The Interview Issue — Part 2

The Interview Issue — Part 2

Fairmont President’s Club

If there is one hotel guest program in North America that we have often overlooked, it’s the Fairmont Hotels President’s Club. We’re not sure why we have, because once we reviewed the benefits and the value which all members get just by joining, it’s clear we’ve been missing out. Who better to get us updated and talk about the program than Jon Mamela, Director, Relationship Marketing at Fairmont Hotels.

InsideFlyer
How would you best describe what type of loyalty program the President’s Club is?
Jon Mamela
First and foremost, it’s a guest recognition program.

IF
Where does the free, high-speed Internet access come into play?
Jon
It’s a value to our member base. Twenty-five percent are independent business owners and consultants who are bearing that expense. With business travel, it was something that we could provide that would allow incremental value to key corporate clients. We took advantage of a technology platform that stands out from some of our competitors. It was also a way for the bottom-tier members to see immediate value.

IF
Your program isn’t based upon the dollars spent, correct?
Jon
Correct.

IF
You seem to have a fun approach to participation in the program. What was the buzz about your partnership with Porsche?
Jon
It was fantastic. We had a 100-percent gain in enrollment over the same period previous year.

IF
When your members contact you, do they call the program FPC, or do they refer to it as President’s Club? Are they into acronyms?
Jon
Yes, they do. We internally say FPC, and also do so on a few of the discussion boards. Publicly though, when speaking to the press, or in ads, we always refer to it as President’s Club.

IF
At the Vancouver Airport Fairmont, you have a team responsible for getting to know the President’s Club members that frequent there a lot. Is that approach common for all Fairmont brands, or is just that location?
Jon
The end result at the airport is not uncommon. We have it many other properties. It’s not mandated out of the corporate office, but it is something that we highly suggest. Having dedicated teams is definitely a plus.

IF
Is most of your membership Canadian, or is there a really good balance between the States and other parts?
Jon
Sixty percent is from the U.S., even though we have fewer hotels there. We are growing. The rest are about 30 percent Canadian, and 10 percent international.

IF
When you merge a portfolio but keep brands independent, is there a change in loyalty practices, or your strategy going forward? How is that going to play out?
Jon
We are in the midst of it, working with Raffles on discussing what we will do in 2007. For the remainder of ’06, they will continue to operate Raffles capital and we will continue to operate FPC. There is an upside from customer standpoint as well as for the collective group brand having one equivalent program.

IF
Does the conversation with Raffles include Swisshotels?
Jon
No, nothing at this point. Just between Raffles and Fairmont.

IF
Is anybody at Fairmont or from the outside questioning why you don’t have points-based program versus just a recognition program?
Jon
It has come up in the past internally. It’s a cost concern, and we have positioned ourselves differently to be more upscale, but being about recognition and not points-based, and also wanting to build loyalty in getting to know you and not getting you loyal to point currency. If you took the points away, what are you left with? Overall, point programs aren’t the way we want to go either financially or philosophically.

IF
Do you think you are closest to the Ritz Carlton, Four Seasons properties, or with JW Marriott? Where does Fairmont fit in with someone who really hasn’t spent that much time with you?
Jon
We would say we are competing more with JW Marriott, Park Hyatt, maybe some more upscale InterContinental brands. We certainly aspire to the point at which Ritz and Four Seasons run their businesses.

IF
The Fairmont Gold — is that an upgrade benefit when you are a Platinum or Premier member, or is it just to suites?
Jon
We in the past did have upgrade availability to Gold. We have since removed that out of a continuing desire to differentiate that product within the hotels and have the guest pay for that rather than having an upgrade privilege. There can be instances where they do get up to Gold with an upgrade certificate, but it’s the direction we have taken.

IF
Sounds like the strategy has been to have the General Manager running things rather than some cookie-cutter mandate from corporate.
Jon
That’s right. We really put a lot of leeway in the hotels to ensure that they deliver personalized service to the degree they can, and also the recognition of the unique nature of each hotel. We want to make Fairmont a representation of the destination. We do allow on the service side a lot of independent discretion in order to benefit the customer.

IF
The Great Escapes promotion has got to be the most popular benefit for the program, because they are always sold out.
Jon
It’s been a fantastic success for us. We are selling them out in a day; some sell in under an hour. Those who have been on them have been blown away. It’s an outstanding value for our members, unlike anyone else. The experience is very intimate. You get to know your fellow FPC members, and you are taken care of with a small incentive trip. Big win for us; great value.

IF
For your members, it seems like the number-one wish list for technology is the iPod video, but their preferred listening music in the room is classical, and that’s just not fitting.
Jon
It’s a very tech-savvy audience we have, particularly with the independent business owners and consultants. At the same time, the average age is 50 plus. We have connected with Apple before, as well as Sony last year with the PSP, and it worked quite well. We will continue to work with Sony and some others in the future.

Citi

Citibank seems to own many of the most successful credit card loyalty programs in the market: American AAdvantage and Diners Club. But two years ago they might have created one of the industry’s most formiable competitors-the PremierPass card. When used right, it can replace traditional frequent flyer program related credit cards in some of the most traveled wallets out there. For an update, we chatted with Terry O’Neil, Senior Vice President, Travel and Affluent Markets for Citibank.

InsideFlyer
How long has the Thank You Network been a part of the program now?
Terry O’Neil
We launched Citi PremierPass in September of 2004 and it was launched with Thank You. Thank You has always been a part of the Citi PremierPass value proposition.

IF
Merchandise redemption?
Terry
Yes.

IF
Is that picking up more, or has there been a change in the balance between redeeming for air travel versus merchandise through the two years?
Terry
Well, it’s equally balanced. Again, what you have to remember is that PremierPass is relatively new. It was launched in 2004, but is growing very successfully, very aggressively. Before we launched the product, we talked to consumers to find out what they really want in a rewards product. And what we found was that what they really wanted was flexibility. They wanted to be able to redeem for travel on any airline, with no blackout dates, but they also wanted to be able to redeem for merchandise, gift cards, or to create a custom reward for themselves. And Thank You enables us to provide complete flexibility to our card members. I think the main thing we are finding is that as the program grows, we’re seeing a steady build-up in redemptions, which tells us that the program is really resonating with our consumers — they are redeeming and are very engaged with the program.

IF
Do you find that many members move up to the elite card now because it is so much richer than the base card?
Terry
Absolutely. We’re finding a lot of our customers opting for elite once they get into the program. I think the key is that when they start to use the no-fee product, they see how rich the value proposition is, and when they earn points for the miles they or their family fly, they see how rich it is. Since the elite-level products offer them the opportunity to accelerate that by earning one point for every mile they fly, and one point for every dollar they spend, it becomes a very rich value proposition, and they see the value in it. I think the other great thing about the elite program that is really appealing to customers is the companion travel benefit. Essentially what happens is when an elite-level cardmember buys a qualifying ticket, they are entitled to bring a companion with them each time, which I think is a really great benefit of the product and another reason why we are seeing cardmembers upgrade to elite.

IF
I have been talking to cardmembers, and what I have heard is that they are surprised that PremierPass sometimes waives the taxes and fees on awards, which is totally unexpected. They are always asking how you can afford to do this. When you look at other loyalty programs, they tend to be adding fees on. How does that work for Citibank? How can you continue to enrich the program like that?
Terry
With Citi cards in general, we value the relationship we have with the customers, especially with PremierPass being a new product. As successful as it is, it’s our way of saying thank you to those who have adopted the card early.

IF
Do people refer to the Thank You points as TY or do they still call it Thank You?
Terry
From our customers you mean? They refer to it as Thank you.

IF
Looking at the industry, one starts to worry a little bit, As airfares start to creep up a bit, there has to be something on your mind about how you control your award chart. Does Citibank have any concerns about continuing your program through 2006 without any changes?
Terry
For 2006, we do not have any concerns. Our cardmembers can still redeem for roundtrip travel on any airline, without blackout dates or maximum fare restrictions starting at about 25,000 points. We intend to keep that value proposition. I think one other important thing to note is that we’re continually talking to our customers in looking for ways to improve the program, and while I can’t go into great detail at this point, over the next couple of months, I think you’ll see some exciting new options coming forward for consumers so that they’ll have even more opportunities to redeem points.

IF
One of the things about your program that we often get questioned about is flight points versus purchase points. Has that been a challenge for Citibank in educating people how both of those types of points get into the Thank You Network?
Terry
It’s something that consumers understand quite easily. We actually spend a lot of time finding out what consumers are saying about our card, listening to our customer service agents, and they really do understand the relation of flight points to purchase points. I think that the reward value proposition is so rich, and having the ability to earn points for miles you fly and dollars you spend, they understand. We spend a lot of time explaining to customers how the card works from the point of acquisition, all the way through their lifecycle with us, how to get the most value out of the Citi Premier card and how to make it work specifically for them.

IF
One of the most unique things I find in talking to your cardholders is that they do purposefully increase their spending just to bring more flight miles into the network, and that certainly has to work to your advantage.
Terry
Absolutely. We believe, and our card members have confirmed this, that we have developed the best rewards program in the industry, and have provided them with a way to earn points faster, and earn free travel faster than with any other program. By using this card for all of their purchases, it serves as a further accelerator.

IF
It must be difficult in the halls of Citibank when you run into the Citi AAdvantage employees because in its own right that card is one of the most successful loyalty cards of all time. Must be a tough place to earn respect.
Terry
Absolutely. Citi AAdvantage is the most successful, if not the most successful co-branded card in the industry. I think the important point to note here is that we attracted a very different customer base than AAdvantage. Our customers tend to fly and redeem on different airlines. I think the other important thing to note is that both products are growing and doing very, very well. We just celebrated AAdvantage’s 25th anniversary with them, we have a very long-standing relationship, and the products are doing very well in their own right. I think that’s mainly because there’s very minimal overlap in the targeting or customer base. We are appealing to a different customer.

IF
Are customers who love PremierPass generally not travelers, or are they travelers without any loyalty?
Terry
I would say that they are not loyal to a specific airlines. They are travelers, and are motivated by traveling, but they’re not always traveling with the same airline. What’s great about PremierPass is that it’s enabling them to amass those miles in one central bank — they’re not ending up with a lot of different reward buckets with which they can’t redeem for anything. They’re not worried with dealing with multiple accounts, and they can redeem much faster.

IF
Is it fair to say your redemptions are balance out among your airline partners?
Terry
From a redemption perspective, we provide cardmembers with the ability to redeem on any airline, with no blackout dates, or maximum fare restrictions. I would say that it’s fairly broad on the airlines they are choosing.

IF
The industry is going through a lot of consolidation. Does consolidation have any effect upon the product in the enhancement of the PremierPass program?
Terry
What we focus on is how well PremierPass is doing, and really providing a unique benefit to our members. I think the success we are seeing is due to the uniqueness of the value proposition that we offer. We are the only product in the industry that enables you to earn points for the miles you fly on any airline. That’s very powerful.

IF
Do you know off-hand the most popular merchandise people redeem for?
Terry
Gift certificates.

AeroMexico

Do all the best frequent flyer programs originate from the U.S.? Many frequent flyers from around the globe might argue they don’t. But when it comes to who’s got the best frequent flyer program among the nations that share a border, Mexico just might present a strong case. As AeroMexico’s Club Premier program undergoes several upgrades this year, we stopped by and had a chat with Rodrigo Cobo, Vice President of Marketing Products at AeroMexico. What we heard is “adding more value back in.”

InsideFlyer
So where is Club Premier these days?
Rodrigo Cobo
What we are trying to do is to reinvent ourselves with a new marketing strategy. We have been in the market for quite a long time now. We are really trying to take into consideration our customers to see what they really want and need, and requirements. We would like to provide a complete value-added frequent flyer program. We would also like to promote loyalty, too.

IF
In regards to added value, did you look at the way Club Premier was already put together and say we need to change? Did you hear from customers you needed to change?
Rodrigo
No, the change came from the industry rather than from the competition. We are the market leaders, we focus very strongly on that. But as leaders, you tend to lose sight of what’s going on. Internally, we took a critical look and asked ourselves what we needed to do to add value for our customers, to really become a representation of the best frequent flyer program, first in Latin America, then in the world. We are very ambitious in that way.

IF
Who do you see as you biggest competition with AeroMexico and Club Premier? Is it the U.S. carriers, or is it the others in Latin America?
Rodrigo
We don’t take actions driven by competition; we are not followers. We try to innovate and create different things within AeroMexico, and although we have a very close benchmark with the competition, we try not to be followers. This year has been very interesting. We have eight new local carriers in Mexico, which makes the whole industry change. We are trying to take that into consideration as well. We have strong competition with American and Continental, but again, we are not a competition-driven company — we are the leaders to innovate so the others will copy off of us.

IF
How has SkyTeam been able to make Club Premier more valuable to members? Have you seen that as a real big plus?
Rodrigo
Of course. We like our relationship with SkyTeam especially since our new CEO came into position. It has been a very direct strategy in the company to strengthen our relationship and learn from this alliance. We have received several customer satisfaction surveys, all the benchmarks that SkyTeam does with airlines. We tend to take into consideration what our other partners are doing in the countries, and we do a lot of benchmarking for those success stories.

IF
Have credit cards become as important of a partner to Club Premier as they have been with some of the other North American programs?
Rodrigo
Yes, absolutely. Also, with this partnership, we are trying to re-invent it. When you talk about income, credit card partnerships are very successful, especially with a company like American Express. With American Express, for the past year, we have been working to re-invent the credit card portion of the program to again gain added value. To do that, we are giving a lot of non-traditional benefits for credit card partnerships. For example, one of the new benefits with American Express and AeroMexcio has been the auctions, in which members can bid their points or miles for items in the auction.

IF
So, what’s been popular within the auctions? What are some of the unique things that members are asking for, and the things that have been popular?
Rodrigo
We are trying to give unique experiences that are very hard to get and are not affordable otherwise. We tailor-make the program, then go out and auction it. We are really excited about it and are looking to begin on July 20th.

IF
With Corporate Club Premier being so different, how is that working for you?
Rodrigo
The club has been very successful. We have a management team to polish the program. We are doing a complete facelift, listening to the needs of the members, giving better benefits.

IF
Have you ever looked at adding an additional elite level to Club Premier?
Rodrigo
We try to focus on the lifespan the passengers have with us. So in the sense of lifespan we are redefining two or three new programs that are the most unique. In the sense of the three-level tiers, we thought about adding another tier, but decided not to launch the new tier, but to add additional benefits to the Gold and Platinum tiers. We want to strengthen the existing tiers and reward the loyalty.

IF
You mentioned a frequent flyer program for teens, and frequent flyer program for kids, a frequent flyer program for university students, and a corporate program. They are all related to Club Premier?
Rodrigo
They are all within Club Premier. They have different names, but within the Club Premier umbrella. They are tiers, they are programs. Each has very interesting partners.

IF
The miles members fly within those programs are still are part of Club Premier package?
Rodrigo
Exactly.

IF
Are other airlines doing things or are there trends out there that you don’t feel fit or belong in the industry?
Rodrigo
I’m a positive guy, so I tend to talk more to that. There are some airlines where we have to recognize what they are doing, but again, we are not followers. There is always room to learn and grow.

IF
Does the new leadership at AeroMexcio see the importance of Club Premier?
Rodrigo
Loyalty programs are expensive to run, and when costs of things on the outside rise, it can impact the development moving forward. That is why we are trying to re-invent the program.

IF
Is award availability an issue with AeroMexico?
Rodrigo
Availability is an issue with everybody. Our relationship with the revenue department is a great marriage, and that is essential in having a resolution to this problem.

Next month in InsideFlyer, we revisit the topic of award redemption and a comparison of hotel programs in light of a changing market. Members are moving down the type of hotel they choose as hotel rates continue to climb.

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