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Hotel Gift Card Surprises

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October 01, 2014
Gift Card | Technology
John Burns - john@burns-htc.com

Hotel gift cards are a low-profile topic in the lodging business. Guests buy them, guests use them; gift cards create little work, and have few problems. No muss, no fuss. 

Recently I spoke with managers of gift card programs from U.S. and global hotel brands. I was interested in gift card popularity, the introduction and success of e-cards, whether e-cards have replaced traditional plastic gift cards and who is buying gift cards.
These conversations revealed several surprises – information that definitely changed my perspective on hotels gift cards. The majority of hotel gift card programs now include an e-card option where the virtual card can be purchased online. E-card redemption is accomplished by the user quoting the gift card number or showing its ID on a smartphone to a hotel staff member. Mostly implemented in 2013, hotel e-cards have been quickly accepted. E-card sales have not cannibalized traditional gift card sales. In fact, at many hotel companies e-card sales now match traditional gift card sales. Sales of both card types are generally increasing. Breakage and non-redemption is significant and a lucrative aspect of hotel gift card programs.

Purchases by businesses are a high proportion of gift card sales in some hotel programs, sometimes exceeding 70 percent of total sales. These corporate sales are used for employee incentives, customer appreciation and the like. Participation in credit card programs where users swap their reward points for a hotel gift card can be a substantial sales source. Expenditures involving a hotel gift card often substantially exceed the value of the gift card itself. It is not unusual for a 200 percent guest spend increment on gift card face value.

Not surprisingly, lodging is the service most often purchased by gift card users. Spa services are a close second. Gift cards are highly successful in bringing new business to the brand.  Many hotel gift card recipients have not previously experienced the brand.  Gift cards create an opportunity to build valuable repeat guests. Hotel gift card administration can be largely outsourced. A growing number of credible vendors offer global service propositions. Accepting full responsibility for fraud liability is an important service provided by some of these vendors. Optimally, on-property gift card purchases and redemptions are handled in the property management system (PMS) through an interface between that system and the third-party gift card administration service.

While breakage is a valuable aspect of the program, hotel gift card program managers are watching initiatives in some U.S. states to apply escheatment laws in order to generate additional revenues to those states. Escheatment is a longstanding government process of taking control of unclaimed/abandoned funds, most commonly seen in long-unused bank accounts whereby the state becomes the owner of the account. Gift card promotion and ready access on property – and increasingly off property as well – have a very direct impact on card sales.

With low visibility and requiring relatively little effort, gift card programs continue to offer interesting opportunities for increased revenue for hotel companies across the globe.

John Burns is a president of Hospitality Technology Consulting. He can be reached at john@burns-htc.com.

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