Sustainability in Travel 2021: Environmental Impact of Hotel and Airline Loyalty Programs

by Wouter Geerts + Skift Team - Jul 2021

Skift Research Take

Travel loyalty programs really are frequency programs. As frequency is directly linked to emissions in travel, how can travel companies find environmentally friendly ways to reward its most valuable customers?

Report Overview

In previous reports, Skift Research has investigated the environmental policies and practices of the six largest hotel and airline companies. This research found that the average CO2 equivalent emissions per room or per mile flown can differ considerably.

To further strengthen our understanding of the impact of travel companies on the emission output, we discuss our analysis of the emission volumes of loyalty programs in this report. All six hotel and airline companies have loyalty programs, which in effect are frequency programs which require more stays or more miles flown to achieve certain status levels.

In this report we highlight how much the average traveler emits on their way from an entry level status tier to the highest achievable tier. We also pose some questions to the industry on how to change and improve their loyalty approaches to mitigate their environmental impact.

What You'll Learn From This Report

  • The importance of loyalty programs to travel players, and the continued interest by travelers
  • The average CO2e emissions to achieve the lowest and highest hotel status tiers
  • The average CO2e emissions to achieve the lowest and highest airlines status tiers
  • How these emissions stack up against the emissions from other activities
  • How airlines and hotels can start a process of moving away from only rewarding frequency of travel

Executive Summary

In previous reports, Skift Research has investigated the environmental policies and practices of the six largest hotel and airline companies. This research found that the average CO2 equivalent emissions per room or per mile flown can differ considerably. 

To further strengthen our understanding of the impact of travel companies on the emission output, we discuss our analysis of the emission volumes of loyalty programs in this report. All six hotel and airline companies have loyalty programs, which in effect are frequency programs which require more stays or more miles flown to achieve certain status levels. 

Our analysis found that the average emissions to achieve the lowest hotel status tier is 0.2 metric tonnes of CO2e, while the highest level is 1.3 metric tonnes. There are some major differences, however, especially in the highest tier. Accor and Wyndham guests achieve the highest tier after an average of 0.6 metric tonnes CO2e, while at Marriott, elite guests emit an average of 2.4 metric tonnes.

Hotel emissions, however, feel inconsequential when compared to airline emissions. Airlines have different methods to achieve status tiers, which makes direct comparison more difficult. We used two hypothetical frequent travelers to determine the average emissions. Our analysis found that travelers emit an average of 3.5 to 6.6 metric tonnes of CO2e to achieve the lowest status tier, which is comparable to the global average of total annual per capita emissions from all activities. To achieve the highest status tier, average emissions jump up to between 13.3 and 25.8 metric tonnes, which is more than the average American emits in a year (15.5 metric tonnes CO2). 

The main question we ask the industry is whether the frequency approach to loyalty programs fits in the 21st century when combating climate change is so critical. Rather than focusing on additional stays or mileage, can the industry think of more innovative ways to promote brand loyalty and increase the lifetime value of its loyal customers? 

We are already seeing some hotels and airlines moving away from a simple number of stays or miles, to allow their customers to attain status in different ways. This is promising, but the industry can take this further.  

We provide a number of examples of where the industry could start to make changes. This includes baking sustainability into their programs by providing bonus points for more environmentally responsible behavior, partnering with companies that offer alternative ways to spend and earn status, relaxing redemption requirements so travelers are encouraged to take the shortest route to their destination, rather than having to take convoluted routes to be able to redeem points, and promoting rail travel through partnerships. 


Loyalty Programs Through a Sustainability Lens

Skift Research has investigated the environmental policies and practices of the largest hotels and airlines in two recent reports: Sustainability in Travel 2021: Emissions Benchmark of Six Global Hotel Companies and Sustainability in Travel 2021: Environmental Performance of the Six Largest Airlines

On the back of these reports, we decided to further analyze the impact of loyalty programs on their customers’ greenhouse gas emissions. All companies covered in the previous reports, which included six hotel companies (Accor, Hilton, Hyatt, IHG, Marriott, and Wyndham) and six airlines (Air France-KLM, American, Delta, IAG, Lufthansa, and United), have loyalty programs in place. As is highly customary in the travel industry, all of these programs are effectively frequency programs, where more spending, stays, or miles flown are rewarded with higher status. 

This report highlights how much greenhouse gas emissions are emitted in the journey towards becoming a high status member of hotels and airlines, and questions whether the frequency model underpinning loyalty programs is outdated.   

From Gold to Diamond: The Importance of Loyalty Programs for Travel Companies

Before the pandemic, in June 2019, we launched a report on hotel loyalty, calling for an expanded view of how to instill consumer loyalty beyond just a points program. While hotels and airlines are increasingly using technological tools like customer relationship management (CRM) systems to improve customer relations and communication, loyalty programs remain an important part of travel companies’ efforts to ensure repeat bookings. 

Looking at hotel companies, Marriott has by far the largest membership base with around 140 million members in its Bonvoy program, which account for half of all stays in Marriott hotels. At Hilton the share of stays by its members is even higher, at around 64%.  

Airlines do not systematically report on their loyalty member base, but it is clear that it is big business for them too. At the end of 2019, Delta reported that it had renewed a contract with credit card partner American Express, which would increase the latter’s contribution to $7 billion annually by 2023. The share of award flights lies somewhere between 7 and 10% for most major airlines, although this has declined over the past years as airlines have made it harder to spend miles. 

That’s not to say that the popularity of travel loyalty programs is waning. The opposite is closer to the truth. Marriott has seen its membership base grow from 110 million members in 2018 to 140 million members at the end of 2019, a 27% increase. Over the same year, Hilton grew its member base from 85 million to 103 million, a 21% increase. 

And at the start of the pandemic, the major airlines used their loyalty programs to raise billions of dollars. In effect, its loyalty members saved the airlines by continuing to spend on their airline credit cards, even when they were not allowed to fly. During these funding rounds, American Airlines’ AAdvantage was valued at $24 billion, and United Airlines’ MileagePlus at $22 billion, far more than the airline market caps during the pandemic. 

With this great, and growing, importance of loyalty programs to travel providers’ bottom line, there is a clear need for travel companies to ensure that their loyalty programs are a sustainable arm of their business. 

There are many discussions on whether the frequency model still works, and it certainly appears that younger generations are less interested in earning and spending miles or points. Research by KPMG found that 90% of Millennials (those born between 1981 and 1995) are part of a loyalty program, but travel and credit card schemes showed some of the lowest uptake. 

Our own research supports this finding, with Millennials in five major countries stating they prefer loyalty programs which give cash back, rather than schemes which allow you to earn free hotel stays or flights. 

It is therefore a good time to consider whether and how loyalty programs can be changed to better cater to a changing customer, and a changing world. In this report we will focus particularly on the arguably outdated concept of the frequency programs in a world where climate change is increasingly top of mind for consumers and companies alike. 

Loyalty Programs Defined

Before diving into the findings, we want to provide some key understandings about loyalty programs which were taken into consideration during this analysis. 

In this report we analyze both airline and hotel loyalty programs. There are certainly differences between the way these two industries reward and recognize frequent customers, but there are some important commonalities between the loyalty programs:

  • In general, airline and hotel loyalty programs allow members to earn points and status. 
  • Points are given for money spent with the hotel or airline, as well as with partners, with the latter generally through credit card partnerships.
  • Points can be spent on free or discounted nights in hotels, or free or discounted flights. Many programs now also allow spending with selected third-party partners. 
  • Status stands separate from the points element in most programs, with programs providing status points based on qualifying spending, miles flown, or nights stayed. Status/tier points can generally only be attained through spending with the company itself. 
  • Different status tiers provide different levels of recognition through free add-ons, like upgrades, free welcome gifts, or additional luggage allowances in the case of airlines. 
  • Predominantly in the U.S., signing up for certain credit cards can give instant status at airlines or hotels, without needing to actually travel or stay. This is done, however, with the understanding that these people are more likely to be loyal customers with these travel brands already, and therefore are expected to travel more. To keep the status beyond the first year, credit card users will need to spend with the airline or hotel. 

The analysis done in this report is admittedly rudimentary, since we can only work with averages. Most airlines allow for higher earning levels on more expensive tickets, and since first class seats take up more space than economy seats, first class passengers are in effect emitting more than economy fliers. The same applies for hotel stays, where emissions are much higher in a presidential suite compared to a standard room. We have to look beyond these caveats to gain at least some understanding of the role frequency programs play in promoting environmentally damaging behavior. 

The Environmental Impact of Frequent Hotel Stays

In the report Sustainability in Travel 2021: Emissions Benchmark of Six Global Hotel Companies we used CDP filings of the largest hotel companies to determine the emissions of an average hotel room at each company. These emissions are expressed in CO2 equivalent, or CO2e, which includes CO2 and other greenhouse gases with warming potential. 

We found that companies differ significantly in their emissions per room, with particularly chain scales having a major impact on emission levels. Luxury hotel brands emit more as they tend to have larger rooms and more amenities and features which contribute to CO2e emissions. Midscale and economy brands tend to perform better, which allowed Accor, which has a large portfolio of lower end hotels, to perform best.

We can combine this data with information on the requirements to achieve different status tiers with these hotel companies, to calculate how much loyalty members will emit on average in their efforts to attain status levels. Below we provide details on the lowest and highest status tiers of each hotel company, and what the annual stay requirements are. 

Combining the tier requirements and the average emissions per room shows that frequent hotel guests will emit an average of 0.2 metric tonnes of CO2 equivalent to attain the lowest status tier, which increases to 1.3 metric tonnes to reach the highest level. 

However, there are some significant differences in emissions, especially for the highest tier. The average Marriott customer emits 2.4 metric tonnes of CO2e to get Ambassador Elite status, while an Accor or Wyndham guest will emit only 0.6 metric tonnes through their hotel stays on their way to attaining Diamond status for either program. 

As it is hard to imagine how these emissions stack up, we provide some context below, showing how the average inhabitant in countries like India and Brazil have annual CO2 emissions that are lower than what is emitted during the 100 nights stayed in Marriott hotels to achieve the top status tier. 

The Polluting Habit of Airline Status Tiers

The exercise we have set out above for hotels can also be done for airlines. In our report Sustainability in Travel 2021: Environmental Performance of the Six Largest Airlines, we calculated the average emissions per revenue passenger kilometer (RPK) for six major airline companies. 

While airline loyalty programs have different ways to allow frequent flyers to attain or retain loyalty status, there is a general need to fly more to attain higher status. Three of the airlines’ loyalty programs are designed around mileage, where members need to fly a certain number of miles to achieve status. This includes the loyalty programs by Delta, American, and Lufthansa. The other three programs are based on spending (United), or a points system based on a combination of distance and spending (British Airways and Air France-KLM). 

To be able to directly compare these different programs we had to make a few assumptions and set some parameters. 

For the programs that are shaped strictly around mileage it does not matter what routes are flown to attain status, but for the other programs different routes can provide wildly different miles flown to achieve the same status. 

We therefore came up with two hypothetical frequent travelers. Traveler 1 only travels internationally between New York and London. Traveler 2 is a domestic traveler, with all her flights between New York and Washington. As the European airlines don’t fly domestic U.S. flights, we used the similar distance of Berlin to Cologne in Germany as an alternative flight for Air France-KLM and British Airways.  

Using the distinction between a short domestic flight and an international medium long-haul flight, we were able to determine how many trips travelers need to make to attain different status tiers with each airline. 

For example, an Air France-KLM member needs to fly 13 international flights or 50 domestic flights annually to attain the lowest status tier, or 38 long-haul flights or 150 domestic flights to attain the highest status tier. With British Airways it is slightly easier to achieve the lowest tier, requiring 9 international or 30 domestic flights, and 43 international or 150 domestic flights for the highest tier. 

For United Airlines we took a snapshot of available prices, and estimated an average price of $450 for a return between London Heathrow and New York JFK, and $150 for a return between New York JFK and Ronald Reagan Airport in Washington DC. This results in a requirement to fly 14 long-haul or 40 domestic flights to achieve the lowest status tier, and 60 international or 180 domestic flights to achieve the highest status tier. 

In all these cases, these are one-way routes, so for return flights this would cut the requirement effectively in half (i.e. United members need to fly 30 international return flights or 90 domestic return flights to achieve the highest status tier).     

Using this information, and the CO2e emissions per RPKs, we were able to determine how much CO2e is emitted on average to achieve status tiers.  

When looking at the lowest status tier, the average annual emissions lie between 3.9 and 6.6 metric tonnes of CO2e. It is clear that point programs that are not strictly designed around mileage have much lower emissions for domestic flights than for international flights, where the actual number of flights count heavier than the distance. It might not be that many travelers will only fly the same short domestic route every time, but it does highlight how certain programs can be more efficient and sustainable depending on travel behavior.

British Airways and United Airlines register the lowest emissions to achieve the lowest status tier. However, when flying mostly internationally, United in particular is highly polluting, with the mileage programs of Delta and American performing much better. 

If we look at the amount of flying needed to achieve loyalty programs’ top tiers, we see emissions shoot up. On paper, the non-mileage programs of United, British Airways, and Air France-KLM require the least miles flown to achieve top status if only short domestic flights are taken. However, when we look at the international flights, the mileage based programs are easier to achieve. Here American, Lufthansa, and Delta all have very similar CO2e output to attain top tier status. According to our calculations, the average annual emissions to achieve top tier status lie between 14.7 and 25.8 metric tonnes of CO2e.  

It becomes clear how inherently polluting airline point programs and status levels are, when comparing this to the average CO2 emissions of people worldwide. The global average per capita CO2 emissions per year are 4.6 metric tonnes, which is around the same level of emissions required to achieve the lowest airline status tier, and about double the emissions to achieve the highest level of hotel status.  

The average annual emissions of a U.S. citizen is around 15.5 metric tonnes of CO2, which is at the lower end of what a frequent flyer would emit in mileage to achieve the highest status tier. 

Questions for the Travel Industry

In this report we have looked at hotel and airline contributions to carbon emissions through the lens of frequent travelers, and how loyalty programs, especially elite status programs, promote and reward consumer behavior that’s environmentally damaging. 

The main question to ask the industry is whether the frequency approach to loyalty programs fits in the 21st century. Rather than focusing on additional stays or mileage, can the industry think of more innovative ways to promote brand loyalty and increase the lifetime value of its loyal customers? 

We are already seeing some hotels and airlines moving away from a simple number of stays or miles, to allow their customers to attain status in different ways. Programs like those of Air France-KLM and British Airways that work with points based on routes and spending or United’s straightforward spending requirements take away some of the connection between more flying and more status. Hotel companies like Hilton, Hyatt, and IHG are also allowing customers to earn status by redeeming points, which they could have earned through non-travel activities, rather than requiring people to stay in their hotels. 

These are movements in the right direction. But more importantly, if frequency programs are here to stay, in some way or another, airlines and hotels should also consider how they can bake sustainability into their programs. Think of programs that would provide bonus points for staying in more environmentally friendly hotels, or spending a little extra on carbon offsetting or a biofuel levy.  

Travel companies should also leverage the continuing popularity of their programs for good. Travel loyalty programs can, and should, be the center of loyalty partnerships. The pandemic has shown that unforeseen circumstances can happen, and having a diversified range of ways for people to earn and spend points will be valuable. This means that airlines and hotels should increase collaborations with players from outside the travel industry, which will also allow consumers to find environmentally friendly ways to earn and spend points, keeping travel players involved without the need to achieve a certain mileage or stays. 

Especially for airlines, relaxing redemption requirements might have a positive impact on which flights are being booked by travelers. This especially counts if airlines collaborate more with other airlines for redemptions, so that customers will be able to take the shortest route to their destination, rather than having to take more convoluted routes to be able to redeem points. 

In a similar vein, train travel is becoming increasingly popular, especially for shorter journeys. Airlines could start selling train tickets through partnerships with train operators, which allow customers to earn points, or to redeem points on train travel.

This is a fine balance to achieve, and obviously airlines and hotels want and need to ensure people continue to travel and stay with them. The loyalty program, however, could be a way for travel providers to promote responsible travel behavior and increase brand loyalty. If companies continue to focus solely on getting their customers to fly more, stay more, and spend more, they will be left behind as consumer sentiments are evolving.