#143: Subscription (Paid) Loyalty in Hotels, Coffee Chains and Airlines - What's Working?

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PAULA: Hello and welcome to episode 143 of Let’s Talk Loyalty.

PAULA: Today I’m chatting again with Rob Burgess, the founder and editor of Head for Points, the UK’s biggest frequent flyer and business travel website.

PAULA: Rob is joining me for a second time on Let’s Talk Loyalty, this time to talk about paid loyalty, or subscription loyalty, as an increasingly important business model for us loyalty professionals to understand and consider.

PAULA: Together we talk through the Intercontinental Ambassador Programme, the coffee subscription concept from Pret a Manger in the UK, as well as Skywards Plus, the new paid loyalty programme option from Emirates Airline.

PAULA: I love this topic, it’s super exciting.

PAULA: So, I hope you enjoy listening and learning as much as I did.

PAULA: Great to have you back on the show Rob, how’s the UK today?

ROB: It’s sunny, which after the flash thunderstorms of the last couple of days is a bit of a novelty.

ROB: But yeah, I’m still missing my two weeks in Spain that I had last month.

PAULA: Oh bless, yes, absolutely, lovely.

PAULA: At least you got there, Rob.

PAULA: So for you who’s such a frequent traveler, certainly used to be a frequent traveler, it’s nice to be getting the world back on track.

PAULA: You were back with me in, I think, October when we had our last conversation.

PAULA: So it was already in COVID times, but certainly now I feel like we’re coming out the other side finally, Rob.

PAULA: And so great to talk about travel and all the trends that’s happening in travel from your perspective.

PAULA: So let’s start off with our usual, I suppose, favorite statistic.

PAULA: And just to get into, you know, what’s going on with you and with Head for Points.

PAULA: I will say from our last show, I was thrilled with how engaged your audience is with loyalty programs in general, because we did talk about coffee loyalty and we talked about John Lewis loyalty as well as the airline loyalty.

PAULA: So plenty to discuss.

PAULA: You always have a great insight on the UK consumer perspective.

PAULA: So let’s kick it off and tell me, what is your favorite statistic today?

ROB: It’s not quite my favorite one, I suppose.

ROB: But the thing that has stuck in my mind over the last few months is that we actually made a 5% increase in our page views last year.

ROB: And indeed, that’s carried on into 2021.

ROB: When COVID struck, my gut feeling was that we would lose 30% of our readership.

PAULA: Yeah.

ROB: And over six months, probably, I mean, I’ll be back in business in six months with probably half to two thirds of the business I started with.

ROB: And here we are 18 months on and we actually have a bigger site, clearly not the same revenue, but a bigger site in terms of readers and numbers that we had in March 2020.

ROB: Which is, that’s partly, I think, us being very good at providing a lot of information and data on COVID, on travel restrictions, on getting flight refunds.

ROB: Partly, I think, because we just have had time to spare at home and actually have more time to mess around on the internet, basically, for a bit of word.

ROB: Well, I’m not suggesting we’re writing Nobel Prize winning stuff.

PAULA: That’s amazing.

ROB: It gives me confidence because we have the people of air.

ROB: And actually, as soon as the flight and hotel markets come back with a vengeance, we can start getting our little commissions on bookings driven by our readers.

ROB: But it gives me good confidence that next year we can get back to 2019 levels of revenue, if not exceed that.

PAULA: That’s wonderful, Rob.

PAULA: And again, just for people who didn’t hear maybe the episode the last time, I know even at that point you were talking about one and a half million page views per month, which was extraordinary, 50,000 premium frequent flyers mainly in the London area.

PAULA: And I think I said to you as well, Rob, that from my few days with Avios, certainly your opinion was always the one that everybody hoped that Rob Burgess would like what we were doing.

PAULA: So certainly, let’s call you an influencer in the travel industry, I would say, huh?

ROB: Yeah, that’s not a word I like.

PAULA: Me neither.

ROB: Well, the job comes with a level of responsibility.

ROB: It is difficult because we’re not desperate for every penny we can get in.

ROB: We have a decent financial cushion even now.

ROB: So we don’t need to plug stuff for the sake of it.

ROB: And we’ve actually turned down quite a lot of potential revenue, which people never really know about and never really give us credit for.

ROB: And it is difficult.

ROB: I thought it was yesterday with something.

ROB: I think we wouldn’t write an article promoting something which we don’t genuinely like and recommend.

ROB: On the other hand, if a product came in and somebody wants to offer a big discount to our readers, even if it’s not something we would use ourselves.

ROB: But that’s okay.

ROB: We’re not selling it for the sake of it.

ROB: We’re saying if you were thinking of getting this and lots of people like it, even though we haven’t gotten it ourselves, we can get 30% off today.

ROB: We’ve never done puff pieces about certain brands of suitcase or something.

PAULA: Yeah.

ROB: We actually make money on that long term because the readers know that what we say has credibility because they’ve seen in the past, but we haven’t actually just written spurious nonsense about various products or services for the sake of a few quid.

ROB: And actually, when we do say something was good, the level of interaction from the readers is huge because they know our recommendation is a genuine one.

PAULA: Okay.

ROB: And that then drives sales.

ROB: Actually, that normally drives some sort of commission based on that.

ROB: Oddly enough, the honesty route has served as well over the years and probably makes us more money overall than just taking every 500,000 quid that’s in front of us to promote some random hotel or resort or suitcase or travel insurance policy or whatever comes along.

PAULA: So I think what we decided we talk about today is, first of all, against the backdrop that we’ve already alluded to in terms of COVID, obviously has really affected, obviously, the travel industry worldwide.

PAULA: Not a huge amount of growth in any particular area, but there is one area that is exploding across all categories, and it is very new in the travel sector.

PAULA: But paid loyalty or subscription loyalty is something that I’ve been writing about, I suppose, for about two years now.

PAULA: My favorite case study is probably in the coffee industry, and I know we’re going to talk a bit about the UK coffee proposition, but Panera Bread is a fabulous paid loyalty program in the US that we can talk about, followed very closely, as we said, by Pret a Manger in the UK.

PAULA: There’s also, I know, a very good subscription loyalty program for the Intercontinental Ambassador program.

PAULA: So we’ll talk about a lot of the things that you’re excited about in that.

PAULA: And then more recently, Emirates launched its Cowards Plus program.

PAULA: So I know you’ve got a lot of views about that, and I will be dying to get into your perspective.

PAULA: Definitely something that I think from your side has some benefits, but probably could go a lot further, is what I’m getting.

PAULA: I know you wrote an article, published it this morning.

PAULA: So let’s start off with maybe the Intercontinental, Rob, because there’s some, I suppose, principles that you’ve really admired that they’ve implemented for their paid loyalty program that I think our audience would love to hear about.

ROB: Yeah, I mean, cards on the table, I’ve paid for Intercontinental Ambassador for probably at least the last 10 years.

ROB: So I put my money where my mouth is on this.

ROB: For those who don’t understand how it fits into the great IHG hotel world, whilst IHG Rewards is technically the loyalty scheme covering all the IHG brands from Holden Express all the way up to Region 6 Census, Intercontinental has historically always had some sort of program just for itself.

ROB: And over the last 15 years, that’s been Ambassador.

ROB: Ambassador is not free.

ROB: Ambassador is 200 US dollars to join and to renew.

PAULA: Okay.

ROB: But there’s no sort of qualification.

ROB: You don’t need to do any stays to get it.

ROB: You can just sign up on the websites.

ROB: So there’s no sort of qualification requirement apart from having $200 sitting in that program.

PAULA: Okay, nice.

ROB: There’s, I used to use them quite a good job with Ambassador, in my view, of creating an attractive initial hit when you sign up and then good ongoing benefits.

ROB: So when you join Ambassador, you get a voucher for effectively a two-for-one stay over a weekend at an Intercontinental hotel.

ROB: At the moment, we’re also letting users at Kimpton, and often at Kimpton’s during the week as well.

ROB: So effectively, if you have an Intercontinental stay coming up or a stay you can move to in this Continental, then the two-for-one voucher can get your $200 fee back straight away in one hit.

ROB: They’ve also started putting suites and other high-end rooms into the two-for-one pool as well.

ROB: So if, like me, you’ve got a couple of kids and you want a junior suite so you can get all the extra beds in or something, then you can do that.

ROB: So you can really make substantial savings, and you can certainly get the average Intercontinental room rate, get your $200 back just in about one transaction.

PAULA: Amazing.

ROB: After that, you then have a decent run of benefits on every Intercontinental estate.

ROB: What’s important is these are guaranteed benefits.

ROB: There’s no if available, there’s no, you know, if we can do it at time of checking, blah, blah, blah.

ROB: The benefits are guaranteed or you get a fixed amount of compensation.

ROB: So there’s guaranteed four o’clock checkout, which I’ve always found especially useful in the US.

ROB: If I’ve got a very late night flight back and I want to stay in the hotel till four and then head down to JFK.

ROB: There are seven, eight p.m.

ROB: flights.

ROB: There’s a guaranteed one little room upgrade, which I’ll have to give you.

ROB: And there’s a $20 or local currency equivalent food and beverage credit.

ROB: So these are things which you can put some sort of notional mental value on and relatively easily on two or three days a year, get towards the $200 fee for Ambassador.

ROB: Once you’ve got Ambassador, it then makes you more likely to move other stays across.

ROB: So if I’m going somewhere and I know a four o’clock checkout will be useful because I know I’ve got a late flight or train back, it makes me more likely to put that stay to an intercontinental because they’re obliged to give me that.

ROB: It’s not like Hilton Honors where it’s Diamond can have a four p.m.

ROB: checkout if available on the day.

ROB: This is a guaranteed thing for ambassador members and the hotel has to block your room at check-in to make sure no one moves into it.

PAULA: Lovely.

ROB: And this thing works really well because one, you as the member are getting a guaranteed upfront benefit in terms of a two for one voucher and decent ongoing benefits, which very easily cover the cost of your $200.

ROB: But hotel, this doesn’t have a real cost.

ROB: I mean, as long as they’re not running a 100% occupancy, the four o’clock checkout is a non-cost.

ROB: We are great at the real cost of a hotel.

ROB: A $20 food and beverage credit possibly is, but then perhaps you have a meeting in the hotel, you may not have had it otherwise in the hotel.

ROB: Just you have to put the $20 up.

ROB: So they’re probably happy with that as well.

ROB: And it all works out, even the free weekend night voucher, to be fair, Intercontinental hotels, they’re mainly business focused.

ROB: They’re probably quiet during weekends.

ROB: They’re probably happy to do the two for one deal as well.

ROB: So it’s a win-win for everyone.

ROB: And $200 is not, it’s a relatively okay price to pay.

ROB: It’s 10 pounds a month equivalent in sterling really.

ROB: And it’s something that people are happy to punt because they think they’ll get value from it.

ROB: You also get Spire Elite status and ISG rewards.

ROB: So you also then have top tier status every time you have to go to a holiday inn or a tram plaza or a holiday express.

ROB: And whilst that’s not the most valuable hotel status ever, it will normally get you a free drink or some bonus points or an upgrade or perhaps lounge access.

ROB: So it also helps give you a bit more, it also makes you slightly more willing to stay at other ISG brands as well.

PAULA: Yeah.

ROB: Overall, it works well.

ROB: The only problem with the Ambassador is that ISG has an issue over how it positions running two different loyalty programs at the same time.

PAULA: Yes.

PAULA: I didn’t even know about the Ambassador program, Rob, but I’m supposed to know about these things, you know?

ROB: Also, ISG in the last five years, they’ve bought Regents, they’ve bought Six Senses.

ROB: And they now have these two additional high end brands, which in theory should probably be linked to Ambassador because they have the same quality of hotel, but they haven’t quite worked out how to do it yet.

ROB: And so as ISG, ISG has also launched Vignette, which is this new five star unbranded collection.

ROB: To allow independent, a bit like Autograph from Marriott or Unbound from Hyatt.

ROB: So luxury, independent hotels who want to become part of ISG’s marketing system, one of their words, can become part of blah, blah, blah, a Vignette collection by ISG Hotel.

ROB: And these also somehow will have to get brought into ambassador.

ROB: So I think the program is going to have to change or at least adapt to deal with ISG’s big push into the luxury sector.

PAULA: Yeah.

ROB: But it’s worked very well.

ROB: And if you look on places like Flyer Talk, you’ll see in general, it has a good reputation and people see the value.

ROB: And the value doesn’t cost much why it’s due to deliver.

PAULA: Which goes here.

ROB: But if I turn the wheel around, in some ways that’s where I think we’ve got Skywards Plus, but Skywards Plus isn’t actually delivering at the moment.

PAULA: OK, so we’ll definitely get into that.

PAULA: And just to summarize, because again, Rob, as you know, people listening to this show, they’re loyalty managers and loyalty directors.

PAULA: They’re global.

PAULA: So the US, you know, lots of people listening there, all the way down to Australia.

PAULA: Obviously, they’re in the UK.

PAULA: So in its simplest form, what I’m hearing that the IHG Ambassador Program is doing super well is instant gratification.

PAULA: So an immediate reason for that two for one hotel stay.

PAULA: I love that.

PAULA: I also really like what you talked about, an exclusive benefit that wasn’t available elsewhere in terms of the guaranteed room upgrade and obviously the late checkout.

PAULA: So they’re all things that I always feel, for example, when I stay in a nice hotel, who wants to leave at 12 o’clock?

PAULA: Because that’s kind of your breakfast and you’re out, whereas four o’clock feels like the whole day.

PAULA: So I think you’re absolutely right.

PAULA: I think that balance of probably quite a low overhead for IHG to deliver in terms of benefits, but really tangible to the customer.

PAULA: And we all know what it’s like to get those benefits and on an ongoing basis.

PAULA: So the sheer fact that you’ve done that for 10 years in a row now, first of all, is a credit to IHG.

PAULA: And yeah, I’m really happy that you shared it with us.

PAULA: Tell me about, before we move on to the Skywards Plus discussion, tell me about your thoughts on Pret a Manger, because this has been in my mind, perhaps, let’s say accelerated by COVID.

PAULA: Clear, we all know that there’s much fewer people, for example, traveling into the city of London.

PAULA: So the footfall into coffee stores is not what it would have been.

PAULA: I’m sure it’s a fraction, in fact, of what it was.

PAULA: So, you know, the 20 euros a month Pret coffee subscription program is something that feels like it could be huge value, hopefully, as more and more people start to get back into the city.

PAULA: It’s something that you think is a good deal for people in London.

ROB: Yes, the Pret coffee program has been a massive disruptor, I think, to the extent that it can be with people still not coming in as much as they used to.

ROB: But, yeah, I mean, fundamentally, the way the scheme works is that, the scheme is actually, if you look at the small print, it’s madly generous.

ROB: You can have five free cups of coffee a day, as long as you leave between half an hour between each one that you order.

PAULA: Wow.

ROB: So, typically, you get 100, 150 a month.

ROB: In the UK, it’s a 20-pound flat fee, which covers eight cups of coffee.

ROB: So even if you’re only working in your office three days a week, if you just get one a day, you’re still saving at least 10 pounds a month on your 20 pounds.

PAULA: Yeah.

ROB: So it’s a bit of a no-brainer.

ROB: The other thing they started doing is offering food discounts with it.

ROB: So at the moment, you get a half-price sausage sandwich in the morning if you have a coffee card, which is actually the thing I tend to buy anyway.

ROB: But what’s interesting about this is that even though this is a no-brainer to anyone who buys more than eight cups of coffee in a month, they are still offering the incentive to sign up, which is the first month is totally free.

ROB: So you can sign up online and then for a month, all the coffee you want.

ROB: In fact, in a month, you can stick to your phone and share it with your friends, and your friends can have free coffee for a month, frankly.

ROB: They don’t really check very much.

ROB: But there’s an interesting bit of psychology about this, which because most people, there’s an issue over how far you might go, how far out of your way you would go to get something.

ROB: And what interests me about this is that, whilst if you’re paying cash, you might just for a change, go to a Starbucks or a Cafe Nero, or your local independent coffee shop, just to mess things up a bit, just frankly for a change of scene.

ROB: That gets quite difficult when effectively, all your coffee at preg is free, beyond a certain point.

ROB: Because there’s an interesting psychological aspect about walking to a Starbucks and paying £2.50 for a coffee.

ROB: Knowing you could have walked for another minute and gone to Pret and not paid for it.

ROB: Even if you’re sick of Pret by that point.

ROB: And you’re having two or three a day.

ROB: And the psychology of getting you into their shops and stopping you going somewhere else because you know you could get the same item for nothing, it takes a little bit more effort.

ROB: It’s quite interesting.

ROB: It’s one thing that’s put me off doing it because I do like to run around various different coffee chains over the course of the average week.

ROB: And I actually, bizarrely, I actually don’t want the sort of psychological pressure of being bad every time I go to a Starbucks or a Cafe Nero because I know I’m paying for something, I’m nice, you have to pay for it, I’ve got a press.

ROB: I know this is the most bizarre thing ever.

ROB: I refuse to take a discount on something because I just know it will cause me psychological trauma every time I go to a competing shop.

PAULA: My goodness Rob.

ROB: Although the discount on such as sandwiches for the next month might just tip me over.

PAULA: Tip you over the edge.

ROB: But it is a, basically it’s got real, it’s got a real world where they can push you.

ROB: But again, it’s because coffee, oddly enough, shares a lot of characteristics with a hotel room or an airline seat.

ROB: In that the actual physical costs of producing that product is about 10p, frankly.

ROB: It’s the beans and the milk.

PAULA: Of course.

ROB: So the gross margin is huge.

PAULA: Yeah.

ROB: And therefore, you can afford to give out five a day.

ROB: So if you did give someone five a day for a whole month, you still wouldn’t physically lose money in terms of the cost of the raw ingredients.

PAULA: Yeah.

ROB: So you can afford to do this.

ROB: And then you see over time, Pret will have the numbers on how many extra items someone buys or whether their spending increases over time.

ROB: I have a lot less now.

PAULA: And I can share some of that as well, Rob.

PAULA: Sorry, just because, again, I know you’re fascinated with the coffee sector.

PAULA: And again, everybody listening is probably as fascinated about this move into paid loyalty in the physical world of products because, again, we’ve all been doing it for so long, obviously, with our Netflix and Amazon Prime subscriptions.

PAULA: But this is a different and I really feel it’s pivotal.

PAULA: And I feel it is something that’s very COVID friendly, dare I say it, because I think in times of uncertainty, people do like the certainty of getting something that is a fixed price.

PAULA: So probably fewer people have the psychological analysis that Rob Burgess has from your amazing understanding of loyalty.

PAULA: But Panera Bread I mentioned at the start of the show, they did publish some incredible statistics, Rob, which just from a business perspective, I think you’d probably appreciate.

PAULA: For example, they said their food sales increased 70% with the customers that subscribe.

PAULA: So it’s like your sausage roll sandwich that you’re talking about.

PAULA: So you’ve already been buying that, but it might move you into becoming a lunchtime customer, for example.

PAULA: They also talked about their renewal rate is between 90% to 95%.

PAULA: And this is for a $9 monthly coffee subscription with them.

PAULA: But also the other one I loved is their subscriber visits increased from about 4% to about 10%.

PAULA: So you’re absolutely right.

PAULA: The footfall and driving people into the pret stores.

PAULA: There’s definitely an extraordinary possibility there for any retailers listening to think about a paid model.

PAULA: And really, as you said, make sure there’s enough benefits to tip you over the edge into actually signing up on a monthly basis.

ROB: Yeah, I mean, I suppose the question is how the word loyalty fits into this.

ROB: I mean, Amazon has always said publicly that they don’t see Prime as a loyalty program.

ROB: They basically see Prime as a sort of fee based delivery service, which just happens to have some other things thrown in with it.

PAULA: Sure.

ROB: And they’re an issue over, are you buying loyalty?

ROB: Is it really loyalty if you’re paying for it?

ROB: I don’t know.

ROB: It’s a difficult concept to fit around, isn’t it?

PAULA: You’re totally right.

PAULA: We debate this all the time in the industry.

ROB: But to some extent, all loyalty, isn’t it?

PAULA: Yeah.

ROB: I mean, even if you take the frequent flyerscapes, it’s still a very shallow way of saying, if you do X flights to this place, then we will give you lounge access and priority boarding and some extra miles going forward.

ROB: That’s still in itself transactional loyalty as well.

PAULA: You’re right.

ROB: It’s not loyalty of the…

PAULA: Emotional.

ROB: Yeah, that’s the kind of surprise and delight type loyalty.

PAULA: Totally.

ROB: It’s more pure loyalty.

ROB: I mean, Pret staff, go back to coffee again, Pret staff have the authority to give away 10 cups of coffee a week to random customers based on the mood there and how someone looks or whether it’s someone they recognize from going in every day.

ROB: And I think there’s a chain called Cafe Nero in the UK, which has a stamp card, which I never ever used to bother with.

ROB: It’s more hassle carrying it around.

ROB: It’s more of an electric.

ROB: The staff in the one near my house used to give me a free coffee every couple of weeks.

ROB: They knew I couldn’t bother collecting the stamps.

ROB: They screwed me on my way.

ROB: Just a favor.

ROB: They knew I should be earning it anyway.

ROB: Yes, it is about loyalty and what is loyalty, what is transactional loyalty, I suppose.

ROB: You’re just paying for something.

ROB: But I’m not against…

ROB: I was looking at a hotel booking this morning.

ROB: When we were in Spain, we did a couple of nights at a non-chain hotel, some friends of ours were there.

ROB: We had a 7 o’clock flight back to the UK.

ROB: I went to discuss late checkout.

ROB: Frankly, this hotel was quite a big package tour base.

ROB: I wasn’t expecting a lot of joy in a late checkout discussion.

ROB: But they said, fine, 55 euros flat rates, so 4 o’clock.

PAULA: Oh, lovely.

ROB: Actually, this was quite an expensive hotel, so 55 euros for another 7 hours, 6 hours was actually great.

ROB: And I thought, actually, this is easier.

ROB: If I know I can go to this place and just pay an extra 55 euros and get room to be in the day, I haven’t had to do 75 nights of this chain to get the right to have a 4 o’clock checkout.

ROB: And then perhaps, Halton style, it’s not to your right, it’s just the best efforts.

ROB: Perhaps we’ve all kind of overestimated somehow these lot of benefits, and perhaps if they were just bottom of menuist things you could buy at a sensible price, it would be, life would be easier.

ROB: And you could certainly almost make your own.

ROB: I mean, you could almost do a subscription.

ROB: You could say, we charge, perhaps Mary should say, look, all our hotels will give you a late check out for $100 or equivalent, but if you want to pay us $500 for an annual subscription to something, we’ll guarantee it for you.

ROB: Perhaps that’s the way forward.

PAULA: I like the flexibility though as well of your Spanish hotel, Rob, because I think that demonstrates a mindset of loyalty.

PAULA: So an intention to take care of the customer, hear what you need, because at the end of the day, it’s very hard to really systemize and develop things that suit every possible scenario.

PAULA: So I think what you got there is somebody who’s on the ball and a hotel that actually realizes that you will value it.

PAULA: No point in doing it for free.

PAULA: So everybody won in that situation.

PAULA: So again, that’s going to drive emotional loyalty and you’ll consider going back.

ROB: We were paying about 500 euros a night.

ROB: Oh my goodness.

ROB: I was expecting to be charged about 200 euros.

ROB: Once we left at 4, the deal was a fixed price until 6 p.m.

PAULA: Amazing.

ROB: Part of the reason was because they were doing a lot of tour groups.

ROB: They even had people arriving very.

ROB: I know there are some groups that are four in the morning, coached back to the airport.

ROB: Thank God we’re not doing that.

ROB: They could control their room cleaning and stuff around that.

ROB: They didn’t have people left very early.

ROB: If you could buy, part of loyalty, again, that’s one issue about unbundling.

ROB: British Airways does not let you buy access to its airport lounges.

ROB: So if you want access, you have to get status in the loyalty program.

ROB: But now you have other, Lough Danes is now selling lounge access.

ROB: Emirates sells lounge access.

ROB: So if you know you can get all these particular aspects of status just by handing out some cash, then does that detract from the valuable loyalty program?

ROB: Because I think in general, people possibly spend more or make more of an effort.

ROB: I’m also guilty of this.

ROB: People often spend more or go out of the way more than they should to earn status based on the actual benefits they get in the future.

ROB: I know if I look back, obviously COVID is slightly different, but even in a normal year, if I look back and say, look, I’ve had a lot of valuable status last year, but actually how many old states have I done with that status this year?

ROB: How many upgrades did I get?

ROB: How many checkouts did I actually need and ask for?

ROB: Often when you’re actually quantified, you didn’t necessarily get that much for the status.

ROB: And then you think, was the effort required to move those states to Hilton, et cetera, et cetera, actually worth it?

PAULA: It’s a big one, but I just want to mention somebody who unfortunately needs to remain nameless.

PAULA: But a certain gentleman did tell me once that he managed to convince his wife that he should fly from Canada to Singapore on a revenue ticket in order to justify retaining his gold status.

PAULA: I presume with Air Canada, I don’t know the airline involved, but to show the extent that he valued his premium tier status, to justify halfway around the world on a revenue ticket, I was blown away.

PAULA: And that’s a real life example of, you know, what I probably call sometimes points junkies.

PAULA: So people like you and I who love to get the extra benefits and to get into the detail.

PAULA: And I do want to get into the Skywards Plus conversation now with you, Rob, to understand, you know, I’m just starting to evaluate it myself.

PAULA: As you know, I’m a big fan of Skywards.

PAULA: I feel like I have both my consumer and my consultant hat on for this conversation because it’s the loyalty program I have the most opportunity to use because obviously I live in its home market.

PAULA: So Skywards Plus was launched recently.

PAULA: There’s about a thousand people I know signed up for this paid subscription loyalty program and really wanted to get your perspective on it from a UK consumer side.

PAULA: What does it offer for frequent flyers or anyone, I suppose, who’s looking to fly with Emirates?

PAULA: And do you think it’s a good program?

ROB: Rob, before I get into it, let me just say, just to put this in context, I also rate Skywards very highly.

PAULA: Wonderful.

ROB: We were in Dubai over Christmas and New Year last year on Skywards tickets.

ROB: We changed because of the COVID situation in the UK, we delayed our return dates three times.

PAULA: Yes.

ROB: Each time I was able to change my tickets for free.

ROB: More importantly, there was no problem getting four business class seats.

PAULA: Extraordinary.

ROB: Each time we rebooked on a flight back to London.

ROB: If you compare it with British Airways, not only would there not have been four business class seats easily available on every flight back to London, they would charge me £140 each time I made a change.

PAULA: Oh my goodness.

ROB: So the ability just to effectively pick and choose the Emirates flights I wanted and do the changes for nothing.

ROB: And actually, they’re quite good in the phone as well.

ROB: That was a great benefit.

ROB: And I’ve done a lot of Emirates Redemptions.

ROB: I’ve never actually paid for an Emirates flight.

ROB: But they’re an American Express transfer partner.

ROB: It’s a UK instance.

ROB: So literally, I can go into my Emirates account, do the transfer more than a minute later than while I was on my Emirates account.

ROB: I can book my flight.

ROB: So just to put it in context, I’m a huge fan of Emirates.

ROB: The airline, their new first class product is astounding.

ROB: My kids rave about the quality of their TV.

PAULA: Yes, yes, I said it too.

ROB: Compared to British Airways and European airlines.

ROB: But my son always asks me if I’m going to get on the Dubai.

ROB: So just for context, I’m a big fan.

ROB: But SkyWords Plus, based on how they’ve currently set it up, doesn’t seem to work for me.

ROB: And if we go back to what we talked about over at Intercontinental and Ambassador, let’s compare and contrast.

ROB: The numbers I’m talking about here are the pounds, sterling equivalents.

ROB: I think fundamentally it’s dollar based scheme, but I only see the pound ones.

ROB: So it’s fundamentally about 250 pounds for the sort of base level SkyWords Plus product, going up to a fairly shocking 760 pounds, which is around a thousand US dollars for top level.

ROB: And this is in itself a huge amount of money for a subscription product.

ROB: The first issue is that there is no incentive for signing up at all.

ROB: Now, most subscription models, whether it’s a magazine, coffee subscription or whatever, have some incentive to sign you up.

ROB: One is because they have an eye on lifetime customer value, and that they imagine that if you join up, you will do three to five years on average, and they pay good money off you in three to five years.

ROB: So if they only break even on the first year, that’s okay.

ROB: But the second reason is what you might call the consumer promise, in that you’re being asked to make a non-refundable cash payment.

ROB: And in return, you are promised a series of benefits, which you may or may not be able to use over the term of your membership, which you cannot accurately quantify the value of.

ROB: Or indeed, you can’t necessarily get upfront, see all the small print and turn conditions that may be linked to this.

ROB: So a good upfront incentive generally makes that consumer promise easier to deal with.

ROB: You pay your fee.

ROB: You’ll get a big one-off bonus, at least for the first year, because that gives you confidence that even if you don’t make full use of the benefits or the benefits don’t turn out to be as good as you think they are, but at least you won’t have lost out in the first 12 months.

ROB: And you can then after a year, choose to twist or stick basically.

ROB: And Skywood’s Plus isn’t doing that.

ROB: They expect you to pay your 250 to 760 pounds with no sign up bonus.

ROB: And you’ll then just take a sort of finger in the air view on whether you can make the number stack up to just what you’re paying.

ROB: In these COVID times, I don’t think anyone has a decent handle on how much long haul travel they’ll be doing in the next 12 months to know if they make money from the subscription.

ROB: My second issue with it is that the benefits are just incremental.

ROB: Fundamentally, what we’re offering is 20% more on everything.

ROB: Depending on what level you join at, you will get 20% more skywards miles when you fly, 20% more tier points.

ROB: That’s not on the tier one, you’ve got to pay for the high level one to get the extra tier points.

ROB: You can redeem a classic reward of the 20% fewer miles.

ROB: 20% psychologically doesn’t do it for me.

ROB: If you see something in a shop and it’s reduced by 20%, that’s not really enough to move you from a was never going to do this to a must have this.

ROB: It’s not like a half price sale or something.

ROB: 20%, if you’ve been seriously thinking about something, it might tip you over the line.

ROB: But 20% itself is not a big psychological difference to make you fundamentally change your behavior, in my view.

PAULA: And I was pricing it out, Rob.

PAULA: So I did do a real life case study in advance, actually, of our conversation today, because you’ve written this phenomenal article.

PAULA: I’m sure plenty of people will be going to read it.

PAULA: And you’ve worked it out, obviously, in the context of, for example, your own family.

PAULA: And I think you made a very good point in that if you do have a particular intention or need to travel, as I thankfully regularly do, then that’s the time to make the decision about whether Skywards Plus makes sense.

PAULA: So I’ve just come back from a trip to Ireland.

PAULA: And if I was to do that again next month, for example, that would be a 90,000 miles requirement if I wanted a business class ticket.

PAULA: So, you know, having worked through the mathematics on it, if I got my 20% off, that would actually save me, I think, $140 US dollars when I worked it out.

PAULA: If I paid the $399 for the classic subscription, which is the entry level, and saved myself those 18,000 miles, then yeah, so the cost would be $400 for the subscription versus if I was to buy the 18,000 miles I needed $540.

PAULA: So I’m getting into your way of thinking, Rob, in terms of how can I make this work for me?

PAULA: So I think there’s very specific scenarios when 20% discount on a classic reward is quite useful.

PAULA: But I think what you’re saying is you have to have that need already clear.

PAULA: You’re not going to subscribe otherwise.

ROB: Yeah, exactly.

ROB: There’s the one sweet spot in SkyWords Plus, as I see it, is the 20% discount on classic reward reductions.

ROB: So if I took my gang down to Dubai business class, there’ll be 360,000 SkyWords miles.

ROB: Normally, I’d sign up for the lowest level actually, the 243 pounds straight, $399 level, and get 20% off.

ROB: So I’m saving immediately since 2000 SkyWords miles for my family.

ROB: And that’s a bit of a no-brainer.

ROB: Those miles are probably worth around in sterling about 700 pounds.

ROB: I can pay you 250 pounds for the membership.

ROB: It’s done.

ROB: But there is more print on this.

ROB: This is a once a year offer.

ROB: You can’t save 20% on every single redemption you make.

PAULA: Okay.

ROB: So oddly enough, once I sit here and say it’s not a great scheme, it’s not a great scheme.

ROB: If my wife suddenly announces she wants to go out to Dubai for Christmas this year, it’s possible.

ROB: We are family down there.

ROB: I may well sign up 48 hours before I pull the trigger for Skyward’s visit to the redemption.

ROB: But that doesn’t in itself make it a good scheme, because all that happens is I save 72,000 miles, Emirates gets 200 pounds off me, but they don’t get to remove 72,000 miles of liability.

ROB: Because I do it, I’m doing from Emirates Express transfer, but they would lose probably 700 pounds of revenue from Emirates Express, so I’d be transferring a few miles over, and I’d be giving them 200 pounds in cash.

ROB: So even Emirates makes no sense.

ROB: And if I did it, it would be a pure commercial transaction with no loyalty element.

ROB: It would be me going, fine, I’m going to pay Emirates 250 pounds, because at the end of the week, I can save myself 72,000 skywards miles.

ROB: There’s no loyalty in this on either side.

ROB: There’s no reason why, for the rest of my 11 months membership, I would be any more loyal to Emirates than anybody else.

ROB: It’s just a pure transaction.

ROB: And I don’t see, I mean, who benefits from it?

ROB: Okay, I benefit from the milestone, but it doesn’t help Emirates much.

ROB: And it’s where, I will be more loyal, no I won’t.

ROB: It won’t make me fly them more during the rest of the year.

ROB: It’s just, it’s almost unnecessary.

ROB: We need to have to do it.

ROB: If we weren’t running this scheme, I would just pay the full 360,000 miles and be done.

ROB: So it’s, in some ways, it’s just making your life more complicated.

ROB: For Emirates, it’s a lot of overhead putting the scheme together.

PAULA: My sense is that they, for example, I know you referenced in your article already as well, Rob, that this was initially launched actually in 2019.

PAULA: So this idea of paid loyalty for Emirates is not new.

PAULA: What I think I’m seeing and hearing is that they are refining, like any, I suppose, loyalty program, refining the proposition, developing it and testing numerous concepts.

PAULA: What I did like you suggested, for example, like the idea of instant gratification would be obviously very compelling.

PAULA: I think you were like, you know, if we got our 30,000 miles or something upfront for signing up, that would certainly, I suppose, drive the decision to subscribe immediately.

PAULA: Whereas I think what you’re saying at the moment is you do have to have the need in mind.

PAULA: And one that interested me, and I suppose I was surprised that I valued this when I was looking at it today, but I do have some friends that are coming to travel and I’ll probably be flying with them.

PAULA: So the airport lounge access for a guest, I don’t know if that’s available to me, for example, in any other way.

PAULA: It’s certainly not as a Skyward Silver card holder.

PAULA: But as a subscriber, if I did get the savings and I got to bring a friend into the lounge, I thought actually that would make me feel, I’d say, more emotionally connected.

PAULA: So that one did kind of resonate again with this particular context that I have coming up with somebody due to travel with me.

PAULA: Is that something?

PAULA: Am I unique in that?

PAULA: Or is that a benefit you think others would enjoy?

ROB: I’m not sure what the cost is.

ROB: Dubai Airport is not short of Plaza Premium, Mahaba and other independent lounges, which you can buy yourself into for around 30 pounds, 200 dirhams.

ROB: So on that basis, it’s not great value.

ROB: But then again, there’s kind of an emotional issue.

ROB: You may want to take them into the same lounge you’re in.

PAULA: Totally.

ROB: I’m not sure what the Emirates guesting rules are, to be honest.

ROB: If you’re in a business class ticket, can you get somebody else in?

ROB: Can you get to them if they’re on a different flight to you?

ROB: Can you get to them if they’re in a different class to you?

ROB: These are all every airline treats things like this in a different way.

PAULA: Yeah.

ROB: So I personally wouldn’t value that so much.

ROB: But again, it’s because you can buy it.

ROB: Because you can buy Emirates lounge access, again, it makes it a commercial decision rather than an emotional decision.

ROB: Because British Airways don’t sell lounge access, then it becomes more of an emotional decision.

ROB: Because if you want to bring people into a lounge with you over and above usual guesting rules, then you’re going to need status or more people are part of the status.

ROB: So a key part of it is just giving things which, as we go into Intercontinental Ambassador, ISU does not offer late checkout to anyone.

ROB: Even if you’re top tier in ICT rewards, which is Spire Elite, you don’t get a guaranteed late checkout benefit.

ROB: So by paying your $200 for Ambassador, you’re getting something which is simply not available via any other route, irrespective of how loyal you are to IT and its other hotels.

ROB: So that’s something which you can, not only can you see the benefit to you in it, but it’s something you can’t necessarily get any other way.

ROB: And it’s a guaranteed benefit.

ROB: So you know you won’t be turned down on the day.

ROB: If you read my stuff, I’m quite big on the concept of, so it’s guaranteed because we all, I did literally once stay in an airport hotel in Frankfurt where I was given the presidential suite, which came with three bedrooms and a fully staffed kitchen and dining room.

ROB: Yeah, but I checked the hotel at night, I was leaving at four in the morning.

PAULA: And you have a million, certainly, avios points and I think a million points and lots of other programs.

ROB: But you know, we weren’t, we didn’t get upgraded on any of our hotels in Palma, in Mallorca over the summer.

ROB: Even though they were both booked as part of packages, which came with a, you know, upgrade, guaranteed upgrade if available at time of check-in.

ROB: And not like which was actually delivered.

PAULA: Okay.

ROB: I mean, being fair enough, you know, that’s kind of what you expect in a, you know, pretty much sold out hotel in peak season, when you’re there for a long stay.

ROB: So obviously, you know, your business upgrade is a one night stay.

ROB: The hotel knows they’re not full that night, whereas you’re checking in for a week, where they actually know how full they’re going to be in six days’ time.

ROB: And their willingness to upgrade you into a nice room, which they could possibly sell in six days’ time to somebody else.

ROB: It was obviously not that high.

ROB: So it’s, the word guaranteed next to a benefit in a scheme means a lot to me.

ROB: If Emirates did offer a fat mileage inducement or put it in the status.

ROB: I mean, if you’re paying 700 pounds, it was probably $1,000 to Emirates.

ROB: The very least I would expect is an Emirates silver card, frankly.

ROB: But the problem is if you do that, then you’re putting a price on silver status.

ROB: So people like you who probably got out of their way to move flights to Emirates when there are other options, because you think you’ll earn status, my thing actually might bother.

ROB: I’ll just pay my $1,000 and get it.

ROB: It’s a complex cycle, isn’t it?

ROB: Why pay you $1,000 if you’re not getting status benefits?

PAULA: It’s a good thing you don’t work in loyalty, Rob.

ROB: I know.

PAULA: It’s fascinating.

PAULA: These are the business decisions we have to make.

PAULA: Make it compelling and make it commercial.

ROB: If I was running a program, it would probably be less profitable, but the overall business would be more profitable.

PAULA: That would probably be the impact of having me running a program.

PAULA: I would certainly hope so.

PAULA: I’ll end with one other quote, which I think again for anyone listening who’s considering paid loyalty, this is probably the most compelling statistic I’ve seen.

PAULA: And it was a quote I came across from McKinsey, who did a survey in 2020.

PAULA: And they stated that members of paid loyalty programs are 60% more likely to spend on the brand after subscribing, where free loyalty programs only increase that likelihood by 30%.

PAULA: So I thought that that was extraordinary for a brand like McKinsey to endorse the model is phenomenal.

PAULA: And I think what I’m hearing from you, Rob, is obviously, first and foremost, the product.

PAULA: We know we’ve agreed Emirates and Skywards are fabulous products.

PAULA: And then obviously, the subscription proposition needs to be absolutely compelling to make sure.

PAULA: And again, because it’s time bound, I think in your article, you were very clear that, you know, to subscribe as close as possible to when you’re going to either obviously redeem to get that one off benefit or, you know, to get into it, to fly more frequently.

PAULA: And that seems to make the most sense in terms of the Skywards Plus proposition.

PAULA: Would that be a fair summary?

ROB: I think so, yes.

ROB: We paid for Amazon Prime, for example, in our house.

ROB: And I think that is, you know, excellent value for you in the UK, it’s 80 pounds a year.

ROB: We’re probably doing at least one Amazon order a week.

ROB: You know, we get, in central London, you can get stuff same day now or early next morning.

ROB: But you also got, obviously, there’s Amazon Music, we’re about to use this, you get the TV, Amazon Prime Video as well.

ROB: And then you compare that to Netflix or the cost of paying for Amazon Deliveries.

ROB: And it’s just a no brainer in terms of value.

ROB: But it also does drive you to spend more on Amazon.

ROB: And if you look at what Amazon has done over the last couple of years, Amazon used to be unbelievably cheap.

ROB: It’s actually not cheap anymore.

ROB: I bought a new hardback book of Amazon.

ROB: I didn’t use a card, but Amazon would normally discount hardback books in the UK from £20 to £10.

ROB: This one I looked at the other day was £20 to £17.

ROB: So there’s quite a bit of margin on that.

ROB: And I found someone on eBay who was doing it brand new for £15.

ROB: But had I wanted it the same day, the same day or before 10 o’clock the next morning, I would have gone the Amazon route.

ROB: Because it’s crazy.

ROB: I can get some Amazon because I can go and actually get them to bookshop myself and buy it.

ROB: The strength of the Prime programme makes me less sensitive to price.

PAULA: Of course.

ROB: Because of the quality of the service that Prime offers.

ROB: And that, I think, is the real value of that scheme.

ROB: It moves you away from being price driven in your transactions with Amazon.

PAULA: And the incrementality, Rob, as well.

PAULA: Because as you talked about the Intercontinental Ambassador programme, I did think that if Skywards Plus, for example, had a two-for-one flight voucher, then I would definitely take another trip.

PAULA: Because I could travel with my partner, for example.

PAULA: So I did think there could be an incrementality, which again, I know it’s very difficult to business case from an Emirates perspective, but I thought that that was very clever.

PAULA: It’s not something I’ve seen Emirates doing from a flight perspective otherwise.

PAULA: So that might be the kind of thing, again, that would kind of get people to go, oh, my goodness, there’s a reason to travel and a reason to subscribe.

PAULA: So yeah, from my perspective, I’m definitely hoping that all of these amazing benefits are available.

PAULA: So, you know, more and more people, even I will say I traveled, as I told you, last week to Dublin.

PAULA: The flight outbound to Dublin was absolutely, I would say, 90 percent capacity.

PAULA: So very happy to see that from Emirates perspective.

PAULA: Much quieter coming back, I will say.

PAULA: But yeah, maybe that’s to do with timing and one of the other things that go into the very complex airline business.

PAULA: So listen, I think it’s time to wrap up, Rob.

PAULA: I could definitely talk.

PAULA: You’re so knowledgeable on all of this and always love to get your really strong, very clear consumer perspective on all things loyalty, certainly in the London market.

PAULA: So that’s it from my side.

PAULA: Is there anything else that you think that you wanted to mention before we wrap up?

ROB: No, no, that’s great, Paula.

PAULA: Always good, Rob.

PAULA: Thank you so much.

PAULA: So Rob Burgess, Editor for Head for Points, the UK’s biggest frequent flyer and business travel website.

PAULA: Thank you so much from Let’s Talk Loyalty.

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