We recently saw how effective rewards sites could be for hotels, but is it still working for the airlines, whose frequent flier programs have been rewarding repeat customers for more than two and a half decades?

These programs are still going strong - an effective airline rewards program and accompanying online rewards site can greatly diminish cross-shopping and lost-bookings. The program with the greatest online presence, Delta’s SkyMiles, attracts nearly a million unique visitors per month. Delta.com’s rewards penetration rate – the percent of site traffic clicking on rewards content is the highest among the competitive set. However, when it comes to loyalty, Northwest’s World Perks and Southwest’s Rapid Rewards are the strongest programs.

Rewards penetration rate measures how effectively a supplier site engages visitors into rewards content. Behind SkyMiles’ 20% penetration rate, NWA, Continental and US Airways drive more than 10% of their homepage traffic to rewards pages. Other competitors, Southwest, American, and United all lag the competitive average in this regard.

NWA and Southwest are the most effective at creating loyalty amongst site visitors clicking on rewards content. NWA captured 79% of the bookings of World Perks visitors in December 2008, while Southwest held 77% of the transactions of its rewards traffic. The laggard in this metric is Delta.com, losing 71% of the bookings of its rewards audience in December.

An effective frequent flier platform is imperative to an airline’s brand loyalty. Two critical success factors for programs are driving online platform usage and loyalty. Newly married competitors Delta and NWA appear to have all the right ingredients for an effective combined offering. Both sites effectively drive traffic to their respective rewards pages. Delta, however, lags behind NWA at creating loyalty amongst this audience. By folding both companies’ routes, programs, and other perks together, the combined entity has an opportunity to resonate with fliers like never before.

Judging by how often I’m asked to join a rewards program when booking any sort of trip, it’s clear that their popularity is on the rise in the travel industry. But just how effective are they?

Hotel Rewards websites, such as Marriott Rewards or IHG’s Priority Club, can attract hundreds of thousands of visitors each month. The largest hotel supplier reward site, Marriott Rewards, engages 19% of the total traffic to the overall Marriott.com website. For hotel chains, growing their rewards sites is critical to improving online channel effectiveness. Travelers who use rewards sites are on average 40% more loyal than non-users.

Most major programs have grown their online traffic in the past year, from November 2007 through November 2008. On average, each site grew by 21% over the past 13 months. The only site that did not manage a traffic increase was Choice Privileges, which declined 4% in users compared to the prior year.

Share of Wallet – the percent of hotel bookings that a given hotel brand captures among its customers or prospects – is a key gauge for measuring loyalty and rewards site performance. Marriott.com captured 68% of the bookings among members who visited Marriott Rewards in November 2008, the highest Share of Wallet among all competitors. On average, rewards sites were able to capture 50% of the bookings of their members.

With difficult market conditions surrounding the travel industry, increasing loyalty among online prospects is integral to hotel supplier’s 2009 success. With consumers more likely to cross-shop and price check than ever before, the incentives and benefits of a rewards platform will often be the deciding factor in the online travel purchase process. Rewards program managers must ensure that their online portals are best in class in order to drive the necessary usage and loyalty.

TripAdvisor.com, the largest travel community on the web and one of the hottest sites within the travel category, has shown impressive growth after a 2008 site redesign. Like most travel-related sites, TripAdvisor.com experienced a lull in activity in the winter months of 2007. However, since January 2008 an average of 6.6 million US unique visitors have viewed the pages of TripAdvisor. In May 2008 TripAdvisor’s US audience was 7 million unique visitors, 34% higher than the level recorded in May 2007.

Many travelers use TripAdvisor for its consumer-generated reviews in order to get an unbiased feel for a hotel or vacation spot. As such, it is important that a consistent flow of reviews are posted so that content remains relevant and up to date. Over the past year an average of 1% of visitors added a review, a significant volume for such a large site.

TripAdvisor.com is a growing site that has managed to harness the valuable opinions of its users. As online travel researchers become more and more savvy, utilizing the expertise and feedback from peers becomes more and more attractive. As such, TripAdvisor and other consumer-generated review sites are poised for continued success.

WAYN.com (Where Are You Now?), a UK-based travel social networking site has recently made successful inroads within the US online population. In hopes of increasing member-engagement WAYN announced WAYN Desktop in September, an application designed to help users more easily upload photos and manage their accounts. Below is a synopsis of the popularity of the varying content areas of WAYN.com, as well as an early-stage look at download interest of WAYN Desktop.

In December, over 550,000 US web browsers visited WAYN.com, up from 330,000 one year ago. Over the past 6 months several pages within the site have emerged as the most popular content areas. The Mail tab is the most visited section of the site with 215,000 US WAYN users landing on it in December. Not surprisingly, the Web 2.0 sections such as Profile, Friends, and Photos have also increased audience volumes over the second part of 2007.

Thus far, the recently announced WAYN desktop application has shown minimal attraction among US visitors to WAYN.com. In December, only 1,130 WAYN members explored the download page of the newly released tool, continuing a downward trend in interest for the new tool.

All in all, WAYN has managed to gain healthy momentum among US travelers. Although the recently released WAYN Desktop application failed to catch on, the site’s core competency, its networking platform, has proven to be a hit with users. Congrats to WAYN.com!

If you have had a chance to read the Q3 Earnings Reports for both Netflix and Blockbuster you undoubtedly noted the glaring difference in strategies between the two competitors. While Netflix continues to concentrate on growing subscriptions, Blockbuster has decided to less narrowly focus on the online channel and continue to use the brick-and-mortar stores as its competitive advantage. Both camps, however, plan to further invest in the new digital delivery medium.

To summarize the two reports, below is a CEO quote from each company’s Q3 Earnings Transcript.

“At a high level, our strategy is to build a very large DVD rental subscriber base and to bundle in the ability to watch those movies online.” - Reed Hastings - Netflix, Inc. - Chairman, CEO

“…our pursuit of by-mail subscribers was a bit overzealous. Clearly our spending on that one channel was exceeding our returns.” - James Keyes - Blockbuster Inc. - CEO

Compete data reflects the combating strategies of the two DVD rental giants. Since June 2007, site traffic of Netflix.com and Blockbuster.com has further divided as Blockbuster reels in its online channel marketing spend. In October, Netflix hosted four times the site traffic of Blockbuster.

Despite differing strategic blueprints, both Netflix and Blockbuster agree on the importance of the up-and-coming distribution channel; digital delivery. Netflix rolled out Watch Instantly (formerly Watch Now) in early 2007 and has managed to garner a significant volume of early adopters. Although download interest peaked in August of this year, actual usage of the product continues to climb month-over-month. There are currently 450,000 Watch Instantly users each month in the US.

Following suit, Blockbuster has announced plans to integrate the recently acquired movielink.com into Blockbuster.com as early as Q1 2008.

If DVD rental market share were a war, there have been several clear battles fought thus far. The first, being the brick-and-mortar battle, was won by Blockbuster. Netflix came on the scene and quickly declared victory in the second battle, online subscriptions, when Blockbuster waved the white flag in their Q3 Earnings Report. An imminent third battle is on the horizon, and the platform is digital delivery. Thus far Netflix has had success in the space but it is far too early to name a victor as Blockbuster’s counter attack has not yet been rolled out.

The News:
In June, TripAdvisor introduced Traveler Network, a social-networking platform that allows users to connect with fellow travelers and share their experiences. Members exchange pictures and videos from previous trips and offer advice on where to go and what to see for future adventures.

Compete Analysis:
In its early stages, Traveler Network has quickly caught on with over 42,000 US travelers signing up in July alone. Showing momentum, the July sign-up volume was 65% higher than that of June. Even with strong early adoption, June and July’s combined sign-ups represent just 1% of TripAdvisor’s 6.8 million monthly visitors.

Traveler Network is growing its user base largely through referrals from early adopting members. In July, over 30,000 Traveler Network members used the site’s “Invite Friends” capability, representing the biggest single source of new memberships. Referrals from current members suggests that the content is compelling enough to grow a significantly larger user base.

Takeaways:
Traveler Network is helping to transform TripAdvisor into a next-generation travel portal. The integration of Web 2.0 functionality is attracting new members and further engaging existing TripAdvisor users. Over 42,000 new members enrolled in July, the first full month of existence. Growing referrals from current users is proof that enthusiasts enjoy the site enough to recommend it to friends, family, and colleagues. As with any social-network, the breadth of content relies upon its members. With a rapidly growing user-base, Traveler Network, still in its infant stage, is poised for success.