Hotel Chain A has a Loyalty program and is in every other way identical to Hotel Chain B, which does not.

If both Hotel Chains do the exact same business (lets say 10,000 rooms a year each), then the expense that Hotel Chain 'A' incurs is one that Hotel Chain 'B' does not, and B is more profitable.

If, instead, the customers value the Loyalty program and choose it 50% of the time more often than Chain 'B', then Hotel Chain A fills 15,000 rooms and Hotel Chain B fills 5,000 rooms.

If the revenue from 5,000 rooms is greater than the cost of the program, then profit is being made.

I don't know the exact numbers, these are given for illustration purposes. The point is are you comparing the cost of a program to current operations with unfilled rooms, or are you comparing the cost to the value of the extra filled rooms, assuming that the program becomes a facet of choice?

Example: On a recent trip we specifically stayed at LA QUINTA hotels, over other choices, because there was a promotion on which let us translate points directly to our AMTRAK rewards program. Every other hotel chain in the three places we stayed didn't even get looked at because of the value we got from that promotion.

Had LA QUINTA not been having the cross promotion with AMTRAK, we would have defaulted back to a hotel chain we had a relationship with, again overlooking every other property in favor of those we had a previous, positive, rewarded relationship with.

Should a chain of only five hotels have a loyalty program? Probably not, unless you are competing with similar properties in the area and it becomes a discerning element in the choice of where to say, realizing that PRICE very often seems to be the primary choice element, and that only once similarly priced properties are being compared do the second tier discriminators, such as loyalty programs or location, come into play.