Travel and Hospitality

Are travel loyalty programmes still worth it? A critical look at recent changes

For decades, travel loyalty programmes have been the golden ticket for airlines, hotels, and travel companies to forge lasting customer relationships. A free flight here, a complimentary upgrade there—these small rewards have led millions of customers to choose loyalty over the competition. As the travel landscape evolves, loyalty programmes must transform to remain a key driver of customer retention and profitability.

Travel loyalty programmes have been key to customer retention, but evolving consumer expectations and post-pandemic shifts are forcing airlines to reconsider their strategies. Consumers are now more demanding than ever, expecting personalised, seamless experiences. These shifting preferences are calling into question whether traditional travel loyalty program can still keep up.

With changing consumer behaviours, emerging technologies, and new challenges in the loyalty ecosystem, it’s time to critically examine the shifting landscape.

Why are loyalty programmes so important for airlines?

For airlines, loyalty programmes are not just about retaining customers—they are a significant revenue driver. With high operational costs and thin margins, airlines leverage loyalty ecosystems to unlock new revenue streams, from strategic credit card partnerships to data-driven customer insights.

Instead, they rely on additional revenue from baggage fees, ticket changes, and, crucially, frequent flyer programmes. Travellers can earn status either by flying frequently or by spending on rewards credit cards. These programmes, especially when paired with credit card partnerships, are highly profitable for airlines. For example, an international commercial airline earned $5.7 billion from selling miles, a revenue stream that significantly boosted their overall profits.

The evolving loyalty ecosystem

The loyalty ecosystem is undergoing a profound transformation, driven by evolving consumer expectations, technological advancements, and competitive pressures. The loyalty ecosystem has evolved into a multi-channel, AI-driven strategy that enables airlines to boost ancillary revenue, optimise customer segmentation, and drive repeat business. Digital transformation is reshaping the travel and hospitality industry, with AI and machine learning enabling highly personalised rewards and engagement. Consumers now interact with brands across mobile apps, websites, and social media—and they expect their loyalty programmes to do the same.

Today’s travellers seek more than just points; they want real-time offers, flexible redemptions, and rewards that enhance their overall experience. They’re no longer just looking for a flight upgrade—they want unique, personalised, and meaningful experiences. This shift toward experiential loyalty is driving brands to innovate, integrating programmes into daily life. From AI-driven personalisation to blockchain-powered reward systems that enable seamless, cross-brand redemptions, the loyalty ecosystem is evolving to deliver greater value, convenience, and engagement.

Catering to diverse traveller needs

Travellers today have varying expectations from loyalty programmes, making personalisation essential for engagement. By leveraging AI-driven customer profiling, airlines can dynamically tailor benefits—such as priority services for business travellers and exclusive experiences for leisure travellers—maximising engagement across customer segments. In contrast, leisure travellers seek memorable experiences, preferring rewards such as exclusive discounts, private tours, or spa treatments.

Beyond individual preferences, loyalty programmes also differ across regions due to cultural, economic, and consumer behaviour factors. In the U.S., market saturation has intensified competition, pushing companies to leverage AI and personalised benefits to stand out. Meanwhile, in emerging markets, loyalty programmes present opportunities for innovation and differentiation. By understanding these diverse needs, brands can design loyalty programmes that not only attract but also retain travellers in a competitive landscape.

What customers really want

An analysis of online forums shows that travellers seek simple, valuable rewards and flexibility—not gimmicks or overpriced redemptions. For instance, the devaluation of points is a sore spot across regions. Airlines have increasingly shifted to dynamic pricing, where the points needed for a reward fluctuate with demand. A free flight that once cost 20,000 points might now require 30,000 during peak season—a trend frustrating loyal customers. Loyalty thrives when programmes align with travel habits and offer consistent perks, but frustration grows when benefits decline, or redemption becomes difficult.

The verdict: are loyalty programmes still worth it?

Loyalty programmes remain a crucial driver of airline profitability and customer retention. By integrating AI-driven personalisation, automation, and predictive analytics, brands can transform these programmes into strategic growth engines. Travellers aren’t abandoning these programmes—they’re simply demanding more. To stay competitive, travel brands are turning to AI-driven solutions, leveraging data to anticipate customer preferences and deliver personalised offers.

By embracing innovation, loyalty programmes can go beyond traditional rewards, creating meaningful experiences that keep travellers engaged. Airlines can transform loyalty programmes from mere marketing tools into powerful drivers of engagement and long-term customer satisfaction. For industry leaders, the message is clear: innovate or risk losing customers.

How can Infosys BPM help airlines unlock the potential of loyalty programmes?

Join leading airlines and hospitality brands that have achieved a 3 million increase in customers, a 7% rise in online sales, and a 17% boost in order frequency with Infosys BPM. Our expertise in loyalty management helps you streamline operations, enhance customer satisfaction, and drive growth. Discover how Infosys BPM travel and hospitality loyalty solutions can help you take your loyalty strategy to the next level.