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BP to buy TravelCenters for $1.3 bln in U.S. fuel retail drive

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BP’s Acquisition of TravelCenters of America Is Now Final

The company purchased TA for $1.3 billion in a dramatic boost to BP’s convenience strategy.

May 17, 2023

ALEXANDRIA, Va.—BP officially has completed its $1.3 billion acquisition of TravelCenters of America (TA). In February, BP announced it had agreed to acquire TA, subject to required approvals, which have been received.

According to BP, TA’s strategically located network of highway sites complements BP’s existing predominantly off-highway convenience and mobility business in the United States, enabling TA and BP to offer fleets and consumers a seamless nationwide service.

“We are thrilled to welcome the TravelCenters of America team to BP and give a turbo-boost to our convenience and mobility business in the U.S. Combining TA’s sites on U.S. highways with our brilliant retail network off the highway immediately expands our offer and doubles our global convenience gross margin,” said Emma Delaney, executive vice president, customers and products, BP.

BP has five strategic “transition growth engines.” They are convenience, EV charging, bioenergy, renewables and hydrogen, and the transaction will provide options to expand and continue to develop convenience and mobility offers. By 2030, BP aims for around half its annual investment to go into these transition growth engines, with around half of its anticipated cumulative $55-65 billion transition growth engine investment going into convenience, bioenergy and EV charging.

In January, TA announced plans to deploy 1,000 EV chargers across 200 locations, and in February, BP announced plans to invest $1 billion in EV charging in the United States by 2030.

With the close of the acquisition, TravelCenters of America common shares have been converted into the right to receive $86 per share.

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BP acquires TravelCenters of America in $1.3bn deal

BY Fraser Tennant

As part of its aim to significantly grow investment throughout this decade, petroleum company BP is to acquire the publicly traded full-service travel centre network TravelCenters of America Inc. in a transaction valued at $1.3bn.

Under the terms of the merger agreement, BP will acquire all of the outstanding shares of TravelCenters common stock for $86 per share in cash. The sale price represents an 84 percent premium to the average trading price of the 30 days ended 15 February 2023 of $46.68.

The acquisition of TravelCenters complements BP’s existing convenience and mobility business and will help expand its offers, including electric vehicle charging, biofuels, renewable natural gas (RNG) and hydrogen.

A condition of the sale is the approval by shareholders who own a majority of TravelCenters’ outstanding shares: Service Properties Trust, which owns 7.8 percent and The RMR Group, which owns 4.1 percent. Both have agreed to vote their shares in favour of the sale.

At the closing of the transaction, which has been unanimously approved its board of directors, TravelCenters will terminate its management agreement with RMR pursuant to the terms of the agreement and pay a termination fee to RMR that is currently estimated to be approximately $44m.

“The announcement that BP is acquiring TA is a result of the successful implementation of our turnaround and strategic plans,” said Jonathan M. Pertchik, chief executive of TA. “We have improved our core travel centre business, expanded our network, launched our specialised business unit eTA to prepare for the future of alternative fuels and improved our operating and financial results, none of which we could have accomplished without the hard work and dedication of our employees at every level.”

Founded in 1972 and headquartered in Westlake, Ohio, TravelCenters’ over 18,000 team members serve guests in 281 locations in 44 states, principally under the TA, Petro Stopping Centers and TA Express brands. TravelCenters’ offerings include diesel and gasoline fuel, truck maintenance and repair, full-service and quick-service restaurants, travel stores, car and truck parking and other services.

Subject to shareholder and regulatory approval, the transacting parties are targeting closing the acquisition by mid-2023.

News: BP to buy TravelCenters for $1.3 bln in U.S. fuel retail drive

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Wawa Is Building Its First Travel Center

South carolina gas station, c-store failed to pay overtime, wawa opens first north carolina store, new owner of sqrl convenience stores tries to force bankruptcy, foxtrot, dom’s file for chapter 7 bankruptcy, travelcenters of america receives rival acquisition bid.

TravelCenters of America, which in mid-February reached an agreement to be acquired by bp Products North America Inc. for $1.3 billion in cash, has received a rival bid. On March 14, TA received an unsolicited, non-binding indication of interest from an unnamed publicly traded fuel supplier and convenience-store operator it calls “Party G” to purchase 100% of the equity interests of TA for $92 per share, according to a filing with the U.S. Securities & Exchange Commission (SEC) .

TA ’ s stock price rose 2.1% after disclosing it received a $92 a share offer, however, on Wednesday, the TA independent board members determined that the offer from Party G didn't constitute a superior proposal to the bp deal, according to the SEC filing. The board members said the offer would require “significant” third-party financing and there was no firm commitment from a potential financing source to provide such financing and the financing markets “remain uncertain.”

A deal with bp , at $86 per share, is still subject to TA shareholder and regulatory approval. The possible acquisition by bp was the result of TA receiving unsolicited interest to be acquired. In response, TA’s board hired financial and legal advisors as part of a formal process to consider a potential sale. This process ultimately included competitive rounds of bidding from potential buyers that resulted in the bp transaction, unanimously approved by the TA board, said TA.

• BP is No. 7 and TravelCenters of America is  No. 29  on  CSP’s  Top 40 update  to the  2022 Top 2 0 2  ranking of U.S. convenience-store chains by company-owned store count.  Watch for the updated list in June.

The proposal from Party G indicated that it planned to finance the purchase through a combination of cash on hand, external financing and lines of credit with a 30-day timeline to conduct diligence and sign definitive agreements.

Party G indicated that it was prepared to enter the lease documentation under substantially the same terms as bp, including restating guarantees of leases on the same terms as the agreement that would include having Party G as the guarantor. The Party G proposal also included a letter from a potential financing source indicating that, “subject to certain terms and conditions, including pricing,” it was prepared to commit to finance the acquisition.

TA and bp filed notifications of the merger with the Federal Trade Commission (FTC) on March 9, and the initial 30 day review period expires on April 10. Board Chairman Adam Portnoy advised the TA board that the board of trustees of Service Properties Trust (SVC), the landlord of most of TA properties and all of its independent trustees had reached a preliminary consensus that given Party G’s credit rating and financial conditions, SVC would not engage in negotiations with or consent to the assignment of the lease to Party G in connection with a change of control of TA.

Westlake, Ohio-based TA, a publicly traded, full-service travel center network, has 280 locations in 44 states and Canada, principally under the TA, Petro Stopping Centers and TA Express brands. Offerings include diesel and gasoline fuel, truck maintenance and repair, full-service and quick-service restaurants (QSR), travel stores, car and truck parking and other services. The company operates more than 600 full-service and quick-service restaurants and nine proprietary brands, including Iron Skillet and Country Pride.

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Berkshire hathaway completes acquisition of remaining interest in pilot travel centers llc.

OMAHA, Neb., January 16, 2024 --( BUSINESS WIRE )--(BRK.A; BRK.B) – Pursuant to the terms of a settlement agreement reached with Pilot Corporation, Berkshire Hathaway Inc. has acquired Pilot Corporation’s remaining 20% interest in Pilot Travel Centers LLC effective today. Berkshire Hathaway now owns 100% of Pilot Travel Centers.

About Berkshire

Berkshire Hathaway and its subsidiaries engage in diverse business activities including insurance and reinsurance, utilities and energy, freight rail transportation, manufacturing, retailing and services. Common stock of the company is listed on the New York Stock Exchange, trading symbols BRK.A and BRK.B.

Cautionary Statement

Certain statements contained in this press release are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Berkshire assumes no obligation and does not intend to update these forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240116124868/en/

Marc D. Hamburg 402-346-1400

Expedia’s New CEO: Fixing Vrbo, Loyalty, and the Outlook For International Growth

Dennis Schaal , Skift

May 14th, 2024 at 1:00 PM EDT

Expedia Group's new CEO, Ariane Gorin, wants to build a great product and accelerate growth. The rest would take care of itself.

Dennis Schaal

Ariane Gorin’s first day as Expedia Group CEO was Monday, and she has moved to the home base in Seattle after living in London and Paris for the past 23 years.

That global perspective, she said, will help as the historically U.S.-focused Expedia Group tries to get more international, including in Scandinavia and Japan. In 2023, the company generated 63% of its revenue from U.S. points of sale.

Skift caught up with Gorin Monday in Las Vegas, where thousands of Expedia Group partners gathered for the company’s annual Explore 24 conference over the next two days.

Here are eight takeaways from the interview:

1. The Priority Is to Grow Organically

Expedia recently completed a tech migration that brought together several of its brands onto one platform. The idea is to unlock growth from within but we also asked about the potential for acquisitions.

Gorin: “There are always things to get done. On technology, the front-end migration is done. On acquisitions, I certainly don’t have anything to share right now. What we will do is be really thoughtful about where does it make sense to deploy our capital. I think we have a lot of great opportunities ahead of us organically. The first thing on my radar is about working to accelerate the growth of our company with all the investments we’ve made the last couple of years. It’s in our hands.”

2. International Growth Will Be a Focus for Expedia Group

Gorin said she will be spending a chunk of her time on expanding the company internationally for the sake of partners and customers, but the growth may be more tactical than in the past.

Gorin: “What I can tell you is that we’re taking a measured approach as we do it to make sure that we’ve got the right formula to work in different countries. What’s your marketing mix? What are the product specifications you need for that country? I think in the past, perhaps we’ve gone kind of across the board, and I think here we’re being quite measured and thoughtful about where we want to go.”

3. No Retreat on the B2B Business

In the first quarter, Expedia Group’s B2B business, where it powers travel programs for loyalty programs, banks, retail outfits and other travel agencies, generated nearly 29% of revenue. Is Gorin concerned that when Expedia powers travel for a major credit card company that Expedia is losing customers to that bank, making Expedia increasingly weaker? Some analysts have argued that Expedia should abandon such programs.

Gorin: “I wonder if someone asked Amazon the same question when they started with AWS (Amazon Web Services) to empower other e-commerce players. Travel is a massive $2.3 trillion market. Despite us and other OTAs and large hotel chains, it’s still a quite fragmented market. A lot of people want to be in travel, whether they’re financial institutions who want to add it to a loyalty program, whether it’s long-tail, offline retailers.”

“And so the fact that we can use our technology and our inventory to power them allows us to bring more value to our supply partners and others. It also, I think, creates this nice flywheel of improving the whole ecosystem. And to the question, does it cannibalize? I’m not worried about that.”

4. Expedia Needs to Win Back More Vrbo Customers and Grind Out Improvements

Vrbo, Expedia’s vacation-rental brand, hasn’t bounced back as quickly as hoped following the tech migration that put it on the same platform with Expedia and Hotels.com. We asked Gorin what the issues are .

Gorin: “We went through the migration in the second half of last year. Whenever you go through any migration, you’re going to take some steps back before going forward. You have to win back the travelers who are having those experiences.”

“At the same time — because we knew that was going to happen — we pulled back in our marketing spend at a time that when there were some competitors that were becoming more active. We’re very bullish on Vrbo. I think it’s got a great brand, a great positioning, and really good supply. And so it’s just a matter of being tenacious, and continuing to grind out improvements.”

5. You Can’t ‘Flip a Switch’ After Introducing a New Loyalty Program

Is the new One Key loyalty program taking longer than expected to get going? Expedia Group last year folded multiple loyalty programs that it previously ran for its Expedia, Hotels.com and Orbitz brands into a single loyalty plan, One Key. Hotels.com had, in some respects, a more lucrative program and many Hotels.com customers haven’t embraced One Key.

Gorin: “I would just say with any loyalty program there is not going to be a switch that you flip on overnight. We’re happy with the results that we’re seeing. We’ve rolled it out in the U.S., and we’re seeing good sign ups with new members. We’re seeing good signs on repeat bookings and engagement.”

“One of the reasons to put One Key out there was to capture more trips within the Expedia Group ecosystem for a given traveler. And what we found is that people who were using their One Key cash or redeeming their one key cash on Vrbo, if they had earned it on Expedia or Hotels.com, 25% of those people had never used Vrbo before.”

“So they were brand new to Vrbo. For those trip types, we would expect that they would repeat. So it is linking together this house of brands through the One Key loyalty program.”

6. When It Comes to Offering Discounts, You Have to Realize Some Customers Are Price Sensitive

Expedia is doing a lot more discounting through One Key. Booking.com started doing a lot of this discounting and merchandising a few years ago. Is it getting more competitive? Is it a race to the bottom?

Gorin: “People shop in a lot of different ways. We have to accept that. A lot of travelers out there are price sensitive, and they want to make sure that they’re getting what they’re actually buying. In our One Key program, we have member discounts. We have silver and gold tier member discounts. And we have great engagement from our hotel partners on those because they see that as a way to go get incremental travelers. And then when it comes to merchandising, I think we’re thoughtful about what are the returns relative to other marketing standards.”

7. Expedia Is Testing to See How Big a Deal AI Trip Planners Will Be

Expedia introduced on Tuesday an upgraded version of your AI trip planner, Romie, to assist travelers from not only planning a trip but making changes during the trip. Will these generative AI trip planners become a sweet spot for the use of gen AI in travel?

Gorin: “I think we’re all testing to see how are people going to interact. We have great success using Gen AI internally, for example, in our call centers, and we’re testing it with some of our commercial teams. Our developers are using it. And of course we have it in a bunch of places in the product. So Romie? It’s just another example of us testing things. And then as always, in whatever country, you get feedback from travelers, and then you iterate from there.”

8. Expedia’s Share Price Will Take Care of Itself

Expedia’s stock is down some 30% in the past few months.

Gorin: “I’m focused on having products and experiences that are great for travelers, that partners love and want to be part of, and having an organization that has very engaged and motivated teams that are able to be creative. And I think if we do those things, the rest will take care of itself.”

Have a confidential tip for Skift? Get in touch

Tags: ai , ariane gorin , artificial intelligence , booking holdings , business travel , dwell , expedia , expedia group , future of lodging , generative ai , hotels.com , loyalty , one key , online travel newsletter , short-term rentals , travel tech , vrbo

Photo credit: Expedia Group CEO Ariane Gorin. Expedia Group

Travel invented loyalty as we know it. Now it’s time for reinvention.

Travel brands didn’t invent loyalty programs, which have been traced to as far back as the 18th century . 1 James J. Nagle, “Trading stamps: A long history,” New York Times , December 26, 1971. But ever since the first major airline frequent flier programs appeared in the early 1980s—soon to be followed by similar programs from hotel chains—the travel industry has become known for letting customers accumulate redeemable “miles” and “points.” Modern-day voyagers are deeply familiar with loyalty-related concepts such as status tiers, members-only lounges, and point-earning credit cards.

Travel loyalty programs were originally designed to influence travelers’ behavior. By offering rewards such as free flights and hotel rooms to frequent customers, a company might convince power users to consolidate their travel spending with its brand. Why fly airline X when you’re halfway to earning a free perk for remaining faithful to airline Y?

Over time, many travel loyalty programs became wildly successful—not just as a way to boost sales or strengthen customer relationships but as major profit centers in their own right. Travel companies found they could sell loyalty points in bulk to, for instance, banks, which in turn offered the points to their credit card customers as rewards for spending. In 2019, United’s MileagePlus loyalty program sold $3.8 billion worth of miles 2 Brian Sumers, “How is United Airlines’ loyalty program worth $22 billion?,” Skift, June 15, 2020. to third parties, which accounted for 12 percent of the airline’s total revenue for that year. In 2022, American Airlines’ loyalty program brought in $3.1 billion in revenue, and Marriott’s brought in $2.7 billion. 3 Form 10-K, fiscal year ending December 31, 2022, American Airlines Group, Inc.; Form 10-K, fiscal year ending December 31, 2022, Marriott International, Inc. Many loyalty programs have evolved into discrete divisions with their own profit-and-loss ledgers.

Along the way, however, some travel players have shifted their focus away from the original purpose of these programs. As loyalty programs have become powerful bottom-line enhancers, companies have sometimes been tempted to view them first and foremost as revenue generators instead of tools to sway customers’ behavior or to improve customers’ experiences . The postpandemic resurgence of travel demand has also pressured companies to shore up their loyalty programs’ viability by devaluing members’ points and miles and enacting rule changes that have at times caused customer frustration. At the same time, innovative loyalty programs in other industries are raising the bar, opening customers’ eyes to the value that loyalty programs can offer.

As a result of these factors, travel loyalty program members have become increasingly disloyal. For some customers, reaching the top tier of a loyalty program is still almost a facet of their personal identities—“Just a couple of more flights, and I’ll reach elite status!” But many loyalty program members now seem more inclined to play the field. The warm feelings at the heart of loyalty, which lead travelers to show allegiance to a brand and trust that their faithful behavior will be noticed, seem to fade when brands let their focus drift away from rewarding their most valuable and consistent customers.

Loyalty is about more than a program, a department, or a tangible redemption offer.

Loyalty is about more than a program, a department, or a tangible redemption offer. True loyalty is won through a genuine desire to forge bonds with customers and thereby maximize each customer’s lifetime value to the brand. Travel brands, therefore, should consider rethinking and reinventing their loyalty programs in ways that frame loyalty as something more than points and miles. A mindset shift, coupled with three practical actions, could help restore the luster of loyalty programs while bringing straying customers back into the fold.

A mindset shift, coupled with three actions, could restore the luster of loyalty programs while bringing customers back into the fold.

How we got here: Disruption, devaluation, and dissatisfaction

When travel came to a halt as a result of the COVID-19 pandemic, many travel brands—hoping to keep customers happy—“froze” the loyalty program status levels of members who might have otherwise lost perks due to a lack of travel activity. When travel spending was slow to resume, brands changed their program rules to make status tiers significantly easier to reach and maintain. These moves made sense in the face of an unprecedented disruption, with far fewer miles and points being redeemed.

But as travel recovered, loyalty programs became burdened by increased redemptions and overpopulated high-status tiers (evidenced, for example, by the lines outside the doors of airport lounges). Some major travel brands have responded by adjusting loyalty program rules. They’ve ended the status extensions that were granted during the pandemic, and they’ve devalued points and miles—raising the bar to redeem them for free flights and rooms.

All these changes have, understandably, been made with an eye toward programs’ profit-and-loss statements. But collectively, they’ve resulted in widespread customer dissatisfaction. Program members have chafed at having their points devalued and benefits clawed back. Meanwhile, successful loyalty programs in other sectors have opened customers’ eyes to other types of value that these programs can provide, such as better customer experiences, richer communities, more tailored personalization, and exclusive access to events or offers.

Loyalty surveys conducted by McKinsey in 2021 4 The 2021 loyalty survey of roughly 10,000 American consumers covered multiple sectors (including airlines, hotels, cruise lines, banks, retail, grocery, and others). and 2023 5 The 2023 loyalty survey of 3,200 American travelers covered the airline, lodging, and cruise sectors. revealed a steep decline in the likelihood that a customer would recommend airline, hotel, and cruise line loyalty programs to a friend or colleague—even though the likelihood that customers would recommend the airline, hotel, and cruise line brands remained relatively steady (Exhibit 1).

A focus on a loyalty program’s bottom line can distract from its higher purpose

A travel loyalty program might be able—at least temporarily—to disappoint its members while inflicting minimal damage on its company’s earnings. This is because so much of a modern travel loyalty program’s importance comes from B2B sales of batched points or miles. The programs’ most relevant customers in terms of generating revenue are credit card companies, not individual travelers. And these B2B deals generally involve long-term contracts that guarantee sales years in advance. A travel brand can unilaterally issue more loyalty program points to sell to third parties at any time, as well as raise the redemption levels for flights or rooms if margins become undesirable.

Meanwhile, airline travelers have fewer options than they did in the past. Consolidation of major airline brands means it’s harder for frequent fliers to abandon one airline and its loyalty program for another without losing access to convenient flight routes or departure times. And customers who have already banked a large number of miles or points with one airline or hotel program can feel locked in.

For all these reasons, loyalty programs appear to be in a position of strength. But a narrowed emphasis on revenue and costs could lead to brands’ losing focus of the big picture. Travel loyalty programs were originally conceived as a clever way to influence customer behavior—and encourage customer loyalty. But it’s not clear if the programs are currently fulfilling either mandate as successfully as they could.

McKinsey research reveals that airline loyalty programs’ ability to change fliers’ behavior declined between 2017 and 2021, and again between 2021 and 2023 (Exhibit 2). During those time frames, it became less likely that a customer who was a member of a given airline loyalty program would report that they chose the associated airline over other options or increased the frequency of their spending with that airline. If this trend continues, it could eventually create a vicious cycle: airlines would cut loyalty program budgets if they deemed them ineffective at influencing customer behavior, lower budgets would lead to reduced program benefits, and less attractive benefits would result in customers perceiving program participation as having less value.

McKinsey research further shows that loyalty program members these days aren’t especially loyal (Exhibit 3). Hotel, cruise, and airline travelers are typically members of about three or four different loyalty programs within a given sector, our analysis finds. On a yearly basis, they consider traveling with about three different brands within that sector and ultimately transact with more than one of them. Travelers don’t even consolidate their spending with the brand they say they “prefer” within a sector: the median share of the customer’s wallet for preferred brands is only about 50 percent in lodging, 60 percent in cruise lines, and 60 percent in airlines—with the remainder of the customer’s spending spread around to other players within the same sector.

Evidence suggests this trend will persist. According to our 2023 survey on travel loyalty, younger generations are more likely to consider and transact with multiple travel players. Gen Zers and millennials consider about 1.7 times as many brands as do baby boomers and the Silent Generation and transact with about 1.3 times as many brands.

All this comes at a time when the travel loyalty market is becoming more competitive. Consumer banks, which were once content to offer cobranded credit cards featuring travel brands as the marquee partner, are now launching their own self-branded travel awards ecosystems and booking platforms. Travelers might wonder why they should put all their loyalty points in one basket with a single airline or hotel brand when a consumer bank might offer more flexible rewards redemption and possibly a better user experience. (It’s worth noting that our research suggests the likelihood that a customer would recommend some of the major consumer banks with travel loyalty initiatives to a friend or colleague is far higher than the likelihood that a customer would recommend a cruise line, lodging brand, or airline.)

How to reshape loyalty for a new travel landscape

Our research finds that experience —far more than tangible, “earn and burn” benefits—is what wins customers’ loyalty. Experiential factors, including “offering an experience worth paying more for” and “feeling taken care of,” have become more important over time and now account for three of the top five (out of more than 40) drivers of loyalty to cruise lines, hotels, and airlines. For hotels, experience has four times more impact than tangible benefits on purchase frequency, while for airlines, experience is more than twice as likely to influence frequency. Positive past experiences are the biggest factor in customers’ desire to travel more with a company in the future.

The following three steps could help travel brands adjust to this changing landscape and engender loyalty that goes beyond a mere quest for redemptions and perks.

Put experience at the core of loyalty programs

When our 2023 survey asked American respondents which company they’re most loyal to, Amazon received more votes than the top six travel players combined—despite the absence of any traditional, points-based loyalty program. How does Amazon win loyalty? By providing a frictionless experience.

How can travel brands learn from this and win customers’ love even when points and miles are worth less? By offering distinctive, satisfying experiences: making customers feel delighted is the key to their hearts, but McKinsey’s 2023 loyalty survey showed that only 20 percent of travelers were delighted by a recent travel experience.

Companies should strive to design loyalty programs around experiential benefits that make travelers feel special. This can be win–win, such as when Delta offered free in-flight Wi-Fi to loyalty members, which led to a better experience for the members while also boosting enrollment in Delta’s loyalty program. In retail, some programs bring together engaged communities of like-minded brand loyalists. Advance notice or exclusive access to offers can send loyalty members a signal that the brand considers them VIPs.

Brands should seamlessly integrate customer experiences between desktop, mobile, and physical locations—meaning that frontline workers have an important role to play. Proper execution of customer service is vital for getting experiences right, so companies should try to keep frontline workers top of mind. Workers should be given the proper training and tools to satisfy customers, and the effectiveness of this training should be measured.

When it comes to mitigating, or avoiding, a negative customer experience, saying “sorry” can go a very long way. Companies should proactively engage customers after service shortfalls, as a service challenge can actually lead to an increase in customer satisfaction if handled well. The form an apology takes might be made commensurate with a customer’s status level in the brand’s loyalty program, and any recompense can be informed by a predictive analysis of its impact —considering factors such as the magnitude of the lapse and the nature of the customer’s other recent interactions with the brand.

(Finally) use data to offer personalization to members

Travel brands have long had access to reams of customer data. Loyalty program members surf on travel companies’ Wi-Fi, sleep in their hotel rooms, fly on their planes, and cruise on their ships. But many travel brands haven’t yet captured the opportunity to use these unique data to offer their members personalization on par with other industries. Likewise, although airlines and hotels have incredibly sophisticated, lightning fast, AI-enabled pricing algorithms, they aren’t consistently harnessing their technology capabilities to power real-time customer personalization.

Nontransactional engagement opportunities, such as the daily interactions fostered by social communities, offer rich troves of data that can be used to hone personalization. In turn, personalization can drive engagement, as seen in Sephora’s Pocket Contour Class initiative, which lets users upload a selfie to get personalized makeup tips.

Personalization can be employed to tailor both experiences and offers for loyalty members. Our research has shown that 78 percent of consumers are more likely to make a repeat purchase when offered a personalized experience . The goal should be to achieve a hypersegmentation of program members that’s so nuanced, it results in a “ segment of one .”

Rethink partnerships to protect self-interests while delivering customer value

Since the 1980s, travel companies have been partnering with banks to launch cobranded credit cards. But several credit card brands now offer their own, self-branded travel rewards ecosystems. These ecosystems sometimes direct bookings to airlines, hotels, and cruise lines—but they can also serve as a way for credit card brands to steal away travelers’ loyalties. These types of transactional partnerships with consumer banks might eventually cease to be a winning play for travel companies. In time, travel loyalty programs could be driven to seek alternate sources of funding.

The best kinds of partnerships build richer connections with consumers while boosting engagement through thoughtful collaborations. Uber’s partnership with Marriott gives users the option to link the brands’ loyalty programs, tapping into two large customer bases and providing more convenient travel experiences.

One promising recent example of collaboration is a travel media network. A hotel company might, for instance, launch a media network that allows third-party brands to place relevant, nonintrusive, personalized advertisements in the hotelier’s owned spaces—websites, hotel lobbies, guest room TVs, and so forth. This type of partnership can offer travelers an elegant, curated experience while providing the travel brand with an alternate monetization route.

In general, travel companies should cultivate collaborations that protect their interests, generate new revenue streams, add personalization and value for loyal customers, and diversify touchpoints with those customers. Early action could prove vital here, as the travel space will not accommodate infinite partner ecosystems.

As other industries raise the bar and consumers grow increasingly dissatisfied with travel loyalty programs as they are designed today, travel industry leaders may need to ask themselves some hard questions. How can points and miles be paired with experiences and excitement? Which partners are truly adding value? What is causing customers to stray, and how can their loyalties be won back?

Travel brands were loyalty innovators. But travel loyalty programs might soon hit an inflection point. Now is the time to innovate and win back customers’ allegiances.

Lidiya Chapple is an associate partner in McKinsey’s Atlanta office, where Jillian Tellez Holub is a partner; Clay Cowan is a partner in the Dallas office; and Ellen Scully is a consultant in the Seattle office.

The authors wish to thank Bella Alfaro, Alex Cosmas, Marilyne Crépeau, Oren Eizenman, Austin Hack, Ryan Mann, Jacob Miller, Afiya Romeo, Matthew Straus, and Jamie Wilkie for their contributions to this article.

This article was edited by Seth Stevenson, a senior editor in the New York office.

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