American Airlines was the first company in the airline industry to launch a frequent-guest program in 1981 to reward travelers for their loyalty to the brand. In the lodging industry, InterContinental took the lead and became the first hotel company to offer a loyalty program (Dekay et al., 2009). In today’s business world, most hotels have established their own loyalty program, which has gradually become a provision that hotel guests would expect. In 2015, the loyalty programs of major hotel groups had more than 300 million members (Peltier, 2016). While the impressive number shows the popularity or attractiveness of loyalty programs, the real active members are far fewer than this number (Peltier, 2016). For instance, La Quinta Returns program has 11 million members, yet only 25.5 per cent were active members in 2015 (Peltier, 2016). The surprising contradiction between the popularity of loyalty programs and the lagging number of active members inspired the researchers of the present study to ask the research question of whether it is operationally and financially beneficial for hotel companies to invest in loyalty programs. The benefits for hotels to offer loyalty programs to their guests can be manifested in profitability, share of wallet, willingness to pay more, word-of-mouth (WOM) and electronic WOM (Kandampully et al., 2015). First, through initiating loyalty programs, companies can directly gain profits from customer repurchase behavior (Bolton et al., 2000; Keh and Lee, 2006). Moreover, using loyalty programs to manage current customers can reduce the cost needed to attract new customers, thereby indirectly increasing the profitability. Second, the term share of wallet describes how customers choose to allocate their monetary resources among different products of different brands (Evanschitzky et al., 2012). It is important for companies to understand how their customers make purchase decisions among various products or services. Loyal customers tend to stay with one company and build emotional commitment with it (Evanschitzky et al., 2012). Closely related to sharing of wallet is the third benefit of loyalty program – willingness to pay premium. Once loyalty is built with a company, loyal customers are less sensitive to the premium price charged by the company and are more likely to perceive greater values from the products or services provided by this company (Dowling and Uncles, 1997; Reichheld and Sasser, 1990). In addition, customer loyalty has an impact on customer behavior; in that, loyal customers tend to actively spread positive WOM, whether in person or through electronic media, thus playing an important role of brand ambassadors (Kandampully et al., 2015; Jeon and Jeong, 2017).