Why Airlines and Hotels Need Loyalty Diversification

Selling Travel online has never been more expensive. Between Search Engine dominance, Metasearch engines, and Social Media advertising, customer acquisition costs are continuously raising and eating into profit margins.

For Airlines and Hotels, a strong Loyalty program becomes the foundation of their commercial defence. Building a "Walled Garden" or a Closed User Group is one of the most effective ways to lower acquisition costs. However, locking a user into an ecosystem means trading a lower upfront marketing cost for a much higher long-term servicing obligation.

To make this work, Travel brands have to rethink their economics. Here is why the traditional "earn and burn" model is failing to capture the modern consumer, and how the industry applying Loyalty Diversification.

The Limits of Traditional Frequent Flyer Programs

For decades, standard Loyalty programs were simple: you buy a Flight or a Room, you earn Points/Miles. Better yet, you spend money on a co-branded credit card, and you earn points.

Needless to demonstrate that the co-branded credit card is still a massive cash cow. For many Carriers, the revenue generated from selling miles to partner Banks overwhelms the actual profit of flying people on planes.

However this legacy model has a blind spot; it is designed almost exclusively for high-frequency Corporate travellers and heavy spenders. If you are an occasional Leisure traveler who takes two to three trips a year, this traditional airline status schema feels completely out of reach. When Consumers realise the rewards are almost impossible to obtain, they abandon brand loyalty entirely and book whatever is cheapest via a Metasearch engine.

What Younger Travellers Actually Want from Rewards

The industry often assumes that Gen Z and Millennial travellers just need a more gamified Loyalty app to stay engaged. The reality could be much simpler: they are more sensitive to immediate utility.

The brands successfully capturing this demographic are doing it through frictionless and instant gratification: Hopper, through its Premium tier, actively promotes the continuous accrual of "Carrot Cash." Trip.com built its TripPlus program around Trip Coins, which users can immediately apply to Hotel bookings for instant savings at checkout.

These mechanics treat Loyalty as a continuous loop of micro-rewards. It proves that flexibility and transparency—unlike rigid multi-year commitment—are what actually drive repeat purchases for modern travellers.

Loyalty Evolution to Subscriptions: Stabilising Revenue vs. Managing Churn

In order to capture the mid-frequency traveler and secure predictable cash flow, the industry is pivoting toward subscriptions. When a user pays a monthly fee for travel perks, their shopping behaviour changes altogether. They are less likely to check prices on Metasearch sites and go straight to the brand’s direct channel to make sure they get their value for money.

Having said that, subscriptions are not a magic fix for revenue management and come with real operational friction:

Pre-Paid Flight Passes: Low-cost carriers like Wizz Air have pioneered models like the All You Can Fly, securing upfront cash in exchange for monthly flights. However, these programs are strict: they include Blackout dates, limited cancellation windows, and restrictive modification rules mean that the moment a user's perceived value drops below their monthly payment, they could potentially cancel.

"Status as a Service": On the other end of the spectrum, legacy carriers are monetising the perks of Loyalty directly. Programs like Emirates Skywards+ allow users to pay an annual fee to unlock bonus miles, lounge access, and better redemption rates. This is smart ancillary pre-monetization. By selling perks that use existing infrastructure, the Airline generates immediate cash and effectively shaping how and when members use their rewards.

"Loyalty as a lifestyle" : Leisure Travel is rather a low-frequency purchase. To combat churn, advanced brands are transforming points into daily currencies. While the goal of a traditional co-branded card is shared, this model removes the frictions away by offering the ultimate flexibility to link any existing debit or credit card. Programs like Emirates Skywards Everyday allow users to passively earn and burn miles on daily habits like dining and groceries. This psychological habituation achieves zero-cost daily engagement, ensuring that when users finally book a trip, they bypass search engines entirely.

The Tech Stack Dilemma: SaaS Vendors vs. Portability

It is challenging to run a modern and dynamic subscription program on a legacy Passenger Service System (PSS) or an outdated CRM. Those systems were built to track ticket numbers and inventory, not to process recurring SaaS billing.

To get around these internal IT bottlenecks, many airlines look into 3rd party software vendors. However, plugging blindly in a proprietary subscription platform is risky. You might trade your old GDS lock-in for a brand new SaaS lock-in.

The technical mandate here is portability: Airlines and Hotels must demand open standards and clean APIs with an absolute ownership of their customer data. You don't necessarily have to build everything from scratch using open-source code—that comes with its own heavy engineering and compliance costs—but you must ensure you have a clean exit strategy. The Travel brand must retain total control over its digital storefront, regardless of which vendor is processing the subscription payments in the background.

AI Travel Agents and the Payment Trust Barrier

If you have a portable, data-rich Loyalty program, you have the exact foundation needed for the next wave of travel tech: Agentic AI.

An AI agent reads a User's active Flight credits, checks live Hotel availability, and autonomously books a weekend getaway entirely within the brand's closed ecosystem.

But getting from here to autonomous booking requires crossing both psychological and regulatory trust barriers. Travel is an emotional purchase. Before an AI can spend a consumer's money, the Industry has to navigate strict compliance laws. In Europe, the PSD2 directive requires strong Customer Authentication for most online payments, making automated AI purchases a serious regulatory headache.

More importantly, the industry has to figure out if consumers actually want an AI finalising a €2,000 vacation without their final approval. The technology to make this happen does exist, yet the Consumer trust required to deploy it does not.