Dec302010

Comparing 2011 Q1 Hotel Loyalty Promotions using Base Points Equivalent Value

The common method used to compare different hotel loyalty programs is to compare the cost of a hotel reward with the cost to earn base points.

For example:

  • Hyatt Regency Miami –  Jan 19, 2011 = $329/night
  • Gold Passport category 3 reward night = 12,000 points

$329/night earns 1,645 base points with Gold Passport. A member needs 7.3 nights paying $329 per night to earn one free night at this hotel. This is the method used by NerdWallet.com in its hotel loyalty program comparison.

But this method is not practical for me since I would never pay $329 for a room I can get for 12,000 points. Creating averages is useful for hotel program comparison, but my objective with hotel loyalty programs is to be better than average.  

Loyalty Traveler looks at this Hyatt Regency Miami room rate and calculates 12,000 Gold Passport points saves $329. Getting $27.42 value for every 1,000 Hyatt Gold Passport points is an excellent redemption opportunity.  

  • Four Points Miami Beach –  Jan 19, 2011 = $199/night
  • Starwood Preferred Guest category 4 reward night = 10,000 points

$199/night earns 398 base points with SPG. A member need 25.1 nights paying $199 per night to earn a free night at this hotel.

Remember this is just one points value for one hotel on one particular night. Other hotels will give a different value.

Some comparative analyses use this method and calculate the rate for earning a free night across hundreds of hotels and then develop an average for that program. Nerdwallet came up with a value of 13 Hyatt nights being the average for earning a free night and 22 Starwood nights to earn one free night.

The basic problem with the average number of paid nights to earn a free night methodology is any one hotel loyalty program member will have a unique set of hotels with different values than those used by NerdWallet or any other random sample.

For example: Hyatt Regency Santa Clara California for 12/30 has a room rate of $79. This Gold Passport category 2 hotel is 8,000 points for a free night.  $79 hotel rate earns 395 base points. This hotel takes 20.3 nights to earn a free night (8,000/395).

Averaging the Hyatt Miami (7.3 nights) and Hyatt Santa Clara (20.3 nights) gives 13.8 nights I need to stay at Hyatt hotels to earn a free night.  Whether this is an accurate estimate for any specific member’s hotel stay pattern is questionable, but at least this is a method for evaluating the rate at which a free night is earned in a specific hotel loyalty program and the numbers for different hotel loyalty programs can be compared to each other.

 

Promotions Make All the Difference

The limitation of the NerdWallet.com method shown for nights needed to earn a free night is the promotion factor is excluded. Promotions make all the difference in the ability to earn free nights with less spend.

Base points equivalent value (BPEV)

Hyatt Gold Passport Reward nights = 5 points per dollar base points earn rate.

  • Hyatt category 1 = 5,000 points (equal to base points earned for $1,000 hotel spend)
  • Hyatt category 2 = 8,000 points ($1,600)
  • Hyatt category 3 = 12,000 points ($2,400)
  • Hyatt category 4 = 15,000 points ($3,000)
  • Hyatt category 5 = 18,000 points ($3,600)
  • Hyatt category 6 = 22,000 points ($4,400)

Hyatt hotel rewards show how much hotel spend is needed to earn a free night using the base points earn rate as a monetary scale equivalent to a free reward night. Hotel program comparisons have used this method of comparison for several years.

Hotel loyalty member’s objective is reducing the spend amount to earn a free night.

Earning 15,000 Gold Passport points will take $3,000 in hotel spend if only 5 points per dollar are earned for all hotel stays. Ways to improve the earn rate are:

  • Hyatt Gold Passport promotions
  • Hyatt Gold Passport elite status for elite bonus points (Platinum = 15%; Diamond = 30%)
  • Hyatt Gold Passport G bonus for specific hotel stays
  • Hyatt Gold Passport Visa Credit Card

Hotel loyalty promotions are perpetual bonuses that can be maximized by planning hotel stays for that purpose.  Promotions alter the entire base points equivalent value methodology for comparing hotel loyalty programs due to the ability to earn far more than base points for hotel spend.

Evaluating promotion bonuses is not easy.

How do I compare a promotion bonus of 25,000 Hilton HHonors points after 4 hotel stays to 4x points for a 4-night stay?

How do I compare 500 bonus points per night for a three night weekend Starwood stay to Marriott Rewards free night after two stays?

Base Points Equivalent Value (BPEV)

As Loyalty Traveler I have analyzed hotel promotions for several years. One of the primary difficulties is finding an objective way to compare different hotel promotions.

I am commonly asked by hotel travelers, “What is the best promotion right now?”

Elite status, single night or multiple night stays, location are all factors to be considered. But is there a way to objectively compare the potential value of different promotions and rank them to each other?

The central idea for Base Points Equivalent Value is calculate the promotion bonus points and correlate the promotion bonus to a monetary scale using base points earn rate for the specific hotel loyalty program.

The rest of this post shows how to make these comparisons.

 

2011 Q1 Hotel Loyalty Promotions

I will compare Q1 2011 promotions from Marriott Rewards, Starwood Preferred Guest and Hilton HHonors using BPEV methodology.

Hilton HHonors – 2x base points for two-night stays; 3x base points for three-night stays; 4x base points for four night or longer stays. No bonus points earning limit. Loyalty Traveler HHonors promotion analysis (12-28-10).

Marriott Rewards – one free night at category 1 to 4 hotel after two stays. Two free nights earning limit. Loyalty Traveler Marriott promotion analysis (12-27-10).

Starwood Preferred Guest – 2x base points + 500 points per night Thursday through Sunday nights. Loyalty Traveler SPG promotion analysis (12-15-10).

Stay Patterns (assume all hotel rates are $100 per night)

I use a hypothetical room rate of $100 per night for each hotel stay pattern to compare all programs on the same hotel spend. The base points equivalent value shown only applies to the promotion bonus and ignores the base points and elite bonus points normally earned for the hotel spend level. 

Hotel Stay Pattern 1:

1 night + 1 night + 1 night + 1 night  ($400 total hotel spend)

  • Marriott = $4,000 Base Points Equivalent Value.
  • SPG = $1,200 Base Points Equivalent Value
  • Hilton HHonors = $0 Base Points Equivalent Value.

 

Hilton = 0 bonus points. There is no bonus for one night stays.

Hilton HHonors = $0 Base Points Equivalent Value.

Marriott = 2 free nights. Equivalent to 40,000 points.

Marriott = $4,000 Base Points Equivalent Value.

SPG assume all Friday and Saturday nights = 400 bonus points (double points x $400) + 2,000 bonus points (500 points per weekend night x 4 nights) = 2,400 points

SPG = $1,200 Base Points Equivalent Value

The promotion bonus for the member with four one night stays has no promotion bonus value for Hilton HHonors where the bonus only kicks in with a two night or longer hotel stay.

SPG earns 2,400 bonus points in this example which is equivalent to the points earned for $1,200 in hotel spend. SPG has a BPEV equal to $1,200 for this hotel stay pattern including four weekend nights.

Marriott Rewards earns two free nights after four stays and the BPEV is a high $4,000. A Marriott Rewards member would need to spend $4,000 to earn 40,000 points without any promotion or elite bonuses.

 

Hotel Stay Pattern 2: 

1 night ($100) + 1 night ($100) + 2 nights ($200) + 2 nights ($200) for $600 total hotel spend.

  • Marriott = $4,000 Base Points Equivalent Value.
  • Hilton = $400 Base Points Equivalent Value.
  • SPG = $300 Base Points Equivalent Value.

Hilton earns no bonus points for the two 1-night stays and double points for two two-night stays.

1 night ($100) 0 bonus points + 1 night ($100) 0 bonus points + 2 nights ($200) 2,000 bonus points + 2 nights ($200) 2,000 bonus points = 4,000 bonus points.

 (0 + 0 + 2,000 + 2,000) = 4,000 bonus points.

$400 Base Points Equivalent Value.

Marriott Rewards = 2 free nights with four separate hotel stays. Spending an additional $200 over the four one-night stays earns no additional promotion bonus. Two nights for a category 4 hotel reward is equivalent to 40,000 points. $4,000 Base Points Equivalent Value.

SPG assume all Monday to Wednesday nights for SPG = 600 bonus points (double points) = $300 Base Points Equivalent Value.

SPG double base points is a low value bonus unless combined with a Thursday, Friday, Saturday, or Sunday night.  

Hotel Stay Pattern 3: 

2 nights ($200) + 2 nights ($200) + 3 nights ($300) for $700 hotel spend.

  • SPG: $2,100 Base Points Equivalent Value.
  • Marriott Rewards: $2,000 Base Points Equivalent Value.
  • Hilton HHonors: $1,000 Base Points Equivalent Value. 

 

Hilton HHonors: BPEV = $1,000.

2 nights ($200) 2,000 bonus points + 2 nights ($200) 2,000 bonus points + 3 nights ($300) 6,000 bonus points = 10,000 bonus points.

 

Marriott Rewards: $2,000 Base Points Equivalent Value.

1 free night at category 4 hotel earned for two stays and equivalent to 20,000 points.

 

SPG: $2,100 Base Points Equivalent Value.

Assume all weekend nights. SPG = 700 bonus points ($700 double points) + 3,500 bonus points (7 x 500 points weekend night). 4,200 bonus points.

Hotel Stay Pattern 4: Average $200 per night room rate

3 nights ($600) +  3 nights ($600) + 4 nights ($800) + 4 nights ($800) for $2,800 hotel spend.

 

  • Hilton HHonors: $7,200 Base Points Equivalent Value.
  • Marriott Rewards: $4,000 Base Points Equivalent Value.
  • SPG: $1,900 Base Points Equivalent Value.

 

Hilton HHonors: BPEV = $7,200.

3 nights ($600) 12,000 bonus points + 3 nights ($600) 12,000 bonus points + 4 nights ($800) 24,000 bonus points + 4 nights ($800) 24,000 points = 72,000 bonus points.

 

Marriott Rewards: $4,000 Base Points Equivalent Value.

2 free nights at category 4 hotels is equivalent to 40,000 points.

 

SPG: $1,900 Base Points Equivalent Value.

Assume Monday through Wednesday and Monday through Thursday stays.

SPG = 2,800 bonus points ($2,800 double points) + 1,000 bonus points (2 x 500 points Thursday nights) = 3,800 bonus points.

The Value of Promotion Bonus Points 

Base Points Equivalent Value is simply a scale for objective comparisons of hotel loyalty promotions, but you still need a way to compare the relative value of the bonus points earned. 

A Loyalty Traveler cardinal rule is hotel points have no value until redeemed.

Commonly used redemption valuations for hotel program points are based on a variety of models. The simplest way to value points is a comparison of hotel reward cost divided by room rate.  

For example: Hyatt Regency Miami with a $329 room rate is 12,000 points for a reward night.

1,000 Hyatt points are worth $27.42 in redemption value for this hotel night.

Repeat this calculation for thousands of hotels in a hotel loyalty program and you will likely find a range of redemption value centered around the ranges shown below. Most reward night redemptions will fall into these value ranges.

Common Redemption Value Range for 1,000 Hotel Points 

  • Hilton HHonors = $3 to $7 per 1,000 points.
  • Hyatt Gold Passport = $12 to $20 per 1,000 points.
  • IHG Priority Club = $5 to $10 per 1,000 points.
  • Marriott Rewards = $7 to $11 per 1,000 points.
  • SPG = $23 to $35 per 1,000 points.  

The ability to go lower than $4 per 1,000 points is easy with Hilton where finding $100 room nights costing 50,000 points is not too difficult ($2 per 1,000 points redemption value.)

Starwood redemption opportunities in the $60 per 1,000 points range is possible when redeeming Cash & Points for a $300 room night at a category 4 hotel for $60 + 4,000 points.

4,000 points saves $240 cash and the SPG redemption value is $60 per 1,000 points. 

I can calculate the rebate value using redemption value estimates for each of the stay patterns shown previously as a function of total hotel spend.

Hotel Stay Pattern 1: Total Hotel Spend = $400 on four 1-night stays. 

Hilton HHonors = No bonus for one-night stays = $0 promotion value rebate. (0% rebate value

Marriott Rewards = 40,000 points bonus = $280 to $440 in rebate value. Actual value is more likely closer to $280 since free hotel nights limited to category 4 hotel reward.

$280 points redemption value/$400 hotel spend = 70% bonus points rebate value.

SPG = 2,400 bonus points = $55.20 to $84 redemption value for promotion bonus points = 14% to 21% rebate value.

Hotel Stay Pattern 2: 

Total Hotel Spend = $600 for 1 night ($100) + 1 night ($100) + 2 nights ($200) + 2 nights ($200). 

Hilton HHonors = 4,000 bonus points = $16 to 24 promotion value rebate = 3% to 4% rebate on $600 spend.

Marriott Rewards = two category 4 nights is equivalent to 40,000 bonus points.  $280 points redemption value/$600 hotel spend = 47% points rebate value on $600 hotel spend. 

SPG = 600 bonus points = $13.80 to $21 redemption value for bonus points earned from $600 in spend = 2% to 4% rebate value on $600 hotel spend.

Hotel Stay Pattern 3:

Total hotel spend = $700 with 3 stays for 2 nights ($200) + 2 nights ($200) + 3 nights ($300)

Hilton HHonors = 10,000 bonus points = $40 to $60 promotion value rebate = 4% to 6% rebate on $700 spend.

Marriott Rewards = one category 4 night is equivalent to 20,000 bonus points.  $140 points redemption value/$700 hotel spend = 20% points rebate value on $700 hotel spend.

SPG = 4,200 bonus points = $96.60 to $147 redemption value for bonus points earned from $700 in spend. 14% to 21% bonus points rebate value on $700 hotel spend.

 

Hotel Stay Pattern 4:

Total hotel spend = $2,800 with 4 stays for 3 nights ($600) + 3 nights ($600) + 4 nights ($800) + 4 nights ($800). 

Hilton HHonors = 72,000 bonus points = $288 to $432 promotion value rebate = 10% to 15% rebate on $2,800 spend. 

Marriott Rewards = two category 4 nights is equivalent to 40,000 bonus points.  $240 points redemption value/$2,800 hotel spend = 9% points rebate value on $2,800 hotel spend.

SPG = 3,800 bonus points = $87.40 to $133 redemption value for bonus points earned from $2,800 in spend. 2% to 5% bonus points rebate value on $2,800 hotel spend.

Conclusion:

This post shows mathematical models for evaluating hotel loyalty promotions. The hotel stay patterns I used in these examples illustrate the variability in earning promotion bonus points dependent on the specific hotel stay pattern and hotel spend. Hilton, Marriott and SPG each show the best promotion value  for at least one of the hotel stay patterns.

Determining the best hotel promotion depends on your hotel stay pattern. Comparing promotions to each other is complicated even when excluding factors like hotel brand preferences and elite status benefits.

My overall opinion of the three 2011 Q1 hotel loyalty offers from Hilton, Marriott and Starwood indicate the value of these first quarter promotions is relatively low compared to many promotions in 2010.

The hotel loyalty program member wants promotion value to be more than 20%.

For example: The free night for every two stays like Priority Club had for the end of 2010 makes a 100% promotion rebate possible. I spend $80 per night at two Holiday Inn hotels and use my free night earned for a $200 InterContinental Hotel night. My promotion bonus rebate value is equivalent to 125% of my total hotel spend. This far exceeds the 2% to 21% promotion rebate value shown for Hilton and SPG with these 2011 Q1 offers.

Free nights are high value promotions and Marriott Rewards promotion rebate value shows the high value of free nights compared to bonus points offers from SPG and Hilton.

Free night offers were uncommon prior to 2009, except for the recurring Hyatt Gold Passport free nights.

Loyalty Traveler does not expect free nights to continue at the pace they were offered these past two years, however, promotion bonuses that have less than 10% rebate value are the kinds of offers that make Expedia package deals look better than hotel loyalty programs.

Hopefully these models shown here will help readers evaluate the promotion value for your own hotel stay pattern.

The best hotel loyalty promotion for Q1 2011 really depends on your specific hotel stay pattern.

And we wait to see what Hyatt, Priority Club and Goldpoints Plus roll out for Q1 2011.

Related Post:

http://loyaltytraveler.boardingarea.com/2010/12/29/base-points-equivalent-value-method-for-hotel-program-comparisons/ (Dec 29, 2010)

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 »

Pingbacks

Comments

  1. Ric
    I really enjoy your analysis, even though I do not understand much of it.

    But you overvalue hotel points, as you fail to include the points you would have got from the stay had you paid cash.

    Lastly is the value of what you actually would have paid, as I am not sure many people going for fun would stay at a 500$ property for a week.

  2. ffi – I am not sure what aspect of the post you are saying overvalues hotel points. You need to be more specific for me to rebut.

    There are times when I compare points earned from a paid stay to spending points for a free night to get a real valuation of my choice.

    This post looked at promotion bonus points in isolation of base points and elite bonuses.

    Bottom line is you need to spend points at some time rather than paying for a room or there is no point in collecting points.

    Some travelers argue that I must consider the value of a hotel room as the value I would have actually paid for the room.

    I find that an illogical argument.

    For example: I have never paid over $300 for a hotel room, ever!

    I have stayed dozens of nights in hotel rooms that would have cost over $300 if I had not used points. Does that mean my points are worth less than $300?

    I don’t buy that argument. That argument works with airlines where hardly anyone buys a $10,000 First Class ticket. But a hotel with the lowest room rate over $300 is filled with guests paying $300+ per night. Luxury hotels are not filled with people paying for rooms on points (unlike First Class on an airline).

    So is the St. Regis New York not really a $500 per night hotel since I won’t pay that amount for a room night?

    There are only three choices when picking a hotel:
    1. Pay $500 to stay at a $500 per night hotel
    2. Use points for a free night at a $500 per night hotel
    3. Stay somewhere that is far less than $500 per night.

    When I use points to stay in a $500 per night room I value those points at $500. I don’t have to stay in a NYC hostel because that is my real budget. That is why I collect points. Loyalty travel allows me to stay at hotels where I wouldn’t stay if I had to pay cash.

    That is the reason I am a loyalty traveler.

    Disclosure: I have only stayed in NYC once and it was using 10,000 Starpoints per night rather than paying $450.

    My memory of New York City is the Sheraton Russell (no longer a Starwood Hotel) and that is a $450 per night memory in my mind even though I did not pay cash.

  3. I plan to follow up this post using real hotels and real rates to show the value of current loyalty promotions. The internet connection at the hotel I was staying this morning was too slow to do much internet research.

  4. The Hilton Any Weekend prepaid sale going on till end of January also includes 2X base points, and breakfast is also included at some properties.

  5. Hi,

    Thank you for all your effort in putting this together…
    I am currently a Diamond @ Hilton and I am looking to make the switch. I usually travel one night at a time…any recommnedations on which program to switch to???

  6. How unfortunate that the hotel loyalty program is based solely on the perks offered. I’ve been a member of the IHG Priority Club loyalty program for over ten years now (since 2001). What I can tell you that is not included in this article is that the customer service support is horrible. Poll any long-term PC member and I’m sure you’ll find horror stories of having to fight tooth and nail for points owed. I’m currently (6/2011) fighting them over several missing points issues. Try to contact anyone other then the generic 800 (toll-free) customer service number and you’re out of luck. IHG has done a splendid job of hiding from its’ customers, relegating people to on-line complaint forms that never get followed up on. I don’t know if they’re just too big to care about the core client (end user), or if they’re truly that dysfunctional when it comes to addressing and solving customer care issues.

    So it’s easy to promise the moon in the form of generous points (that you may never collect), room upgrades and other perks, but it’s another to make good on your commitment. Perhaps next time, a sub-category for this award can be added, one that focuses in on best customer care provided….I wonder if anyone would win that award…certainly not IHG.

    Adam Doban.

Comments are closed.