An Examination of Internet Intermediaries and Hotel Loyalty Programs: How Will Guests Get their Points?
Carroll, Bill; Siguaw, Judy D.B.A.
Competitive forces have made loyalty programs a key point of contention between hotel chains and the online intermediaries that sell hotel rooms using a merchant model. Hotel companies would prefer not to award points for the discounted rooms that they sell through the internet agencies. The intermediaries, on the other hand, would like to strengthen their position by offering hotel loyalty-program points. Ironically, although loyalty programs are costly for chains to operate, the cost of giving points is low for hotels, and the points have little intrinsic value for guests. Moreover, loyalty points are being used increasingly as a commodity that can be exchanged for goods or services not related to the hotel companies that issued them. Beyond that, an analysis of the game theory relating to the hotels' position suggests that hotels will eventually want to award points for internet-merchant sales, if only to minimize losses if a competitor does so. Finally, although one internet intermediary has experimented with setting up its own loyalty-point program, most seem to want to avoid taking on that expense.
hotels; internet intermediaries; loyalty programs; merchant model; game theory
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