Why the Hotel Derek is handing cash back to guests

(Hotel Derek Houston)

Independent hotel operator Destination Hotels is offering a new rewards program option at its Hotel Derek, A Destination Hotel, in Houston.

The new program is focused around instant rewards, where the hotel pays guests on check-in. If guests stay four nights at the hotel, they will pocket $100 in the form of an American Express gift card.

“We understand in this economic climate that it is important to provide value, which is why we’ve created this timely program to better serve our go-getter customers,” Mark Noyes, GM of Hotel Derek, said in a statement. “Gone are the days that people should have to worry about racking up points – luxury and convenience don’t come with a punch card. We don’t want our guests concerned about tracking points. We would rather have them stay at Hotel Derek now, and we will reward them with a $100 on each visit that they can put toward their next adventure.”

Loyalty programs are going through a transformative period, with the prevailing trend from hotels centered on giving back to customers through discounted room rates. Hotels have long wrapped free amenities, such as Wi-Fi, into their rewards programs, but the industry is now experimenting with simply handing out cash.

But will it work? A study from April found that the primary motivation for guest loyalty is the expectation of financial payoff, meaning that these strategies may find strength. The key difference in strategies between Destination Hotels and a company like IHG (InterContinental Hotels Group) is that IHG is offering its discount during the booking process, while Destination is handing out cash at the door. Directly discounting room rates may translate into more reflex bookings, but giving out cash gift cards during check-in almost guarantees that some of that money will find its way back into the hotel.