Nov292009

Response to Hilton HHonors Jeff Diskin USA Today interview

USA Today’s Barbara DeLollis, writer of the Hotel Check-In column, published an interview November 24 discussing the Hilton HHonors loyalty program changes with Jeff Diskin, Senior Vice President, Customer Marketing, Hilton Hotels Corporation.

She asked Mr. Diskin for a response to members who are upset over the coming changes. I particularly like this quote, “We offer one of the fastest if not the fastest track to elite-level status in the industry and members can earn more points faster with Hilton.”

As an aside, let me start out by telling you a comment made in a travel track forum at Blog World Expo 2009 by a hotel industry person when asked what hotel marketing people look for when deciding whether to work with a travel blogger. He said he looks for multi-paragraph comments in response to blog posts. I chuckled when I heard that standard.

I comment frequently on other people’s blogs and I often feel like I am hijacking a blog since I am one of the few people I ever see writing a lengthy comment. I hijacked Barb DeLollis’ blog with two lengthy analyses of Hilton HHonors that are probably longer than the entire Jeff Diskin interview. And I cut out several points I wanted to make.

I suggest you read the Jeff Diskin HHonors interview in USA Today.

And then read my analysis of certain comments made with regard to a comparative analysis of HHonors to the other major loyalty programs of Hyatt Gold Passport, IHG Priority Club, Marriott Rewards, and Starwood Preferred Guest.

Hilton Hotels has a good product on par with the other major hotel loyalty programs.  There are many facets to the HHonors loyalty program and things like Miles & Points, discounts on award stays of 6 nights or more, and the ability to convert airline miles into HHonors points are admirable attributes benefitting members.

My concern is that Hilton HHonors is pushing the bar higher towards a devaluation of points across hotel loyalty programs. These changes push Hilton farther outside the norm with regard to other hotel loyalty programs.  At the upper end hotels, currently Category 5 and 6, and soon to be Categories 6 and 7,  the Hilton HHonors program is still competitive with regard to hotel free nights using points, but the Hilton chain is allocating a much larger proportion of their hotels to the upper tier categories relative to the other four hotel chains’ loyalty programs. Starwood Preferred Guest is really a poor value at the high end Category 6 and 7 hotels in terms of how much spending is required to earn a free night, but a relatively small number of hotels are in the top two categories. I would argue the quality of a Starwood Category 6 hotel is much higher than a Hilton Category 6 – soon to be Category 7 property.

I think Hilton HHonors is not as good a value as the other hotel chains at the mid-level and low-level category hotels. Increasing PointStretcher award availability would go a long way to improving that aspect of the program. The past several years have seen hotels available for PointStretcher awards, a 40% discount using points for a free night, dwindle down to no hotels at all for the last six months of 2009.

The primary objection to the Hilton HHonors changes, in my opinion, is not the addition of a new higher category 7 to the Hilton HHonors reward table. The hint from HHonors representatives that the changes will result in a large scale shift of hotels upward within the new categories is the truly objectionable aspect of the changes if they turn out to be true.

The distribution of hotels within the hotel categories is the primary concern around the proposed restructuring of HHonors category changes.

Basically the hotel chain is renumbering categories from the current HHonors system of Opportunity at the lowest end, along with Categories 1, 2, 3, 4, 5, and 6.  HHonors Category 6 is currently populated by some of the high end Hilton and Conrad hotels. Waldorf-Astoria Collection is a separate high end category within the HHonors program.

Hilton HHonors will still have the same number of hotel categories in 2010. There is no change in the points required for Category 3, 4, 5, and 6 hotels in 2010. The change we are awaiting is what proportion of hotels will be moved from their current category placement to a higher category.

Essentially, the HHonors hotel category labeled Opportunity is becoming Category 1 in the new 2010 system and these hotels will remain at 7,500 points for a free night. Currently, there are only 1% of the 3,300 Hilton Hotels in the Opportunity category and these hotels will likely be almost the same set of hotels in the new HHonors Category 1.

The real impact of the changes becomes apparent when looking at the current Category 1 to Category 5 hotels.

Here is a breakdown of 2009 Hilton HHonors hotels by category which is not precise, but probably accurate to 1 or 2% based on my Loyalty Traveler research. Hilton HHonors website makes it difficult to quickly determine what hotels are in each category. Hyatt, Starwood, and Marriott provide lists of hotels in each hotel reward category. Hilton requires a search by country. I attempted to update my Hilton spreadsheet last December, but stopped after two weeks due to time constraints. FlyerTalk member BlondeBomber has tracked Hilton Hotels category placement over several years and I used his spreadsheet for a quick estimate of how many hotels are located in each Hilton HHonors reward category.

HHonors Category Shift for 2010 Could be 20% Across the Chain

HHonors Category Shift for 2010 Could be 20% Across the Chain

 

 

Here are my comments I posted on USA Today in response to the Barbara DeLollis’ Hotel Check-In interview with Jeff Diskin, along with additional tables I made showing comparisons of the hotel programs.

November 28 comment by Ric Garrido:

My readers at Loyalty traveler know I am a numbers person. There are some numerical errors in this piece.

Hilton, Marriott, and IHG award 10 base points per $1 spent at hotels. Starwood awards 2 base points per $1 hotel spend and Hyatt awards 5 points per $1 hotel spend. The article should state 2 and 5 points rather than $2 and $5.

In that same paragraph I understand the calculations used for the comparison of money spent to earn a free night. Apparently Mr. Diskin is comparing earning for highest elite members. These dollar amount calculations equate to the estimated earning for Hilton HHonors Diamond (28 stays or 60 nights in calendar year), Hyatt Gold Passport Diamond (25 stays or 50 nights), Marriott Rewards Platinum (75 nights), IHG Platinum (50 nights or 60,000 points earned), and Starwood Platinum (25 stays or 50 nights). [Note: SPG does not appear to be calculated correctly]

Hilton HHonors is based on a member choosing a “points & points” earning preference instead of “points & miles”. HHonors member earns 10 base points per $1 in hotel spending + 5 Diamond elite bonus points + 5 points per $1 for “points & points” for a total of 20 points per $1.

HHonors Diamond member = 20 points per $1 (Category 7 hotel = 50,000 points)
Marriott Rewards Platinum member = 15 points per $1 (Category 8 hotel = 40,000 points)
Hyatt Gold Passport Diamond = 6.5 points per $1 (category 5 hotel = 18,000 points)
IHG Priority Club Platinum = 15 points per $1 (InterContinental high tier = 40,000 points)
Starwood Preferred Guest Platinum = 3 points per $1 (Category 7 = 30,000 points)

The money spent to earn a free night in each chain:
HHonors 50,000/20 = $2,500
Marriott 40,000/15 = $2,667
IHG 40,000/15 = $2,667
Hyatt 18,000/6.5 = $2,769
SPG 30,000/3 = $10,000

The $4,000 for Starwood spending used in the article comparison looks incorrect to me. $4,000 would be correct for a Category 5 free night at a Starwood hotel, but the highest category hotel was used for the other 4 chains.

SPG always looks very bad in these comparisons, but SPG loyalty program members know most of the points earned are from promotions and elite bonuses rather than base hotel spending. Hilton is opposite in that most points are earned from base hotel spending.

As an SPG Platinum on a $100 stay I earn far more than 300 points. I typically receive 500 bonus points for a platinum amenity and almost always at least 1,000 points for a promotional bonus. 1,800 points for a $100 stay is far more earning power than indicated from a comparison of base spending.

The main point I make when evaluating hotel claims for the best earning potential is the “promotions make all the difference”.

The points earning potential of Hilton HHonors looks highly favorable when only base spending is compared. Hilton HHonors lags behind the other four chains compared here when it comes to points earning potential and free night offers through promotions.

IHG, Hyatt, Starwood and Marriott all ran earn a free night promotions in 2009 which made a free night possible for under $250 in total hotel spending with the other chains.

Where was Hilton?

 

November 29 comment by Ric Garrido

Here are some other relevant points to the HHonors changes and your article.

Mr. Diskin rationalizes the HHonors increase in points due to hotel rates increasing 30% over the past few years. The logic here is that Hilton HHonors is playing catch-up to changes other hotel chain loyalty programs have already made.

Here is my analysis comparing Hilton HHonors to other hotel loyalty programs.

A shift of almost all hotels upward in the categories, which I believe is what Hilton representatives implied might happen with the changes, will mean only 1% of hotels will be the same price in 2010 for a free night. Only the bottom level of hotels in the Hilton chain, the current Opportunity Category hotels moving to Category 1 level hotels in 2010 will be available at the same cost as 2009. Hilton’s other 3,300 or so hotels, around 98% of the global properties will increase in points for a free night in 2010 if Hilton HHonors increases the hotel category across the system for hotel rewards.

On average the increase is 20% across the 3,300 hotel chain based on the points needed to spend one free night at every Hilton-brand property in the world in 2009 compared to 2010 if all hotels move up one category in the 2010 realignment.

Hotel Competitive Sets

The other side of this argument is the issue of ‘hotel competitive sets” within any specific location. Mr. Diskin claims Hilton HHonors will still require the least spending to earn a free night at a top level Category 7 hotel even after the 25% increase next year compared to spending for a free night in the top hotel level for other major hotel chains. That argument is essentially correct, however, the comparison disregards the issue of a comparable competitive hotel set for most locations.

A hotel competitive set must be used when comparing hotel reward nights across different hotel chains. Comparing a Hampton Inn to an InterContinental or JW Marriott is not really meaningful since they are different market segments and different price segments.

Mr. Diskin uses the highest tier hotels in each chain as a competitive set to make his point that Hilton requires less spending for a free night. But aside from a few locations in the world like New York, Paris, London, Tokyo, Sydney, and Rome, the competitive set is not going to be based on the highest category hotels for most cities.

I’ll show the concept of a hotel competitive set using San Francisco hotels.

San Francisco has several hotel brands from each major hotel chain within close proximity of each other and also close in price. Hilton operates the Hilton Union Square and Hilton Financial District.

A competitive set of comparable hotels in the Central Business District of San Francisco to the two Hilton Hotels are Hyatt Regency San Francisco, Grand Hyatt San Francisco, Marriott Marquis, Marriott Union Square, Starwood Westin St. Francis, Starwood Westin Market Street, Starwood Luxury Collection Palace Hotel, Starwood Le Meridien, InterContinental San Francisco, and InterContinental Mark Hopkins.

Using the same variables from the article for hotel spending the comparison works out like this if the two San Francisco Hilton Hotels go from their current Category 6 to the new Category 7 for free nights:

Hilton Union Square, 50,000 points = $2,500
Hilton Financial District (Category 6 in 2009) Cat 7 = $2,500

Hyatt Regency San Francisco Category 4 = 15,000 points = $2,307
Grand Hyatt San Francisco Category 3 = 12,000 points = $1,846

Marriott Marquis, Category 6 = 30,000 points = $2,000
Renaissance Stanford Court, Category 6 = 30,000 points = $2,000
JW Marriott San Francisco, Category 6 = 30,000 points = $2,000
Marriott Union Square, Category 6 = 30,000 points = $2,000

Starwood Westin St. Francis, Category 4 = 10,000 points = $3,333
Starwood Westin Market Street, Category 4 = 10,000 points = $3,333
Starwood Luxury Collection Palace Hotel, Category 5 = 12,000 points = $4,000
Starwood Le Meridien, Category 5 = 12,000 points = $4,000
Starwood W Hotel, Category 5 = 12,000 points = $4,000

InterContinental San Francisco, 40,000 points = $2,667
InterContinental Mark Hopkins, 40,000 points = $2,667

San Francisco Hotel Competitive Set for Comparison of Hotel Spending by High Elite member to Earn a Free Night

San Francisco Hotel Competitive Set for Comparison of Hotel Spending by High Elite member to Earn a Free Night

 

The amount of spending to earn a free night using points at a San Francisco hotel will be less for Hyatt and Marriott than Hilton within this comparable competitive set. And there is a good argument to be made that the JW Marriott may be in a higher level hotel set for San Francisco.

In my opinion, based on detailed analysis of hotel loyalty program promotion bonuses over the past few years, Hyatt Gold Passport, Starwood Preferred Guest, and IHG Priority Club allow a loyalty program member the ability to earn promotional bonuses at a much higher percentage to base spending than is typical with Hilton HHonors, thereby reducing the total spending required to earn a free hotel night from those chains.

There is one other point to make regarding the highest categories for the different hotel chains.

Hilton HHonors currently has over 100 hotels in the highest Category 6 level. Assuming most of these current HHonors category 6 hotels are recategorized in the new HHonors category 7, a comparison across chains may look like this in 2010.

Hilton Category 7 = 100 hotels worldwide
Hilton Category 6 = 200 hotels

Marriott Category 8 = 12 hotels worldwide
Marriott Category 7 = 19 hotels worldwide

Starwood Category 7 = 16 hotels worldwide
Starwood Category 6 = 45 hotels worldwide

Hyatt Hotels Category 5 = 25 hotels worldwide

Marriott is the hotel chain most comparable to Hilton. The data shows Hilton will have 6x as many hotels in its two highest categories compared to Marriott.

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.

More articles by Ric Garrido »

Comments

  1. Superb analysis, and one I am happy to read. It’s a very calm analysis of numbers, leaving aside all the genuine emotion each of us have about the programs, which in my opinion lessens Hilton’s appeal even more. It’s difficult to quantify the distaste Hilton diamonds have for Nor1, the lack of promotions, and so forth – but your analysis stands solidly on its own.

    Many of us to expect a number of Starwood properties to move down in category in 2010. Starwood sets its levels based on the average revenue for a room night, which has certainly been lower in 2009. If Starwood does indeed do this, it would be interesting for you to redo this analysis at that time.

  2. You’ve done a comprehensive analysis and you’re right on target. I dumped HHonors years ago when they started playing this game. They went from one of the best programs to the worst. I was incredibly loyal to them, but have since taken all of my revenue elsewhere.

  3. Carol,

    Thank you for the outstanding analysis. I have been a very loyal HH member since 1994 and have produced a lot of revenue for Hilton which ultimately has earned me multi million points and the VIP status. A few years ago I learned that the program is not what it used to be and hence I have taken my business elsewhere. The program has now a new category 7 which requires a greater number of points for stays. I used to spend 125,000 points for 6 nights stay at the Hilton Hawaiian Village in Honolulu. Two years ago I had to spend 175,000 points (40% increase) for the same and this year I spent 225,000 points (29 % increase compared to two years ago and 80% increase to 7 years ago). The trouble is that in contrast the quality and perks for the VIP members have diminished substantially. Although we received a room with a good view (upon my request, persistency and lots of bickering), we were very disappointed with the overall appearance of the hotel, unhappiness of the service employees, unreasonable prices of food and drinks at restaurants on the hotel premise and condition of the room. As a VIP members we used to receive full complimentary breakfast which has now been replaced with a high carb continental breakfast which you can upgrade to a full breakfast at $26 per person by paying an up charge of $16 per person. They have removed all silverware and replaced them with plastic utensils which has no relevancy to the VIP membership. Parking used to be free which is now $24 per day. The bathrooms are in disrepair and falling apart. They have placed some very annoying vendors apparently from the middle east all over the hotel property which are very pushy and take the joy out of your vacation by their persistent obnoxiousness. So, it may appear to some that the Hilton Honor program may award more points per stays and Dollars spent, the catch is at the other end when one tries to use the points where the points required for rewards are no longer reasonable. Overall, the program is not what it used to be and I want to say that the big change came about shortly after Blackstone acquired the Hilton properties. I would no longer recommend the Hilton Honor program ato anyone.

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