Posted by Ric Garrido

This post shows tables I created  for the hotel reward category distribution between Hilton HHonors and Marriott Rewards. The tables illustrate how hotel category reassignment plays into the overall value of hotel points when it comes time to redeem what you earned.

Let’s face it. Hilton and Marriott dominate the American landscape for business travelers due to the number of hotels around the country at a variety of market segments from upper midscale to luxury hotels. Each chain is poised to break the 4,000 hotels worldwide benchmark in the next couple of years.

HHonors members can double dip and earn points and miles for each hotel stay or 15 points/$1 as a Points & Points earner. Marriott Rewards has Residence Inn and TownePlace Suites properties which only earn 5 points/$1 compared to 10 points/$1 for other Marriott brands. Virtually all HHonors hotels earn 10 points/$1. The new Hilton brand Home2 Suites earns only 5 points/$1, but there are only a handful of these hotels currently in the 3,800+ Hilton Worldwide portfolio.

Bottom line is Hilton stays earn more points for HHonors members.

 

Earning is only 50% of the Loyalty Points Equation

Calculating points earned is relatively easy for Hilton HHonors and Marriott Rewards. Earning is a function of your hotel spend for stays and points earning partner activity. Estimate your spend and you have a base level for estimating the points you will earn. The unknown variable is amount of points earned from HHonors or Marriott Rewards promotions.

$2,000 in hotel spend Hilton HHonors = 30,000 points (Points & Points earner) + hotel stays promotion points + elite bonus points + partner activity bonus points.

$2,000 in hotel spend Marriott Rewards = 10,000 to 20,000 points, depending on how many Residence Inn and TownePlace Suites stays, + hotel stays promotion points + elite bonus points + partner activity bonus points.

But how much are 30,000 HHonors points compared to 20,000 Marriott Rewards points?

Redeeming Points

The point of earning hotel points is to redeem the hotel loyalty currency for hotel stays or other items of value like airline miles or tangible objects like a TV set.

30,000 Hilton HHonors points buys a category 4 hotel reward night at a Hilton brand hotel. Extended stay rewards (4 or more nights offer discount rates) and Points & Money rewards (50% points + cash) can stretch your points for even more reward nights or a higher category reward night.

20,000 Marriott Rewards points buys a category 4 hotel night at a Marriott brand hotel. Marriott does not have a Points + Cash option, although there are 5th night free rewards.

Forgetting the special reward rates, the primary question is what are the  category 4 hotel options in Hilton HHonors compared to category 4 hotels in Marriott Rewards?

Hotel Category Reassignment is the primary factor changing hotel point value.

Hotel points have no value until they are redeemed.

The reason I pay so much attention to hotel category reassignments each year is when a hotel shifts from one reward category to another, the value of hotel points changes for that hotel.

HHonors shifts a hotel from Category 2 to category 3 and the cost of a reward night changes from 12,500 points to 25,000 points. The reward night cost doubled, but the hotel room rate probably only changed by a few dollars per night.

A category 2 reward night at a hotel with a $100 room rate for 12,500 points is $8.00 per 1,000 points redemption value for my HHonors points. This same hotel at say $105 as a Category 3 hotel for 25,000 points gives a redemption value of  $4.20 per 1,000 points.

The problem with hotel loyalty points is the earning rate does not improve at anything close to the redemption rate devaluation. Most hotel loyalty programs have not altered earning rate for close to a decade. Starwood Preferred Guest made an earning rate adjustment for Super-Platinum members in 2012. This is the first adjustment SPG has made to the 2 base points and 1 elite point earning rate in over a decade.

Hilton HHonors and Marriott Rewards have not adjusted earning rates in years.

Yet, each hotel loyalty program has added new high-end reward categories in recent years.

Hotel Reward Category Shift

Annual reassignment of hotels among reward categories tends to move average redemption rates higher across the program.

Here are some tables to illustrate how hotel reward category assignment and reassignment changes points redemption value.

Both Hilton HHonors and Marriott Rewards offer category 1 hotels for 7,500 points. The difference is there are only 35 HHonors category-1 reward hotels in the United States right now (up by another 9 hotels on April 30) compared to 227 category-1 hotels in the USA with Marriott Rewards.

HHonors 2012 USA distribution

Marriott Rewards Category Distribution 4-12-12

April 2012 Hotel Reward Category Distribution for Marriott Rewards and Hilton HHonors in the USA

HHonors website allows a search of category hotels by country.

Therefore, I created the tables of USA hotels by category for HHonors and Marriott Rewards for the USA as of April 12, 2012. These are fairly accurate tables.

The total count of hotels for Hilton HHonors in the table below is just an estimate since I did not check each country (about 80 countries to check) for each HHonors reward category to build an accurate count for international Hilton brand hotels. The Marriott hotel numbers in the table are more precise. The hotel numbers for Marriott Rewards categories 2-4 were quick counts, so close, but not quite accurate.

HHonors-Marriott April hotel distribution

*Note the numbers in this table do not reflect the April 30 changes for HHonors reward category reassignment.

HHonors net change

HHonors Reward Category 6 and 7 will grow by about 25% on April 30 when 27 more hotels become reward category 7 and 66 hotels are added to reward category 6.

The table below is one I created two years ago in 2010 based on precise data for all Marriott and Hilton hotels worldwide. The two tables when compared reflect changes over the past two years.

image

 

Marriott Rewards and Hilton HHonors Category Reassignment Trends

The trend over two years shows Marriott Rewards moving hotels upward and out of category 1 and 2 as the proportion of hotels in the two lowest categories has dropped from 34% of the chain to 28%. Many of these formerly category 1 and 2 hotels have likely gone to category 3, but the proportion of category 3 hotels has not changed much overall. As hotels moved into category 3 from lower categories, hotels have moved up from category 3 to higher categories.

The movement of hotels to category 4-7 has been a significant shift in category creep. In March 2010 there were 490 Marriott hotels in categories 5-8, fewer than 15% of Marriott hotels. Two years later that has increased to about 670 hotels; more than 18% of Marriott hotels.

Marriott rewards program still has a far higher proportion of hotels in categories 1-3 (62%) relative to Hilton HHonors categories 1-3 (44%).

Marriott Rewards has fewer hotels in category 5-8 (19%) than Hilton (23%). Hilton rewards for Waldorf Astoria Hotels are similar to Marriott’s Category 8. Ritz-Carlton reward tiers are not considered in this analysis. Hilton HHonors has around 900 hotels in categories 5-7 and Waldorf Astoria. Marriott has about 700 hotels in categories 5-8.

Conclusion

Marriott Rewards hotels tend to be in lower reward categories compared to the Hilton brand hotel in the same location. And the HHonors hotel reward category reassignments on April 30, 2012 do not help in this comparison. More hotels will be added to HHonors Category 6 and 7 at the end of the month to skew HHonors to even higher category hotel rewards.

HHonors members earn more points per dollar on hotel stays, but Marriott Rewards members have far more choice of hotels at lower reward rates compared to Hilton when it comes time to redeem your earnings for hotel stays.

16 Responses

  1. Excellent analysis.

  2. Thank you, you always deliver top notch information, this is incredibly useful.

    Best,

    PedroNY

  3. This is exceptionally helpful. Marriott is my hotel chain of choice, but I always evaluate whether to switch some of my spending to other brands. Based upon where I do my spend and where I redeem points, looks like I need to stay put with Marriotts for now.

  4. Terrific analysis. Can you add spg into the mix and see what that analysis shows in comparison to Marriott and Hilton?

  5. @Joe Nevin – I have charts from 2010 showing the comparisons. Off the top of my head I can say SPG mirrors HHonors with hotels skewed to higher categories and Hyatt mirrors Marriott with a much larger proportion of hotels in lower categories than SPG.

    SPG has the Cash & Points advantage. Hyatt shifted more hotels up in the past two years.

    I’ll try and create new tables for SPG and Hyatt next week.

  6. @Ric You are one of the best bloggers out there that provides analysis based on solid data. Keep it up.

  7. Great analysis. Definitely shows the price appreciation for reward stays.

    http://www.doubletreefranchise.com/SF/HHonors/HHonors_OwnersFAQs.asp#12 says 25% of the revenue comes from partners (and basically covers administrative costs?). I expect that the abundance of points available by means other than hotel stays is helping to drive the prices of reward stays.

    Another question that occurs to me is whether these programs are fully funded or not(kinda like defined benefit pension plans).

    If fully funded, then they have assets accumulated to pay for future redemptions. With low interest rates lately, they are probably earning less than expected and so need to adjust the value of the redemptions.

    If not fully funded, then they probably have lots of points that have been accumulated over the years, especially by retiring baby boomer road warriors, that are now being redeemed at a higher rate than previously and so they need to adjust the value of the redemptions.

    Either way, redemption values drop.

    All the different ways that they “add/increase value”, e.g. Cash and Point stays, that you are great at analyzing need to be paid for somehow, so that comes out in other ways like the increase point cost of redemptions.

    Thanks for the numbers!

  8. I have limited familiarity with HHonors, but as for Marriott Rewards, I think the first part of the analysis may be skewed as it neglects that, for a business traveler (and the first part of the post indicates Marriott and Hilton are the dominant hotels for such travelers) Marriott points earned receive a bonus based on Elite status:

    Silver: 20% bonus
    Gold: 25% bonus
    Platinum: 50% bonus

    So the standard 10 points/$1 (excluding the Residence Inn and TownePlace) is really 15 points/$1 (with 50% bonus) for your true business traveler with Platinum status.

    Excellent analysis overall!

  9. @Tom – Hilton HHonors elites get the same bonus percentage as HHonors Gold (25%) and HHonors Diamond (50%). Silver is lower for HHonors at 15%.

    I ignored the elite levels since they are similar for both programs.

  10. Ric – you mention that hotel redemptions are constantly devalued without a corresponding increase in earning, but you are neglecting inflation. Assuming earning stays the same (say, 10 points/$), redemption will have to go up over time with the current redemption methods as inflation will drive up prices.

    Consider this very simplified scenario: Hotel chain X earns 10 points per dollar and redeems at 25,000 points/night, so $2500 in spend earns a free night. Chain ADR is $100, so a free night is 25 nights on average. After a decade, ADR goes to $150. The hotel is faced with either increasing the redemption rate to 37,500 points for a free night or absorbing the higher cost of a free night, now redeemed after 16.67 nights on average.

    The only way around this is to do what Southwest (and Hilton to a lesser extent with premium room rewards) do for redemption and make it points per dollar vs. a fixed rate.

  11. @Ben – Hotel reward category shifts increase the cost of reward nights at a much higher rate than inflation.

    I do not have quick access to data to show comparisons from a decade ago for rate and reward cost.

    But I think that if you go back to 2002 hotel rates and reward rates in 2002 for programs like Hilton and Starwood where there was a big upward shift of hotels in the reward categories, that you will find hundreds of hotels where the average hotel rates increased about 10% over the past decade, if that, compared to the reward rate increasing 100% to 150%.

    Average hotel rates in 2012 are not much different than 2007 for most hotels. The biggest increases in the past year are primarily in the top 25 hotel markets in the US.

    The changes in Marriott and Hilton hotel reward reassignment are primarily in secondary US markets where rates in many of these places are actually lower than 2007.

  12. Thanks for the great analysis. It obviously took a lot of time and effort. The information is extremely useful.

  13. Thanks great analysis

  14. I have been a HHonors Diamond for 10 years. This year I am going Marriott. Just think it makes more sense. Hope I’m not wrong!

    Comment by pat cantwell on January 7th, 2013 at 11:03 am
  15. Good analysis. Some more points.
    1) Compare Marriott quality versus Hilton quality for Cat 1-3 hotels. Bulk of the travellers are in that range hence it is the most important segment.
    2) Compare the web site experience between Marriott and Hilton.
    3) Compare the rewards’ accumalation leaving Residence Inn & TownePlace Suites out of the equation.

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