Jan042012

Thoughts on hotel category reward changes – past and future

The announcement of new higher reward tiers by IHG Priority Club yesterday got me thinking about an article I wrote 12 months ago for InsideFlyer called “Scaling Peaks of High Category Hotel Rewards“.  Structural changes to the hotel reward night cost are infrequent among hotel loyalty programs. Typically the adjustment is simply to add another high end hotel reward category in the segmentation of hotels within the loyalty program.

The addition of a new higher reward also tends to shift most properties upward in the system.

Hilton HHonors simply shifted all hotels upward in its restructured rewards table when the Category-7 hotels were added two years ago. The net effect was more than 80% of hotels in the Hilton HHonors program increased reward cost for nights using points. Hilton HHonors still has the best extended stay discounts for hotel rewards with up to 25% fewer points needed for stays of six nights or more compared to the standard reward rate. Hilton HHonors, Marriott Rewards and SPG are the only programs offering extended stay reward discounts on the standard redemption level for reward nights.

Marriott Rewards made its major restructuring in 2009 with significant increases in the cost of extended stays at its hotels when it changed to a simple 5th night free reward chart.

Hyatt Gold Passport added Category-6 to its structure in 2010 and shifted many hotels upward. The category shift  depleted a large proportion of bargain category-1 hotels at 5,000 points.

SPG has made few changes to its reward charts in the past few years. I anticipate we can see a change to the low category points cost of 2,000 to 4,000 for category-1 and category-2 hotels, possibly this year. How much longer can SPG category-1 last with fewer than 25 hotels globally in 2011 and fewer each year? Raising the cost in points for these hotels would allow SPG to redistribute category-2 hotels down to category-1 without lowering the current reward cost for these same hotels.

SPG high category hotels are already out of alignment with the other chains in the cost of hotel rewards.

Frequent Guest or Frequent Spender?

My concern with hotel loyalty program reward night cost as a hotel frequent guest and not a big credit card spender is the continual rise in reward cost for hotels without a change in the earning structure for points. During the the 13 years I have been an SPG member the hotel reward rates increased from 12,000 points to 35,000 points for top category hotels in SPG while the earn rate has remained unchanged at 2 points per dollar and 1 bonus point per dollar for elite members.

Basically the frequent guest suffers from inflation in the cost of reward nights in the loyalty program generated to a large degree by the mass production of points earned for non-hotel stay activity like credit card spend, online shopping, and social media promotions. These are good revenue generators for the hotel loyalty program, but not necessarily a positive effect for the loyal frequent guest whose reward stays increase in cost.

IHG Priority Club Rewards tier changes

Priority Club is raising the cost of rewards in 25% of its 4,500 hotels on January 18, 2012. The change will raise the cost of many Crowne Plaza and Hotel Indigo properties by 40% and hundreds of other hotels by 25% or more points for a reward night.

The Priority Club program has a different reward structure than other programs in basing the cost of a hotel reward night by hotel brand. Rather than go to a simple tier structure where a popular Holiday Inn in one location might cost the same as an InterContinental in another location, the program is adding multiple tiers for rewards for each hotel brand.

Scaling High Category Awards

An interesting pattern emerges when base points earned per dollar are correlated to the cost of award nights at various category levels in different hotel programs. The amount of hotel spend needed to earn sufficient points for a free night at the highest award levels is similar across hotel programs–except Starwood Hotels and Club Carlson.

Club Carlson category 6 hotels at 50,000 points require $2,500 in hotel spend to earn base points on spend. Club Carlson members earn 20 points per dollar with no lower earning brands. This change occurred in 2011. Will this earn rate to redemption rate good value last through 2012?

Hilton HHonors category 7 hotels at 50,000 points range from $3,334 in hotel spend for Points & Points earners to $5,000 for Points & Miles earners. Hilton HHonors launched Home2 Suites brand in 2011 and also lowered the earning rate for base points to 5 points per $1. All Hilton brands earned 10 points per $1 until the launch of Home2 Suites. This two-tier earning rate is a pattern seen with lower rate for base points earned in Marriott Rewards and IHG Priority Club for their extended stay brands. That was one of the most unwelcome changes in 2011 with Hilton HHonors.

Marriott Rewards highest category 8 hotel nights are 40,000 points. Earning 40,000 base points requires $4,000 in hotel spend. Most Marriott brands earn 10 points per dollar, except Residence Inn and TownePlace Suites have a lower earning rate of 5 points per $1. The cost for category-8 hotel rewards is as high as $8,000 in spend for Marriott Rewards members living at Residence Inn hotels.

IHG Priority Club will have three tiers of InterContinental Hotels at 30,000 points, 40,000 points and 50,000 points as of January 18, 2012. The top tier will require $5,000 in base spend. The lower earning brands of Staybridge Suites and Candlewood Suites at 5 points/$1 will take as much as $10,000 in spend to earn points for a top-tier reward night. Priority Club along with Hyatt Gold Passport and Club Carlson does not offer any discount for extended stay rewards.

Priority Club Crowne Plaza and Hotel Indigo rewards at 35,000 points will require $3,500 to $7,000 in hotel spend at the base earn rate for members.

Hyatt Gold Passport category 6 award at 22,000 points per night equates to $4,400 in spend at the earn rate of 5 points per $1.

Starwood Preferred Guest members earn 2 points per $1. A category-7 hotel is 30,000 points in low season if it is not a specialty “no standard rooms” hotel requiring double points. That is $15,000 in hotel spend or $10,000 as an elite member and far exceeds the hotel spend to reward cost of other hotel programs. Even a low season category 5 Starwood hotel at 12,000 points takes $4,000 to $6,000 in hotel spend or $5,333 to $8,000 in hotel spend in peak season.

Hotel Loyalty Promotions 

The frequent guest relies on hotel loyalty promotions to improve the earning rate for points. 2012 will be an interesting year to watch promotion patterns. The hotel industry gained ground in 2011 as rates climbed and occupancy soared in many locations.

Will free night earning promotions offered in 2011 be seen in 2012? HHonors and SPG currently have resort focused free night offers and SPG’s current promotion is limited to Asia/Pacific.

Will good value promotions see more hotels opt out? This was the case with many Hilton and SPG offers in 2011 where as many as 20% of hotels in the programs did not participate in a loyalty program offer.

Hyatt Gold Passport had many years of Faster Free Nights for a free night at any Hyatt brand hotel globally after two stays, but this promotion was not repeated in 2011.

Marriott runs the same boring promotion over and over, year after year. While two free nights at a low category hotel is a good value promotion, the limitation is the free reward nights are not good for high category hotels.

Club Carlson has had some of the best promotions in the past year and the program is gaining recognition. Can they sustain the momentum?

Priority Club has had some of the best non-stay promotions that generated loads of attention to the program and keeps Priority Club at record numbers of members approaching 60 million globally. These are great if you are into social media games, but where is the love for the frequent guest staying in hotels?

Aside from “Crack the Case” in 2010-11 where I pulled in 100,000 points, the way to get Priority Club points is using social media to find links to promotions that are not generally known outside of FlyerTalk, MilePoint and points blogs. Priority Club is quite generous in giving out points bonuses if you know how to “Crack the Code“.

 

 

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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Comments

  1. Why not include our new fave brand in your calculations (Radisson)? Surely, we did not already lose our love for them? 🙂

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