1 Introduction</h5> Loyalty programs have become a mainstay in the hotel business, and most programs use a tiered reward structure. Each tier offers increasingly desirable benefits and privileges, which are intended to motivate members to reach higher tier levels through increased purchases. Despite the prevalence of reward programs for hotels and other hospitality businesses, research on their effectiveness is limited and inconclusive ( McCall and Voorhees, 2010 ). Even less is known when it comes to the influence of tier level on loyalty. This issue has great practical and financial significance for hotel operators, as documented in the Hotel Group and Loyalty Program Brand Vulnerability Study ( cg42, 2012 ). That study projected a 13% attrition rate for members of the major hotels’ loyalty programs in the subsequent 12 months, and further estimated that the three most vulnerable chains would lose close to $2 billion from those programs. This loss stems primarily from the programs’ most valuable members, the most frequent travelers, who are also likely belong to higher reward tiers ( cg42, 2012 ).</P>While attrition is on the rise, the influence of program membership on hotel choice is increasing ( Barsky, 2011 ). According to that study,
International Journal of Hospitality Management – Elsevier
Published: Sep 1, 2013
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