This study focused on the crucial impact of loyalty programmes offered by hotels as a way to enhance repeat business. The study collected data using self-administered surveys completed by domestic hotel guests in New Zealand (i.e. residents who lived in New Zealand at the time of the study) who had stayed more than once in a particular hotel (as an indication of loyalty) over a three year time frame. Data collected from the survey were analyzed using both regression and structural equation modelling. Results indicated that loyalty programmes have a significant impact before, during and after the service encounter. First, loyalty programmes before the service encounter had a significant positive impact on guest loyalty. Second, loyalty programmes during the service encounter had a significant positive impact on guest satisfaction, and third, loyalty programmes after the service encounter had a significant positive impact on guest affective and continuance commitment. Results from the survey showed that loyalty programmes have a significant impact on guest loyalty, more than staff loyalty and staff interaction, but guest satisfaction and guest affective commitment had more significant impact on guest loyalty than loyalty programmes. The contribution of this study is that it generates an improvement over the current knowledge in the field of services marketing by explaining the significant impact of loyalty programmes on hotel guests in the hotel sector. Loyalty programmes (during the service encounter) have more significant impact on guest satisfaction than staff interaction, and guest appreciate having a hassle-free stay. Also, satisfaction and commitment should be realised before a sense of loyalty develops and it is the sense of loyalty which further drives guests to initiate the decision to become members of a hotel loyalty programme, although the study asserted the significant impact of loyalty programmes on guest loyalty. The second contribution of the study is that it found different guests tend to join hotel loyalty programmes for different reasons. For example, males look for better service, special treatment and collecting points, while females look mainly for price incentives and experiencing a unique stay.