"It's not the despair, Laura. I can take the despair. It's the hope I can't stand," so says John Cleese's character to his co-star, in the 1980s madcap comedy Clockwise.

It's a sentiment anyone working in the travel sector for the last five years can empathize with. We all hoped that, along with a welcome release of pent-up demand for leisure travel, the volume of business travel would rise to pre-pandemic levels, even if it took a little while. It hasn't happened.

By the end of 2022, business travel was still only at 75% of its pre-pandemic levels ^[1]. The latest forecasts are that, with the rise of video conferencing, business travel will never return to its former volumes ^[2]. And the leisure-travel boom may already have peaked ^[3].

Contrary to Cleese, despair is not better than hope in these situations. But hope must come with a plan attached and lead to action.

Hope, in this case, comes in the shape of renewed and re-energized loyalty programs, and their ability to discover new audiences and address them in new ways to drive revenue. 

Why loyalty? Why now?

When things are changing the way they are now, markets and consumer segments come up for grabs. Over the last two years, participation in airline loyalty programmes has fallen from 66% of all travellers to just 52% ^[4].

No one wants to be a commodity. Somehow, we need to get all these numbers — passenger volumes, loyalty-programme participation — back up. But how? In the past, airlines concentrated their loyalty activity on a group they knew well: business travellers.

We all knew the deal. We'd give frequent flyers great loyalty deals. They racked up lots of business trips, which was our primary source of revenue. And they had every reason to stick with one airline, because that made it possible to win enough points to subsidise the flights for their next vacation — and it made them feel valued by and important to that airline.

But with fewer business travellers, that model doesn't work anymore. There aren't enough of them to start with. Many of the ones there are, aren't travelling as often, so it takes them ages to accumulate enough points for any significant benefit. And loyalty schemes are not well suited to capture and incentive leisure-travel audiences.

To be fit for the 2020s, and beyond, airline loyalty programmes need to evolve.

What should the future of loyalty be?

The right loyalty programme has the power to swoop in like Superman, catch the falling indicator on your revenue graph, and take it to new heights in 2024 and beyond. But today's programmes don't have the oomph to do that.

Here's what has to change:

• Data has to drive, not follow: loyalty programmes and the platforms that run them must be able to spot data trends and optimize dynamically to maximise revenue.
• Personalisation is king: pushing travellers to buy seats isn't enough on its own. We need to segment, segment and segment again — then hit each segment with tailored offers.
• Address the whole trip: to drive revenue, airlines need travellers to book as much of the trip as possible with them or their partners — so loyalty has to take in the whole-trip experience.

We want to know the traveller so well that we can offer them exactly the air travel experience, the extras, the car hire, the hotel and the holiday activities to suite their tastes and aspirations. The best way to do this, is by first-party data directly from our own interactions with the customer, rather than relying on third party or lookalike data from ad-tech agencies or other sources.

This is particularly important, as new regulations and best practices are making such third-party data harder and harder to obtain. In the future, effective personalisation will increasingly rely on having access to high-quality, first-party data on customer preferences and priorities.

Because we can do this, they book everything through us. That wins them more loyalty points, so for their next holiday they come back to us to spend those points. And because our loyalty points are much easier to spend, the consumer can use them on leisure trips, even on their daily holiday coffee, further incentivising them to stick with us.

You can see where this is going — we want to set up a virtuous circle. Whatever the natural frequency of each passenger's travel would be, we want to see if we can increase it, even by a little. And we want them to keep coming back to us, time after time. And with a modern, data-driven, and flexible loyalty programme, that's exactly what you can achieve.

How to build the modern loyalty programme

The key to building the kind of loyalty programme descried above is to have the right technology. You need a loyalty platform that is flexible enough to plug into not only all the systems you use yourself, but the systems your partners use.

'Partners' means not just your operational partners, for instance airport retail or baggage handling, but also retail and commercial partners. The platform should be able to interface seamlessly with their systems either — if their systems are older — using bespoke connections or using modern APIs.

The modern loyalty platform is also data driven. You don't simply collect data and then action it months later, by which time the market may have changed. It can tell, using developing data signals, what segment a customer belongs to — even a first-time customer in the process of booking — and hit that customer with tailored promotions and cross-sell propositions in the moment.

The system will also collect first-party data for the customers you do know, both through your own systems and those of your retail and commercial partners. This is vital to enhancing your customer targeting. But it also makes your airline a more valuable partner for other vendors, across the trip experience. Again, this sets up a virtuous circle.

IBS iLoyal is a modern, modular airline loyalty-management platform, already used by many of the world's leading airlines. It allows you to collect high-quality, first-person data, to interface seamlessly with operational and commercial partners and to adapt quickly to changing customer needs.

IBS Software is a leading SaaS solutions provider to the travel industry globally, managing mission-critical operations for customers in the aviation sector. These include both major airlines and operators across the leisure and business travel sectors.

Find out how IBS Software can help you develop the best practices and implement the technologies you need to make your loyalty programme fit for the twenty-first century.