Expedia Disaster, OneKey Rewards Was A Mistake, Rollout Paused To Rest Of The World
Hotels.com had a compelling reward proposition, though it had been devalued over the years. You earned 10% of your room rate back, redeemable after every 10 nights.
When Expedia decided to unify their loyalty programs across brands, not just including Hotels.com and Expedia itself but also Vrbo, they cut the rebate value of Hotels.com bookings by 80%.
- Earning and spending rewards across Expedia’s properties made sense
- These small rewards would bring customers back to spend more across their platforms
- But the earn rates were too low, especially for Hotels.com – going from a generous program that rebated a good portion of spend to one that rebates very little
- Some of that was made up for in hotel discounts for elite members of the program, but only on some hotels and certainly not helpful to anyone expensing their stays
Sure, you could now spend points (and earn them) on short-term Vrbo rentals, but there was no longer a compelling reason to book through Hotels.com. And that has shown up in Expedia’s results.
Expedia itself saw a 20% increase in hotel bookings in the second quarter. Expedia Group overall, though? Just 10%. That says Hotels.com was flat or down in an environment where it should be rising. What’s different is that there’s no longer a strong incentive to use Hotels.com for members in the U.S. or U.K. where the new OneKey program has rolled out.
As a result, Expedia is pausing the OneKey rollout to members in the rest of the world, not wanting to do further damage. They say they realize it doesn’t make sense because Vrbo’s market penetration isn’t as great elsewhere.
The takeaway is that loyalty value propositions do matter, devaluations can harm a business, and when anyone other than Delta does it consumers do know the difference. In fact, there was a limit even for Delta – last fall the reaction to announced changes at the Atlanta-based carrier so scared them and their financial partner Amex that those changes were paused and sweeteners given to customers as a rapprochement.
For U.S. and U.K. members there’s a conundrum. They could increase hotel-earning, but don’t seem to need to at their Expedia property. Do they push business over to Hotels.com with higher earning there? Do they let members convert back their points into a separate program? Or do they accept that they’ve made the Hotels.com property less valuable? It can be tough to undo damage once it’s been done.