweeted a Drudge Report item about the attacks, then provided his own message about the travel ban.

A few minutes later Trump tweeted a message of support for Londoners: “Whatever the United States can do to help out in London and the U. K., we will be there – WE ARE WITH YOU. GOD BLESS!”

Earlier this week, the Trump administration asked the Supreme Court to immediately reinstate its ban on travelers from six mostly Muslim countries and refugees from anywhere in the world. The administration argues that the U.S. will be safer if the policy is put in place.

Lower courts have blocked the Trump policy, citing various reasons including statements Trump made during the 2016 campaign. The legal fight pits the president’s authority over immigration against what lower courts have said is a policy that purported to be about national security but was intended to target Muslims.

Trump later called Prime Minister Theresa May to offer condolences. The White House said the president “praised the heroic response of police and other first responders and offered the full support of the United States government in investigating and bringing those responsible for these heinous acts to justice.”

The State Department issued a statement condemning them as “cowardly.”

“The United States stands ready to provide any assistance authorities in the United Kingdom may request,” State Department spokeswoman Heather Nauert said.

“Our hearts are with the families and loved ones of the victims. We wish a full and quick recovery to those injured in the attacks. All Americans stand in solidarity with the people of the United Kingdom,” she said.

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JetBlue Tests Facial Recognition and 5 Other Aviation Trends This Week

KLM

A customer uses facial recognition software to board a KLM flight in Amsterdam. JetBlue soon will become the first U.S. airline with a similar program. KLM

Skift Take: These are the aviation trends we were talking about this week.

— Sarah Enelow

Throughout the week we post dozens of original stories, connecting the dots across the travel industry, and every weekend we sum it all up. This weekend roundup examines aviation.

For all of our weekend roundups, go here.

>>American Airlines has a new lounge for ultra-premium passengers at JFK. Good luck getting in though: American Airlines Launches Flagship Airport Dining for Top-Tier Fliers

>>It’s starting to look like an electronics ban on flights from Europe to the United States may not be imminent. But no one outside of government knows for sure — not even airlines: Laptop Ban on European Flights Might Not Happen, Report Says

>>Even as tests go, this is a tiny one. But it shows what’s possible with biometrics. Wouldn’t it be nice to be able to go through the airport without showing a boarding pass or passport? JetBlue to Test Facial Recognition for Boarding Without Passports

>>United is making a sound business decision by rewarding its best customers. But in recent years, we’ve seen the chasm grow between the flying haves and have-nots: United Brings Back Hot Food on Some Routes — But Only in Economy Plus

>>Business travelers love saving two or three hours of flying time. They’ll surely love United’s new nonstop. But for everyone else, 18 hours is a long time to spend on an airplane. Even a 787: United To Fly Longest Ever U.S. Airline Route

>>Honeywell has a new suite of connected tools that it’s bringing to market powered by satellite connectivity. In a crowded market, though, it may take some time before the potential is fully realized: Honeywell Shows Off Connected Aircraft Capabilities On Test Flights

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