Leveraging blockchain to enable faster and more secure data transfers has become one of the top technology trends for airlines, hotels, car rental companies and other travel providers. Using blockchain to track baggage, book flights and reserve hotels is something that’s beginning to emerge. But could blockchain also help improve loyalty rewards programs?

Traditional loyalty programs pose a widespread issue in the travel industry, and blockchain may be able to help solve it.

Loyalty Programs: What’s the problem?

Beginning in the ‘80s, loyalty rewards programs debuted as a new part of the travel industry’s marketing strategy, connecting airlines to hotels, restaurants and other services. Now, there are over 3 billion loyalty program memberships in the United States alone.

While that may sound like a large number, the majority of members do not actively participate in their programs, with as many as 76% not using their rewards. As a result, unclaimed points can pile up and become a liability on an organization’s balance sheet. In 2017, many major companies in the industry lost billions due to unredeemed points: Hilton at $1.4 billion, American Airlines at $2.7 billion, and Marriott at a whopping $4.9 billion – just to name a few.

Further, companies must start appealing to millennials, which represent the next lucrative customer base for the hospitality industry. However, they have much more information readily available than that of other generations, frequently basing their decisions on online ratings and reviews rather than brand loyalty alone. Due to this difference, while not inherently disloyal, many long-standing marketing methods do not have the same effect on them, making it harder to make loyalty programs appealing. In fact, a massive 86% of millennials in the United States do not belong to a hotel loyalty program at all. It’s imperative for hotels to find new ways to get their attention.

Clearly, something needs to change. And blockchain may be the answer.

Transforming Loyalty Programs through Blockchain

A participant in a blockchain-based rewards program exchanges tokens instead of points for products and services, which is a huge plus. The distinction between the two lies in the lack of an intermediary facilitating the transaction, as blockchain makes these exchanges peer-to-peer. This makes transactions fast and easy. Also, tokens are transferrable with any partners on the network. This isn’t limited to only customers redeeming points from a business; business-to-business transactions are possible, as well.

A blockchain-powered loyalty rewards program comes with a number of benefits for providers and members alike. For example, loyalty programs encourage their customers to purchase more products and services, as customers are incentivized to spend more money when they have tokens available.

Loyalty Program Providers: Due to its very nature, having loyalty tokens on a blockchain makes them unique, traceable and fraud-proof. Providers can gain full transparency into tokens and how they are used, as well as increase participant and partner satisfaction by connecting participants to numerous redemption options. The stats say it all: 70% of consumers prefer programs that partner with other brands in order to offer more ways to earn loyalty tokens. This helps promote brand recognition, too.

Using a blockchain can help lower expenses, as well. A blockchain requires no middleman to manage transactions, and is extremely cost efficient when it comes to data analysis. Loyalty program providers can easily track, report and analyze member behavior in order to create the best experience possible.

Loyalty Program Members: By using tokens securely earned and spent on a blockchain, members can receive rewards almost instantaneously. This means someone paying for their hotel could use their tokens earned right after to grab a bite or rent a car.

Additionally, instead of tasking the participant with keeping track of 30+ programs all on different platforms, a blockchain loyalty program operates on a single platform, with a wallet seamlessly covering multiple programs. This makes it much easier for members to keep track of tokens and avoid any expiration dates – which is one of the biggest pain points members voice. In turn, this keeps tokens from becoming a liability for loyalty program providers.

More Freedom, Happier Customers

By bringing loyalty programs into a more digital sphere, the traveler gains autonomy otherwise lacking in traditional rewards programs. The tokens redeemed are transferrable across the entirety of the blockchain network – not just for airport miles. By giving participants the power to choose where to redeem their rewards, and the ability to redeem them instantly, companies can keep customers using their tokens time and time again.

For more information, be sure to watch our latest webinar, Building Loyalty Programs with Blockchain. Click here for the webinar recording!

Download our infographic to learn how blockchain can be applied to your customer's journey.

Steven Hodges