Jan032011

Free Your Summer with Winter Stays – Chicago Hotels Case Study for Comparing Q1 2011 promotions

When I see a new hotel loyalty promotion roll out, my analysis focuses on how I can maximize the value of the promotion to reduce my overall cost for hotel nights. I plan my hotel travel year with the purpose of earning elite status and its commensurate hotel benefits, but I also keep my eyes open to high-value promotions for earning free hotel nights.

This past week I wrote two posts on Base Points Equivalent Value.  I truly am just making this stuff up. I have to make this stuff up since I am unaware of anyone else creating consumer models for hotel loyalty programs.

The rationale for creating Base Points Equivalent Value modeling is to develop a method to compare hotel loyalty promotions between different programs.

Background

I was Hilton HHonors Diamond for about five years until around 2006. I intuitively felt most hotel loyalty promotion offers from Starwood Preferred Guest, Marriott Rewards, and Priority Club were higher value offers than I received from Hilton HHonors. The promotions from Hilton HHonors just seemed less valuable than offers from other programs, but I had no way to actually compare offers in different programs.

Readers take note: Hilton HHonors was one of the best hotel loyalty programs for high value promotions in 2010. The HHonors program took a big PR blow when HHonors raised the cost of reward nights at more than 80% of its 3,600 global properties in January 2010. The return of high-value promotions and increased availability of PointStretcher reward nights has added a bit more value back to the HHonors program in 2010.

Comparing Hotel Loyalty Programs

Sites like Carlson Hotels goldpoints plus DotheMathSite.com compare hotel loyalty programs by base points and elite bonus points earned from a set level of annual hotel spend. Earned points are correlated to hotel reward cost to show the number of free nights earned for the set level of hotel spend.

There are two major problems with this model:

A comparison of category 1 hotel rewards is also misleading since Hilton and Starwood have only around 1% of their total global portfolio listed as category 1 hotels while Hyatt and Marriott have a much higher percentage of their hotels in the lowest hotel reward category (see graph below).

  • Promotions are not considered in hotel loyalty program comparisons.

Loyalty Traveler axiom: Promotions are a vital and variable factor in hotel loyalty program comparisons.

Loyalty Traveler slide- Hotel Reward Category Distribution for Hilton, Hyatt, Marriott and Starwood

 

Credit card sites develop “value of point” averages for each program. Average point value is useful for some comparisons, but I argue an individual can do much better than average if you take it to the limit.

For example: 50,000 Hilton HHonors points for a category 7 hotel reward night can be used for a room that will cost $100 per night at some hotels or $500 per night at other hotels.

The consumer has the choice whether to redeem for $100 in cash savings at a high-category reward hotel in a popular location off-season or $500 at a high-end, high-category hotel with a luxury reputation.

Personally, I try and take it to the limit when getting the most hotel value for my points.

Chicago Case Study of 2011 Hotel Loyalty Promotion Value

Hotel loyalty programs have highly-educated mathematicians to create complex cost-benefit models for hotel loyalty promotions.

Loyalty Traveler is developing a simply-educated consumer model for comparing promotion value.

Here is how I look at the current Q1-2011 hotel loyalty promotions from Hilton Honors, Marriott Rewards, Starwood Preferred Guest, and Carlson Hotels goldpoints plus through my base points equivalent value model.

I stayed a week in downtown Chicago October 2010. Most major hotels were in the $200 to $400 price range during that week with large conventions booking up hotels.

I used 25,000 Priority Club points to stay at the Crowne Plaza Avenue when the room rate was around $300 after tax. I stayed at two Starwood Hotels using Cash & Points and saved around $200 per night on hotel rates.

Sure I could have Pricelined my way into the Red Roof Inn right off Chicago’s Magnificent Mile for $100 a night. I think my loyalty points offered the better Chicago deal for hotels. 

The low room rates in Chicago for this January and February kind of blow me away. The winter months offer a great opportunity to hang out in downtown frozen Chicago on cheap rates while piling up promotion credits.

Marriott MegaBonus

(New Marriott MegaBonus is available now for registration and hotel stay offer starts February 1, 2011)

Fall MegaBonus offered free night after two stays paid with Visa through January 15, 2011. Registration closed for Fall MegaBonus Oct 31. The examples I show here are likely applicable for February travel too. 

  • Tue Jan 11  Fairfield Inn & Suites Chicago Downtown = $79  (MR category 5: 25,000 points)
  • Wed Jan 12  Springhill Suites Chicago River North = $99  (MR category 5: 25,000 points)

 

Marriott Rewards Promotion MegaBonus

$178 x 10 points/$1  = 1,780 base points for two nights.

1,780 base points + one free night at MR category 4: 20,000 points.

Quantifying the value of Marriott’s MegaBonus free night promotion 

20,000 points is equivalent to the number of base points normally earned with $2,000 in Marriott Rewards hotel spend.

  • Base Points Equivalent Value (BPEV) for this promotion bonus offer is $2,000.
  • The promotion has a BPEV = $2,000 for $178 hotel spend.
  • $2,000 BPEV/$178 = 11.23

Divide the Marriott Rewards MegaBonus BPEV value by the amount of hotel spend to earn the promotion bonus value. For this stay the promotion value shows every $1 in actual hotel spend ($178) earns $11.23 equivalent in base points for these two nights at Fairfield Chicago Downtown and SpringHill Suites. 

The resulting number (11.23) can be compared to other promotions and hotel stay patterns to reveal an earn rate for hotel promotions. The higher the number the more points earned per dollar in hotel spend. 

I think this number also correlates with promotions and hotel reward earning for other hotel chains like Starwood and Hilton. 

Taking Loyalty Upscale 

Promotion bonus earn rate for Marriott MegaBonus will be less if you spend more money to earn the same free hotel night after two stays. 

For example, in Chicago: 

  • Thu Jan 13 Renaissance Blackstone Chicago $159 (MR category 6: 30,000 points)
  • Fri Jan 14  JW Marriott Chicago $179 (MR category 6: 30,000 points) 

The promotion free night earned at a category 4 Marriott Rewards hotel is still worth 20,000 points and has a promotional bonus BPEV = $2,000. This means you would need to spend $2,000 to earn the same category 4 hotel reward night without the MegaBonus promotion. 

Renaissance Blackstone + JW Marriott Chicago = $338.

  • 2,000 BPEV/$338 = 5.92

Fairfield Inn Chicago + SpringHill Suites Chicago = $178

  • $2,000 BPEV/$178 hotel spend = 11.23 

11.23 compared to 5.92 indicates the promotion bonus is earned at a faster rate or lower level of hotel spend when staying at the Fairfield Inn and SpringHill Suites for $178 to earn the free night rather than the Renaissance and JW Marriott.  It should be intuitively obvious that earning the same bonus for less money gives a better promotion earn rate. 

Within a single program it is easy to show how the promotion value changes when a free night is earned through less hotel spend as shown with Chicago Fairfield Inn and SpringHill Suites example. Two stays at these hotels for $178 earns a free category 4 hotel night. Another Marriott Rewards member may spend $338 and earn the same Marriott category 4 hotel free night bonus. 

Spending $178 to earn a free night is better promotional value, although there is an argument that two stays at Renaissance and Marriott may be the overall better lifestyle value, especially if the member is elite and upgraded. This is a point that has become internalized personally after several years of playing hotel loyalty promotions.

As a Marriott Rewards member I may only really care about what I can get with a free night at a Marriott Rewards category 4 hotel.

Example of Marriott Rewards Category 4 hotel nights

Pittsburgh Marriott City Center May 23-27, 2011

$289/night.

Something is happening in Pittsburgh during these dates I randomly picked in a random location. Courtyard Pittsburgh Downtown is $229 per night and also a Marriott Rewards category 4 hotel.

Both of these Marriott brand hotels are available using points for free nights during these dates in May when the rates are astronomically high.

This example shows how you can stay in two upper-upscale hotels for two nights in Chicago for $338 and earn a future free hotel night at another upper-upscale hotel worth $289. This is an 85% rebate value on the cost of your initial hotel stays to earn the free night.  

As the annual forward-looking loyalty traveler I am, my plan is earn four free nights with 8 one-night stays during the next few months at Marriott brand hotels and potentially save $1,300 with four free hotel nights… whether in Pittsburgh, Hong Kong, Moscow or Prague. 

For the faithfully loyal Marriott Rewards member there is really no reason to look beyond what is spent, what is earned, and the value of points and free nights with Marriott.

BPEV is more useful as a tool for comparing Marriott to Hilton and Starwood promotions.

Base points equivalent values (BPEV) are useful to show how Hilton and Starwood Q1 2011 promotions stack up to Marriott’s MegaBonus offer. 

I have already shown how Marriott’s MegaBonus offer in Chicago has the potential for earning a $300 free night after $178 in hotel spend. (Tax is a significant factor adding as much as 20% to your actual hotel spend, but I exclude it for simpler calculations. In real travel taxes and fees are a real added expense.) The problem with Marriott MegaBonus is there is no more promotion incentive after four hotel stays. Marriott may be a high value promotion, but I need to move on once I have earned the two free nights before April 30, 2011.

2011 Q1 SPG Great Weeks, Grand Weekends Jan 3- April 15

SPG ‘Great Weeks, Grand Weekends’ 2011 Q1 promotion offers double points every night and 500 points per weekend night Thursday through Sunday nights. 

Double Points = 2 base points per dollar + 2 bonus points per dollar = 4 points per $1 

Four Points Chicago Downtown/Magnificent Mile (Adjacent to Trader Joe’s for groceries)

  • Thursday-Monday, January 13-17, 2011
  • $75/night.
  • $300 for a 4-night stay. 

Four Points Chicago 4-night weekend stay $300 total hotel spend earns:

600 base points + 600 bonus points (double points) + 2,000 bonus points (4 nights x 500 points per weekend night) 

= 3,200 points for this $300 4-night stay. 

This $300 hotel stay earns the same amount of points normally earned from $1,600 in hotel spend without any bonus promotions. $1,600 hotel spend x 2 points per dollar = 3,200 base points. 

My Loyalty Traveler BPEV model looks only at the 2,600 bonus points earned from the promotion in isolation of the normal base points.

SPG ‘Great Weeks, Grand Weekends’ promotion value is 2,600 points = $1,300 base points equivalent value. This $300 Starwood hotel stay has a $1,300 base points equivalent value.

SPG ‘Great Weeks, Grand Weekends’ promotion value for four nights in Chicago = $1,300/$300 = 4.33 

I showed above how the Marriott Rewards MegaBonus promotion can be done in four nights for $516 in Chicago and earn the equivalent of 40,000 points when used for two free Marriott Rewards category 4 hotel nights. Marriott MegaBonus promotion cost $516 for four nights in Chicago and earns $4,000 BPEV. 

Marriott Rewards MegaBonus promotion value for four nights in Chicago = $4000/$516 = 7.75. 

Ultimately the value of any hotel loyalty promotion is determined by your hotel points redemptions.

$300 spent at the Four Points Chicago earns 3,200 points overall. This is sufficient for one weekend night at a SPG category 2 hotel. You might redeem a SPG category 2 free night and save $75 on the room rate or save $200 on a room night at some other hotel some other night. Redeem wisely.

Sheraton Miami Airport $159 room rate or 3,000 points Saturday 2-19-11

Marriott Rewards is a higher value promotion than SPG Great Weeks, Grand Weekends in this comparison of BPEV derived promotion value, but ultimately the value of a hotel loyalty promotion depends on the value of free night redemptions. The limitation of MegaBonus means the promotion bonus value is done after earning two free nights. SPG may be the next best deal. But we still need to look at Hilton HHonors 2011 Q1 offer.

  

Hilton HHonors 4x points on 4-night stays 

  • Hilton Suites Chicago Magnificent Mile
  • $101 per night January 13-17, 2011

Hilton Palmer House Chicago Any Weekend, Anywhere Sale with breakfast and bonus points

$84 Advance Purchase Rate x 4 nights = $336.00 hotel spend = 15,120 points 

336 x 15 points = 5,040 (Points & Points) + 10,080 points (4x promotion is 30 points /$1 bonus)

= 15,120 points 

Without 4x promotion this stay earns 5,040 points. Promotion 4x base points is a bonus of 10,080 points. 

10,080 promotion bonus points is a $1,008 base point equivalent value (BPEV) for a Points & Miles earner or $672 BPEV for a Points & Points earner. 

Hilton HHonors 4x promotion value

  • $1,008 BPEV/$336 hotel spend = 3.0 (Points & Miles Earner)
  • $672 BPEV/$336 hotel spend = 2.0 (Points & Points Earner) 

My BPEV model indicates the Hilton HHonors member is only earning $2 in BPEV per $1 in hotel spend for the Points & Points earner compared to the Four Points weekend stay earning $4.33 in BPEV per $1 for the SPG member and from $5 to $11 in BPEV per $1 for the Marriott member depending on hotel choice.

The BPEV model also accounts for low promotion bonus value. Here are a couple of examples.

Westin Michigan Avenue Chicago  

  • January  3-6, 2010
  • $99/night x 3 nights = $297
  • Double Points = $297 x 4 = 1,188 points 
  • Promotion bonus is 594 points.

Base Points Equivalent Value = $297

$297 BPEV/$297 hotel spend = 1.0 (double points promotion)

Hilton Palmer House Chicago

  • Jan 3-6, 2010            
  • Any Weekend Anywhere rate includes breakfast and earns double points.
  • $127/night x 3 nights = $381

Hotel Stay Points

$381 x 15 points/$1 (Points & Points earner) + $381 x 20 points/$1 (3x base points Q1 2011 promo bonus) + 381 x 10 points (Any Weekend Anywhere bonus) = 17,145 points.

11,430 bonus points has a BPEV value = $762 for HHonors Points & Points earner.  (11,430/15)

$762/$381 = 2.0 for HHonors 3x promotion for 3-night stay. 

The better promotion, SPG or Hilton depends on nights of the week and length of stay. 

These two examples illustrate how double and triple points promotions reduce the leverage factor opportunity for maximizing promotion value. When there is a set bonus for nights or stays like Marriott’s free night after two stays, then reducing hotel spend to earn that bonus maximizes the leverage potential. When a bonus is a base points multiple of hotel spend, then there is little leverage potential except to meet the stay requirements for earning the best promotion bonus available like Starwood’s double points + 500 points per night or Hilton’s triple and quadruple base points for three and four night stays. 

This is the final post in my series explaining the Base Points Equivalent Value model.

This BPEV idea has been playing around in my head over the past couple of weeks. As I said, I am just making this stuff up as a way to mathematically compare the value of hotel loyalty programs in a single program or across hotel loyalty programs. 

I do think base points equivalent value is a way of reasonably comparing hotel promotions in different loyalty programs.

Related posts:

Base Points Equivalent Value Method for Comparing Hotel Loyalty Programs (Dec 29, 2010)

Comparing 2011 Q1 Hotel Loyalty Promotions using Base Points Equivalent Value (Dec 30, 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 »

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Comments

  1. You’re clearly on the right track analyzing the bonus points relative to the value of the awards/rewards in this way. Your model is becoming more refined the more you use, develop and test it. Back in September you pointed out flaws in others who have tried to value hotel points in a convincing way. I take your analysis and try to work the additional benefit of using the hotels rewards credit card. I have 4 hotel credit cards and one airline mileage credit card. At some point the permutations and combinations are overwhelming so one has to draw the line somewhere.

    I think your sampling of actual hotel room rates was more expansive when you did this previously. You must have determined that all that extra work did not gain anything significant in terms of the results. I think you did this before in an analysis of California hotels. Looks like you’ve scaled that part of it back to a reasonable level in your current working model.

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