Colloquy.com estimates U.S. Consumers Loyalty Program Points Value

Colloquy.com is a loyalty marketing and news organization. Travel is one sector of their loyalty programs industry coverage that also includes financial and retail loyalty programs.

Two recently published white papers by Colloquy.com display a macroeconomic view of the size and value of loyalty programs for U.S. consumers. Colloquy estimates the total value of loyalty currency issued to U.S. consumers in 2010 is a $48 billion dollar industry across financial, travel and hospitality, and retail sectors of U.S. economy in 2 billion U.S. household loyalty program memberships. Both papers are available online for free download.

Here are some interesting data points from the two papers regarding U.S. consumers, the loyalty program industry and more specifically travel loyalty program statistics.

Billion Member March: The 2011 Colloquy Loyalty Census (Colloquy.com 15-page pdf file)

• Over 2 billion loyalty program memberships in U.S. households.
• Average 18 loyalty program memberships per household. (My Loyalty Traveler household is above average with more than 100 loyalty program memberships in airlines and hotel programs.)
• Active loyalty program memberships are  less than 50% total memberships with an average 8.4 active memberships per U.S. household in 2010. Active membership is defined as one activity with the loyalty program in previous 12 months. (For example, I belong to Emirates Skywards frequent flier program, but I have not earned any miles in program in past 12 months, so I am not an “active†member.)
• Loyalty memberships increased 16.3% from 2008 to 2010; likely an effect of the great recession and consumers seeking better value.

 

2010 Loyalty Program Membership by Industry Sectors

• Financial Services – 420 million members
• Airline = 324.9 million (2006 to 2010 growth = 28%) 
• Hotels = 176.8 million (2006 to 2010 growth = 37%)
• Car Rental & Cruise = 17.8 million

One of the more interesting findings to me is the flatline in membership for credit cards over past two years with just 2% growth. There was 77% growth in financial services loyalty memberships from 2006 to 2008 and only 2% growth from 2008 to 2010. The financial services sector is saturated and that likely explains the unprecedented high value frequent flyer bonus miles offered for new card memberships in the past year with offers of 50,000 to 100,000 miles not so uncommon a promotional bonus for new airline cobranded credit cards.

Colloquy Airline Loyalty Program Forecast

After 28% growth from 2006 to 2010 the forecast for airlines is actually a decline in memberships as airlines merge and consolidate frequent flyer programs.

Colloquy Hotel Loyalty Program Forecast

After 37% growth from 2006 to 2010 the forecast for hotels is to be flat in membership enrollment. I actually dispute this forecast since I think the social media efforts of hotels is catching the attention of far more members of the public. There are as many hotel loyalty programs as airline programs in the USA and membership in hotel programs is underrepresented for the travel industry relative to airline loyalty membership. Consumer awareness of the value of hotel points will continue to increase hotel loyalty membership in my opinion.

 

Colloquy 2011 Buried Treasure: The 2011 Forecast of U.S. Consumer Loyalty Program Points Value (9 page pdf white paper by Colloquy.com and SwiftExchange.com)

Colloquy published a big picture view of loyalty programs that estimates total value of loyalty currency issued to U.S. consumers in 2010 is a $48 billion dollar industry across financial, travel and hospitality, and retail sectors of U.S. economy. Kind of remarkable to think that all the points and miles combined, earned by millions of travelers in the U.S. in 2010 is just about equivalent to the wealth of Bill Gates.

 

“Buried Treasure†by Colloquy.com published the total “perceived†value of points earned and sold through Travel & Hospitality companies in 2010 at $17.04B (billion) dollars in issued travel funds currency. Travel & Hospitality spend directly with travel providers generated $9.74B in loyalty points. Bonus points issued and sold to third-parties generated $7.30B (43% of total points).

Colloquy.com 2011 Travel and Hospitality Sector Perceived Value of Points

• $17.04 billion = perceived value of travel loyalty points and miles issued in U.S. in 2010.
• $9.74 billion = 57% of perceived value of rewards received directly from travel provider.
• $7.30 billion = 43% of perceived value of rewards issued and sold to third parties.
• Travel and Hospitality comprises 36% of total points value issued, second to Financial Services at 37%, Retail 25% and other 2%.
• Travel and Hospitality loyalty points comprise 80% of the total loyalty points sold to third-parties.

The Colloquy Loyalty Census indicates 43% of all points and miles issued by travel and hospitality sector were points and miles sold to third-parties. For example, you are receiving travel industry points that were sold by Mileage Plus when you get United Mileage Plus frequent flyer miles for dining or Hilton HHonors points for online retail shopping or SPG points for American Express credit card transactions earning hotel points. These third-parties pay for miles and points earned by the consumer from travel partner activity; primarily purchase activity with the third party vendor offering miles and points.

Other observations reported in Colloquy 2011 Buried Treasure: The 2011 Forecast of U.S. Consumer Loyalty Program Points Value

• Nearly one third of points value goes unredeemed. (Loyalty traveler note; I assume this is far less for travel and hospitality sector, but this data is not reported by sector in Colloquy report.)
• Colloquy believes the $48 billion dollar value of loyalty points issued and sold in U.S. in 2010 is conservative estimate.

 

Colloquy provides three recommendations for loyalty programs that I like as favorable for consumers:

1. Make redemption easier.
2. Step up communications. Alert members of point balances, reward options and program tier progress. Engage customers.
3. Utilize partnerships. Allow consumers to earn and redeem loyalty points with a variety of partners.

 

How much points liability is outstanding?

COLLOQUY and SWIFT EXCHANGE completed this Forecast through an intensive nine-step process that required examining the perceived value of loyalty rewards across all industries. The challenge in compiling the Forecast was in the varying ways that companies account for the points and miles they issue, which represents “liability†in financial terms — an obligation that will incur cost at a later date when fulfilled. In many cases, the actual dollars that loyalty operators account for on their books reflect their effective cost of rewards. But, that is not universally the case. That is one reason we chose to focus on the perceived value of the rewards earned in points-based programs. The methods vary because no Generally Accepted Accounting Principles exist yet in the U.S. governing how companies record the perceived value or the actual cost they incur to deliver loyalty rewards. To meet this challenge, we studied a mix of publicly reported data points, including reviews of corporate public records, websites and press releases, in addition to thirdparty information and proprietary estimates. Forecast assumptions also were used. The loyalty industry reports outstanding points as liability. There is no uniform standard for reporting liability. 

All I know with relative certainty about points liability is the hotel industry’s loyalty liability in my case is probably underestimated.

This Loyalty Traveler knows the value of hotel points on a microeconomic level.

Colloquy.com links:

Billion Member March: The 2011 Colloquy Loyalty Census (Colloquy.com 15-page pdf file)

Colloquy 2011 Buried Treasure: The 2011 Forecast of U.S. Consumer Loyalty Program Points Value (9 page pdf white paper by Colloquy.com and SwiftExchange.com)