Jun102008

Inside Flyer’s Hilton HHonors Triple Dip

Hilton Auckland, New Zealand

Stephen Colbert might ask, “Hilton HHonors hotel loyalty program – Great or Greatest?
I have loads of respect for the crew at Inside Flyer. Without Randy Petersen and FlyerTalk, I’d probably still be a fully employed school teacher taking lots of vacations and getting less value out of my travel expenditures . But now it is time for this loyalty program graduate to challenge my teachers at the House of Miles. I question some of the calculations from Inside Flyer’s recently published Hotel Loyalty Program Comparison Tables.

Back in February when I was in Colorado for a few days without internet access, I made a comparative analysis of earnings for a Hilton HHonors member who chooses each of the different earning options of Points & Points, Points and Variable Miles, or Points and Fixed Miles. I don’t think I ever published my findings on my blog.

I am revisiting this topic in conjunction with the Inside Flyer Hotel loyalty program comparison chart published in the June 2008 issue that I mentioned in last Friday’s blog post.

I noticed errors in the Hilton HHonors portion of the report and considering the findings of Inside Flyer’s comparison that Hilton provides incredible value with their Double Dip program, I feel I need to report what I see as errors in the published charts of the Inside Flyer report.

Since the charts simply show numerical data without any reference to how the numbers were calculated, I have undertaken the exercise of taking a closer look at the Hilton HHonors data and independently constructing the numerical data to maximize points and miles from the given variables of spending per year and the number of hotel nights used for the Inside Flyer report.

Without more data I can’t determine exactly how InsideFlyer came up with some of their numbers, but I do see some patterns that appear to have been due to incorrectly calculating HHonors “Double Dip” points earnings.

These are the numbers for HHonors points and miles as I calculated them:
Low-spending traveler: 19 nights and $2,052 in points-eligible hotel charges
HHonors Points and Points = 35,910 HHonors Points; InsideFlyer calculated 38,475 points.
HHonors Points and Fixed Miles = 25,650 HHonors Points and 9,500 frequent flyer miles (assuming 19 stays and 500 miles earned per HHonors stay).
Total Miles if Points and Fixed Miles and all HHonors points exchanged for miles =
11,200 US Airways; or
11,500 if Alaska, Continental, Delta, Northwest, or United; or
12,500 miles if American, Midwest, or Hawaiian. Most other airlines will be 11,500 or 12,500 miles total.
Inside Flyer calculated 14,000 miles earned.
Moderate-spending traveler: 38 nights and $5,928 in points-eligible hotel charges
HHonors Points and Points = Loyalty Traveler calculates 118,560 HHonors Points; InsideFlyer calculated 133,380 points.
HHonors Points and Fixed Miles = 88,920 HHonors Points and 19,000 frequent flyer miles (assuming 38 stays and 500 miles earned per HHonors stay).
Total Miles if Points and Miles and all HHonors points exchanged for miles =
25,800 US Airways; or
27,000 if Alaska, Continental, Delta, Northwest, or United; or
31,000 miles if American, Midwest, or Hawaiian.
Most other airlines will be 27,000 or 31,000 miles total.
Inside Flyer calculated 38,500 miles earned.
High-spending traveler: 76 nights and $19,532 in points-eligible hotel charges

HHonors Points and Points = Loyalty Traveler calculates 390,640 HHonors Points; InsideFlyer originally calculated 439,470 points, but the figure was changed sometime between Friday and today to 390,640.
(Did someone act on my email to InsideFlyer? But only that one figure was changed and the accompanying narrative was not altered along with the points.)
HHonors Points and Fixed Miles = 292,980 HHonors Points and 38,000 frequent flyer miles (assuming 76 stays and 500 miles earned per HHonors stay).

Total Miles if Points and Fixed Miles and all HHonors points exchanged for miles =

62,650 US Airways miles; or
67,000 miles if Alaska, Continental, Delta, Northwest, or United; or
81,500 miles if American, Midwest, or Hawaiian.
Most other airlines will be 67,000 or 81,500 miles total.
Inside Flyer calculated 68,500 miles earned.
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The Double Dip Issue
HHonors is the primary program for this analysis since the Double Dip earning preferences appeared to be the root of the major errors I see in the charts. The problem in calculations results from incorrectly applying HHonors elite member bonuses to the Points and Points Double Dip earnings preference.

The Inside Flyer tables base the hotel points and miles earnings on the frequent guest member holding an elite status level from the beginning of the year. This means that the scenario assumes a HHonors frequent guest starts the year with an elite level membership (say Gold or Diamond) and maintains that level throughout the year with regard to calculating points earned.

The accumulated earnings of points and miles will be lower if the member starts hotel stays with no or lower status and attains a higher status during the course of the year.
HHonors “Double Dip”

HHonors allows members to select their preference for earning HHonors points or airline miles and there are three ways for a member to collect HHonors points and miles.

1. Points and Points
This option provides 10 HHonors base points per $1 and a bonus of 5 points/$1 for a total of 15 points per dollar.
HHonors points earned are 15 points/$1.00 US in eligible hotel spending.

2. HHonors and Variable Miles (Earn 1 mile per $1 US) or

3. HHonors Points and Fixed Miles (Earn 500 miles per stay, except 100 miles per stay at Hampton Inn and Homewood Suites hotel brands)

HHonors Gold Elite

HHonors Gold elite membership is earned after 16 stays or 36 nights. Hotel stays as a Gold elite member receive the benefit of a 25% bonus on base points earned.

BY THE NUMBERS
HHonors Points Earned per stay for the Low-Spending Traveler using a Points and Points preference for “Double Dip”

1,080 HHonors base points are earned for a $108 stay.
Points and Points bonus on base points: 50% = 540 HHonors points
Gold elite bonus 25% on base points only: 1,080 x 0.25 = 270 HHonors points
HHonors points earned per $108 stay as Gold elite = 1,890 HHonors points

Inside Flyer makes the assumption the member is starting at an elite level equivalent to 19 stays which is HHonors Gold.
The calculation for HHonors points earned over the course of a year simply becomes 19 nights x 1,890 points/night = 35,910 HHonors points.
1,890 per stay x 19 stays = 35,910 HHonors points (Loyalty traveler calculation)

Inside Flyer shows 38,475 HHonors points earned.

I believe Inside Flyer calculated per night earnings in this way:
$108/night
10 base points per $1 = 1,080 HHonors base points
Points and Points option = 540 HHonors points
Points and Points earning = 1,620 HHonors points
1,620 points x 25% Gold elite bonus = 405 points (incorrect calculation to apply the 25% elite bonus to the Points and Points 50% bonus on base points; the 25% elite bonus should be 270 points.)
2,025 HHonors points earned per $108 night hotel stay

2,025 HHonors points x 19 nights = 38,475 HHonors points.

The difference in my numbers and the number in the Inside Flyer chart is the calculation error of applying the HHonors elite bonus to the total HHonors Points and Points earnings. The HHonors Gold elite 25% bonus points applies only to the base points portion of the Points and Points Double Dip selection for HHonors earnings.

Double Dip with HHonors Points and Miles
Inside Flyer shows the low-spend frequent guest with 19 nights could have earned 14,000 frequent flyer miles.

How was this calculated?

Hilton HHonors has two selections for hotel stay earnings with the option of earning airline miles in addition to HHonors points.

HHonors and Variable Miles (Earn 1 mile per $1 US) or
HHonors Points and Fixed Miles (Earn 500 miles per stay, except 100 miles per stay at Hampton Inn and Homewood Suites hotel brands)

HHonors and Variable Miles provide the HHonors member with 1 airline mile per $1 spent in eligible hotel charges. Inside Flyer uses $108 as the average daily rate (room and incidental charges like food). The HHonors member selecting Variable miles will only earn 108 miles per stay.

The other Double Dip selection option for miles is HHonors points and Fixed Miles which offers 500 miles per stay, except for 100 miles per stay at the HHonors brands of Hampton Inn and Homewood Suites.

Assume 19 one-night stays in the low-spend traveler profile and total annual spending $2,052.
HHonors and Variable Miles = 2,052 frequent flyer miles
HHonors Points and Fixed Miles with 19 stays = 9,500 frequent flyer miles.

So how does Inside Flyer come up with 14,000 miles earned?

Remember the selection is HHonors Points and Miles and the HHonors Gold elite frequent guest still earns the base points for $2,052 in spending and elite bonus points.

$2,052 x 10 base points/$1 US = 20,520 points.
25% HHonors Gold Elite bonus = 5,130 points.

The HHonors low-spending frequent guest earns 25,650 HHonors points in addition to the 9,500 frequent flyer miles when selecting HHonors Points and Miles.

This is enough HHonors points for a free night Category 3 hotel reward. HHonors PointStretcher reward for a Category 6 hotel is only 24,000 points and can easily be a $400 value when used for a free hotel night.

So, how did Inside Flyer come up wth 14,000 miles earned?

A feature of HHonors is the ability to exchange HHonors points into nearly 40 different airline frequent flyer miles currencies. 8 airlines provide an exchange rate of 10,000 HHonors points convert into 1,500 airline miles. American Airlines is in this category.

23 of the 37 airline frequent flyer programs participating in HHonors points exchange for miles use the rate of 10,000 HHonors points = 1,000 miles. Airlines in this group include most of the major US carriers and large international airlines: Alaska, British Airways, Continental, Delta, Flying Blue (KLM/Air France), Lufthansa (and Miles and More airlines), Northwest, and United.
There are 5 airlines with individual exchange rates. 10,000 HHonors points exchanges into just 850 US Airways miles.

HHonors points to miles exchanges must be made in 10,000 point blocks. 20,000 points earned by the low-spending HHonors Gold elite member can be converted into 1,700 US Airways miles. Add this to the 9,500 miles earned from 19 stays with a Double Dip preference of HHonors Points and Fixed Miles the member ends up with 11,200 US Airways Dividend miles. A bit short of the 14,000 Inside Flyer shows.

The low-spend traveler would earn 2,000 frequent flyer miles from the 20,000 HHonors points earned and exchanged into airline miles with AS, CO, DL, NW, or UA.
The low-spend traveler earns 11,500 miles total with the HHonors Points and Miles earnings selection and exchanging earned HHonors points into miles.

American Airlines, Hawaiian, and Midwest have the best exchange rate for US carriers at 1,500 miles awarded for 10,000 HHonors points. Virgin Atlantic, South African, Mexicana, Gulf Air, and Qantas also offer this exchange rate.

A preference for American AAdvantage miles will provide the HHonors Gold member having 19 stays with 3,000 miles from HHonors points exchange and 9,500 miles from stays for a total of 12,500 American Airlines AAdvantage miles. This is still shy of the 14,000 reported by Inside Flyer in their table.

How did Inside Flyer calculate the numbers to reach 14,000 miles earned?
Here is my guess.

It goes back to the problem of applying the HHonors Gold elite bonus points to the total Points and Points earnings.

There are only 3 options for earnings with Hilton HHonors. Inside Flyer stated the calculations are based on a person selecting Points and Points earnings. It looks to me like the HHonors miles earned was calculated by using 500 miles earned per stay x 19 stays = 9,500 miles earned. Then, the points earned were converted to miles on the basis of 38,475 points earned.

HHonors exchanges must be done in blocks of 10,000 HHonors points. In the case of earning 38,475 points, the HHonors member can exchange 30,000 points for airline miles. If the selection is American Airlines the member will receive 9,500 AAdvantage miles for 19 stays and can also earn another 4,500 AAdvantage miles after an exchange of 30,000 HHonors points. This adds up to 14,000 miles as shown in Inside Flyer’s table.

14,000 total miles earned looks to be an earning preference of “Points and Points and Miles.” Double Dip with HHonors doesn’t work like that. Inside Flyer appears to have used the HHonors Triple Dip in their table calculations.

HHonors would be incredible if the earnings were that good.

The problem is a person selecting HHonors Points and Fixed Miles earns 9,500 airline miles from the 19 stays, but then only earns HHonors Base Points for $2,052 in spending for 20,520 HHonors points and a 25% Gold elite bonus for a total of 25,650 HHonors points.

The member exchanging points for miles is trading a free hotel night at 25,000 points for 3,000 miles at best. This loyalty traveler would redeem the HHonors points for a hotel room and just buy the airline miles or better yet find a better way for getting 3,000 miles than burning 20,000 HHonors points.

Based on $2,052 and 19 stays the Gold elite member earns with various US airlines I calculate, that rather than 14,000 miles earned, the total miles earned is:
12,500 miles with American Airlines, Midwest Airlines
11,500 miles with Alaska, Continental, Delta, Northwest, or United
11,200 miles with US Airways

Moderate-Spending TravelerHHonors Diamond elite member
(HHonors Diamond elite membership requires 28 hotel stays in 12 months).

$5,928 eligible for HHonors base points earnings.
38 nights at $156 per night

Inside Flyer reports: 133,380 total HHonors points earned or 38,500 miles

I believe this was calculated as per night earnings in this way:
$156/night
10 base points per $1 = 1,560 HHonors base points
Points and Points bonus points option of 50% base points = 780 HHonors points
Points and Points earning = 2,340 HHonors points
2,340 points x 50% Diamond elite bonus = 1,170 points
3,510 HHonors points earned per $156 night hotel stay
3,510 HHonors points x 38 stays = 133,380 HHonors points.

Loyalty Traveler’s calculation for HHonors Points and HHonors Points for 38 stays and $5,928.
10 base points per $1 = 1,560 HHonors base points
Points and Points bonus points option of 50% base points = 780 HHonors points
Points and Points earning = 2,340 HHonors points
1,560 points x 50% Diamond elite bonus = 780 points
3,120 HHonors points earned per $156 night hotel stay

3,120 HHonors points x 38 stays = 118,560 HHonors points and nearly 15,000 points less than the 133,380 HHonors points earned as Inside Flyer reports for this scenario.

HHonors Points and Miles as Moderate-Spending Traveler
Inside Flyer reports 38,500 airline frequent flyer miles could have been earned.

The HHonors Diamond member will benefit from selecting HHonors Points and Fixed Miles to get 500 miles per stay rather than 156 miles per stay with HHonors Points and Variable Miles.
Assume 38 one-night stays to maximize the miles earned for 38 stays x 500 miles = 19,000 miles. This is less than half the miles Inside Flyer calculates. It looks like Inside Flyer calculated the other 19,500 miles earned from exchanging 130,000 HHonors points to airline miles at the rate of 1,500 miles per 10,000 points.

13 x 1,500 miles = 19,500 miles earned from exchanging Hilton HHonors points to airline miles.

This is the Inside Flyer Triple Dip that earns 38,500 airline miles.

Loyalty Traveler Calculations for Moderate-Spend Traveler
Assume 38 one-night stays and HHonors Diamond elite membership.

HHonors Diamond member who has selected HHonors Points and Fixed Miles earns $5,928 x 10 base points = 59,280 HHonors base points and 19,000 miles. The Diamond member 50% elite bonus on base points adds another 29,640 HHonors elite bonus points.

HHonors Diamond member earns 88,920 HHonors points and 19,000 airline miles.

Since exchanges must be made in batches of 10,000 points the member will only be able to exchange 80,000 points for 12,000 American Airline or Midwest miles; or 8,000 miles with Alaska, Continental, Delta, Northwest, or United; and only 6,800 miles with US Airways.

Total miles earned ranges from 31,000 for American Airlines AAdvantage miles; 27,000 miles with Alaska, Continental, Delta, Northwest, or United; and only 25,800 US Airways Dividend miles. This is significantly less miles than the 38,500 miles earned shown in the Inside Flyer table.

High-Spending Traveler
Assume 76 nights, Diamond elite membership, and $19,532 spending

And finally the high-spend traveler. The data in this table changed sometime between my initial reading of the report and the chart as shown today on the website.

Last Friday, the total points earned showed as 439,470 HHonors points for a person staying 76 hotel nights with an average daily rate of $257 and $19,532 in annual spending. When I looked today the number in the chart has been changed to 390,640 HHonors points. On both days the chart shows the number of airline miles earned as 66,500 miles.

One-night stays are not necessary to consider for elite status in this scenario for the person with 76 hotel nights because the criteria for HHonors Diamond elite status has been met via all three qualifying standards:
Hotel stays (28 stays)
Hotel Nights (60 nights)
Hotel Spending (100,000 base points = $10,000 eligible spending)

Calculation to get 439,470 HHonors points as originally reported in the Inside Flyer comparison, given the variables.

10 base points per $1 for $257 hotel folio = 2,570 HHonors base points
Points and Points bonus points option of 50% base points = 1,285 HHonors points
Points and Points earning = 3,855 HHonors points
3,855 points x 50% Diamond elite bonus = 1927.5 points (incorrectly applies elite bonus to Points and Points total rather just base points)
5,782.5 HHonors points earned per $257 night hotel stay
X 76 one-night hotel stays = 439,470 HHonors points

Calculation to get 390,640 HHonors points given the variables.
10 base points per $1 for $257 hotel folio = 2,570 HHonors base points
Points and Points bonus points option of 50% base points = 1,285 HHonors points
Points and Points earning = 3,855 HHonors points
2,570 points x 50% Diamond elite bonus = 1,285 points (correct calculation)
5,140 HHonors points earned per $257 night hotel stay
X 76 one-night hotel stays = 390,640 HHonors points. (corrected total as shown in report Tuesday, June 10, 2008).

Points and Miles for High-Spending Traveler
Stays are important to maximize earnings using HHonors Points and Fixed Miles. Assume 76 one-night stays for 76 x 500 miles = 38,000 frequent flyer miles from hotel stays.

The Points earned with the HHonors Points and Miles preference is significantly less than 390,640 points.

HHonors Points Exchange to Frequent Flyer Miles
$19,532 in annual spending earns 195,320 base points and with a 50% Diamond bonus of 97,660 points = 292,980 HHonors points. 290,000 points can be exchanged for airline miles.

Earning Miles with American AAdvantage
29 (10,000 HHonors points) x 1,500 American AAdvantage miles = 43,500 miles
38,000 miles from 76 stays and 43,500 miles from HHonors points to airline miles exchange = 81,500 American Airlines AAdvantage miles earned.

My calculation of 81,500 miles earned for the high-spending traveler is 15,000 miles more than the 66,500 miles shown on the Inside Flyer chart. I don’t know why the Inside Flyer chart is so much lower since the other two scenarios for low-spending and moderate-spending travelers seem to use the pattern of one-night stays to calculate miles earned. In real travel, I think it would be a rare frequent guest with a profile of 76 one-night stays.

Earning Miles with AS, CO, DL, NW, or UA
29 x 1,000 miles = 29,000 miles for Alaska, Continental, Delta, Northwest, or United. Add these exchange miles (29,000) to stay miles (38,000) and total is 67,000 United miles for 76 one-night stays. This is close to the 66,500 mile calculation of Inside Flyer.

Earning Miles with US Airways
290,000 HHonors points exchanges into 29 x 850 US Airways miles = 24,650 US Dividend miles
24,650 Dividend miles (exchanged) + 38,000 Dividend miles (on 76 stays) = 62,650 US Airways Dividend miles

Conclusion

Inside Flyer’s conclusion is Hilton HHonors had the highest value in terms of points and miles earned.

81,500 miles earned from Hilton brand hotel stays is sufficient for an international business class ticket using miles (or is it anymore?). Better yet, in my opinion, 390,640 HHonors points the high spender earns is enough for 13 nights using HHonors points at a Hilton Category 6 hotel.
Think 13 nights x $400/night saved = $5,200 rebate through future free stays on $20,000 in hotel spending. That is a good deal.

But, is it the best deal for a hotel loyalty program?

I think comparable value can be found with the other programs. 25% value added is just the basic known value of hotel loyalty through these HHonors calculations.

I repeatedly show in Hotels and Points blog posts how to get 50 to 100% added value on your hotel spending. The scenarios examined do not even consider promotion offers which, in my experience, can be expected to be at least an extra 1,000 HHonors points per hotel stay.
Programs like Starwood and Hyatt with different scales for their hotel properties will typically offer the frequent guest a promotional opportunity to earn an additional 1,000 points per hotel stay. The bonus points in these two programs are a significant proportion needed for the lower category hotel rooms. A Starwood free night room redemption starts at 2,000 points for Category 1 hotels and Hyatt at 5,000 points for Category 1 hotels compared to HHonors 10,000 points for Category 1 hotels.

Flexibility and opportunity await the loyalty traveler who learns to maximize the benefits of hotel loyalty programs.

About Ric Garrido

Ric Garrido of Monterey, California started Loyalty Traveler in 2006 for traveler education on hotel and air travel, primarily using frequent flyer and frequent guest loyalty programs for bargain travel. Loyalty Traveler joined BoardingArea.com in 2008.

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