Nov082010

The Promotion Variable in Hotel Loyalty Programs – Part 2

Hotel loyalty promotions had a shot of steroids in 2009 as the stock market withered and hotel occupancy plummeted just as many newly-built upper-upscale and luxury hotels opened their doors and tens of thousands of new hotel rooms flooded the market.

The hotel industry could not pull hotel supply off the market and store buildings in the Mojave Desert in the way airlines did with their aircraft to boost plane occupancy.

The Promotion Variable Part 1 showed how hotel programs generally are compared using hotel reward nights. This is relatively easy since hotel programs have a set earn rate for base points dependent on hotel spend.

Spend $500 at Starwood hotels and you earn 1,000 base points (2 points/$1) and possibly another 500 elite bonus points (Gold and Platinum members earn 1 bonus points per $1).

There is still a problem though since different members in the same hotel program may be earning hotel points at vastly different rates even with the same hotel spend.

For example:

Loyalty Traveler’s Equivalent Base Points methodology for Hotel Loyalty Promotions

The promotion variable also has a significant effect on the number of points earned over the course of the year regardless of hotel program. The limited time offer for promotion bonuses combined with the individual member’s travel pattern makes calculating the value of promotions difficult when comparing hotel loyalty programs.

I think the same logic that allows a comparison of hotel rewards across programs using an equivalent base points earn value can also be applied to hotel loyalty promotion value.

Important: The values shown below are only a scale and do not have the real world cash value shown.  In other words, Hyatt $500 per night does not mean the promotion has an actual $500 per night cash value. Promotion values shown in the chart are equivalent base points values.

Promotion Values are equivalent to the amount of base points a loyalty program member would earn if paying for hotel rooms. This is a scale to compare hotel loyalty promotions in different programs by equating promotion value to the hotel program’s own base earn rate for loyalty points.

Hyatt promotion value of $600 per night shown in 2009 Q-2 column is a better promotion value than Hyatt 2009 Q-1 $500 per night promotion since the bonus points earned during the Q-2 promotion are equivalent to the number of base points earned after $600 in hotel spend. Hyatt $500 per night value is a better promotion than Priority Club $100 per night value based on each program’s  own established rate for earning base points on hotel spend.

Higher promotion values are the same as more points per dollar.

2009 Q-1 Hotel Promotions

Hyatt Gold Passport – Up to 20,000 bonus points (Jan 9 – April 30, 2009)

  • Stay 2 nights = 2,000 bonus points
  • Stay 4 nights = 4,000 bonus points (6,000 total)
  • Stay 6 nights = 6,000 bonus points (12,000 total)
  • Stay 8 nights = 8,000 bonus points (20,000 total)

Applying Loyalty Traveler equivalent base points value methodology to this Hyatt promotion.

Step 1: The maximum potential bonus is 20,000 points after 8 nights.

Step 2: Hyatt Gold Passport member earns 5 base points per dollar.

Step 3: 20,000 points is equivalent to base points earned after $4,000 in hotel spend.

Step 4: A member maximizing this offer for 20,000 points after 8 nights earns the equivalent of $4,000 in base points or $500 in base points for each night. This is the value shown in the table above for Hyatt Q1-2009.

Starwood Preferred Guest – 500 bonus points per night and an additional 5,000 bonus points after 10 nights. (Jan 7 – April 30, 2010)

Step 1: Maximum bonus potential is 10,000 points after 10 nights.

Step 2: SPG member earns 2 base points per dollar.

Step 3: 10,000 bonus points is equivalent to base points earned after $5,000 in hotel spend.

Step 4: Promotion potential is 1,000 bonus points per night equivalent to $500 in base points per night as shown in table above.

 

Marriott MegaBonus = 2,500 bonus points per stay beginning 2nd stay, up to 25,000 bonus points. (Feb 1- April 30, 2009)

Step 1: Maximum bonus potential is 25,000 points after 11 stays.

Step 2: Marriott rewards member earns 10 base points per dollar (except for Residence Inn and TownePlace Suites).

Step 3: 25,000 bonus points is equivalent to base points earned after $2,500 in hotel spend.

Step 4: Promotion potential is 2,272 bonus points per stay equivalent to $227 in base points per stay as shown in table above.

 

IHG Priority Club = 3,000 bonus points or 1,000 miles every 3rd stay, up to 30,000 bonus points or 10,000 bonus miles. (Jan 12 – April 30, 2009)

Step 1: Maximum bonus potential is 30,000 points after 30 stays.

Step 2: Priority Club member earns 10 base points per dollar (except for Staybridge Suites and Candlewood Suites = 5 points per $1).

Step 3: 30,000 bonus points is equivalent to base points earned after $3,000 in hotel spend.

Step 4: Promotion potential is 1,000 bonus points per stay equivalent to $100 in base points per stay as shown in table above.

 

Then the hotel promotion world lit up in April 2009

2009 started out with basic hotel loyalty program promotions and the economy spiraled down hitting a low point in March 2009 when the stock market crashed. Hotel loyalty promotions came out hard in the second quarter of 2009.

Hyatt in April 2009 announced its program changes for no blackout dates on hotel rewards; elimination of peak date rewards, complimentary internet and the unprecedented complimentary confirmed suite upgrades for Gold Passport Diamond members.

Suddenly Hyatt Gold Passport offered Diamond elite members four complimentary suite upgrades good for up to 7 nights per stay. SPG had been recognized as the program offering generous complimentary suite upgrades to its Platinum elite members. Complimentary upgrades are generally not confirmed with SPG and anecdotal evidence indicated extended stays decreased the probability of getting upgraded to a suite.

How did SPG respond to Hyatt’s chess move?

Starwood Preferred Guest launched their biggest loyalty promotion in years.

This was the first time Starwood Preferred Guest opened up redemption at Category-6 reward hotels in a general member promotion for a free night after two stays.

Starwood Preferred Guest – Free weekend night every two stays, up to category-6 hotel reward. (May 1 – July 31, 2009) Redeem free nights by September 30.

Step 1: Maximum bonus potential is 20,000 points after 2 stays if free night used at category-6 hotel.

Step 2: SPG member earns 2 base points per dollar.

Step 3: 20,000 bonus points is equivalent to base points earned after $10,000 in hotel spend.

Step 4: Promotion potential is 10,000 bonus points per stay equivalent to $5,000 in base points per stay as shown in table above.

Free Nights – The New Norm

InterContinental Hotels Group quickly followed Starwood’s lead.

The features of the IHG Priority Club and SPG free night promotions were different. Priority Club stated no base or bonus points earned if choosing free nights and there was a four free nights earning limit during the 14 week promotion that was extended into mid-August 2009.

On the upside was no free night hotel restrictions in the IHG chain (SPG did not include category 7 hotels). Any day of the week and half of 2009 allowed for free nights with Priority Club.

Marriott Rewards launched a free night promotion for summer 2009.

3 stays = 1 free night at category-1 to category-4 hotel (earn June 1-August 31, 2009; redeem by Dec 31, 2009)

The one night limit and the limited category-1 to category-4 hotels restricted use of the free night reward for any high-end hotels in the Marriott chain in categories 5 to 8.

Hyatt Gold Passport’s 2009 Q-2 promotion was miles based and illustrates another angle for evaluating hotel loyalty promotions offering bonus miles.

The value of miles is evaluated based on the hotel program’s points-to-miles exchange rates.

Comparing Hotel Loyalty Program Promotions

Hotel loyalty program promotions can be compared using equivalent base points math scale. This works as shown for promotions which are based on a specific number of hotel nights or hotel stays.

The last example shows how this method can be applied to hotel program bonus miles promotions.

The Promotion Variable in Hotel Loyalty Programs Part 3 will show how to evaluate promotions where the member earns double and triple base points with hotel spend.

Related Posts:

The Promotion Variable in Hotel Loyalty Programs – Part 1 http://loyaltytraveler.boardingarea.com/2010/11/08/the-promotion-variable-in-hotel-loyalty-programs-part-1/

The Promotion Variable Part 3 – Hilton HHonors 2009-10 case study

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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