Mar312017

My Double Points Take on “Shrinking Value of Hotel Loyalty Programs”

The Shrinking Value of Hotel Loyalty Programs is an article examining changes to Hilton, Hyatt, IHG, Marriott and SPG by Vikram Singh, global hospitality and travel strategist.

The central argument he makes is most travelers are more focused on hotel location than hotel loyalty points, complimentary upgrades due to status and loyalty amenities.

My sentiments about hotel loyalty programs are similar in many respects.

 

Giving up upscale hotel chain elite status is my major travel style change over past year

After some 17 years holding top level hotel loyalty elite membership in one or more major hotel chains with Hilton Diamond status, Hyatt Diamond and SPG Platinum, I will no longer have top elite membership in any of these programs for the remainder of 2017.

Much of the change in my hotel loyalty elite qualification is due to my travels in the past year around Eastern Europe and Scandinavia. Most places I have been have no hotels, or very few hotels in Hyatt, Marriott and Starwood hotels.

Yet, I still stay primarily in chain hotels earning and burning IHG Rewards Club, Club Carlson, Choice Privileges, Wyndham Rewards and Best Western Rewards.

I still find good value in hotel loyalty programs. I maintain points in every program for when my location coincides with a good points value hotel discount. Just seems lately I seldom need Hilton, Hyatt, Marriott and Starwood points for places I have been.

Shrinking Value of Hotel Loyalty Programs – Vikram Singh

In my opinion, loyalists have three major reasons to stick with a hotel brand:

  1. Points. Earn free nights that can be spent either at a fancy aspirational hotel or a basic property. In other words: spend on business, vacation for free.
  2. Upgrades. Get a better category of room at check-in because of status.
  3. Amenities. Enjoy a welcome gift, free breakfast, better WiFi, lounge access, dedicated reservation support, late checkout, etc.

While people have been chasing points and status, every major loyalty program has devalued their program by doing one or more of the following:

  • Increasing the number of nights you need to attain status
  • Increasing the number of points you need to book a free room by upgrading the hotel categories
  • Creating a new category of rooms and/or elite status level (which devalues the whole program)

The Shrinking Value of Hotel Loyalty Programs

The bullet points indicate three ways hotel loyalty programs have devalued recently. These are pieces I want to address in more detail.

Increasing the number of nights you need to attain status

World of Hyatt is the case study of this change. Hyatt Gold Passport members were able to earn Diamond elite status with 25 stays or 50 nights until March 1, 2017.

Every year I earned Hyatt Gold Passport Diamond elite was based on 25 stays. There were a couple years when I earned Diamond elite during ‘Stays Count Double’ promotions on fewer than 15 hotel stays.

The past few years Hyatt Gold Passport automatically gifted me Hyatt Gold Passport Diamond status with suite upgrades and all the other benefits. That complimentary elite ended this year. I am not Globalist for 2017.

Honestly though, my travels over the past few years have been to countries and cities with no Hyatt Hotels or else the hotels are at price levels above my travel budget for places like Andaz Amsterdam and Park Hyatt Vienna.

Starwood and Hyatt hotel loyalty programs have mirrored each other’s moves fairly closely over the past five years. Both programs are geared around their credit card offers these days. Selling points to the banks is a major money-maker for hotel loyalty programs too. Starwood Preferred Guest still has 25 stays or 50 nights qualification for SPG Platinum.

I wonder if this will change this year to align more closely to Marriott Rewards and World of Hyatt top tier elite qualification?

Increasing the number of points you need to book a free room by upgrading the hotel categories

This is a point I argued for years as I evaluated each year’s hotel category reward changes. An example I like to use is Four Points Sydney Darling Harbour in Australia. The hotel rebranded to Hyatt Regency a few months ago.

I stayed at this hotel in 2003 when it was SPG category 2 and available for 3,000 points on weekend nights. The hotel was SPG category 5 in 2016 when it rebranded.

Hyatt Regency Sydney is a World of Hyatt category 5 hotel for 20,000 points per reward night.

For several years, 1999-2005, I transferred airline miles to Hilton hotel points (1 mile = 2 Honors points) to build up my Hilton Honors account balance when they offered 6-night award stays for 100,000 points.

Every $400 United round trip ticket to Europe earned 25,000 miles that I converted to 50,000 Hilton points. My Hilton Diamond status often meant complimentary suite upgrades on award stays. It was not unusual for me to have a $2,000 reward stay redemption for 6 nights in a Hilton as incidental earning on $800 in United Airlines flights.

Hilton raised the price of reward nights several times over the past decade, including the most recent changes to Points&Money reward nights this month, reducing the value of Hilton points once again.

Creating a new category of rooms and/or elite status level (which devalues the whole program)

Hilton Honors changes to Points & Money Rewards is an overall global devaluation to points value.

Hilton Points & Money reward nights had a major change March 1, 2017 when the price changed from a fixed number of points and fixed amount of cash in USD to a floating amount of points (more consumer flexibility) combined with a points payment pegged to the room rate. In my informal analysis looking at 25 or so properties around the world, the new value of Hilton points redeemed for Points & Money Reward Nights ranged from $4 to $7 per 1,000 points.

Good News

March 2017 changes to Points & Money reward nights created a sliding scale for redemption of points. The change is consumer friendly in that it adds flexibility in allowing a member to redeem from 5,000 points up to the standard reward level with a cash payment. More choice for Hilton Honors members.

Bad News

On the other hand, the devaluation comes in the cash portion paid for a Hilton Points & Money Reward night with a narrower range of points value compared to what was available in the former version of Hilton Points & Money.

Hilton Points & Money Hilton Nordica Reykjavik, Iceland

In mid-February, a Honors Points & Money stay for Hilton Nordica Reykjavik Iceland priced at 16,000 points + 7,406 ISK ($65.55 USD).

The number of points required for a Hilton Points & Money reward night in its former version was fixed at 40% Standard Reward points for that date. Hilton Nordica was 40,000 points for a standard reward and 16,000 points + $66 for Points & Money reward night. This was equivalent to buying 24,000 Hilton Honors points for $66 to buy a reward night.

The same Hilton Nordica Reykjavik hotel room in my check today is $232 per night. The room rate is $8 USD higher than the $224 room rate from my February rate check.

After the Hilton Points & Money reward night changes of March 2017, that $232 room is now priced at 16,000 points + 12,900 ISK ($114 USD). The same room costs $114 now to buy the 24,000 points for a reward night today compared to $66 to buy the same room in February 2017.

In real money, that is a $48 difference in cash cost and reflects a devaluation for 16,000 points of some $40 per Hilton Points & Money reward night.

February 2017 Hilton Points & Money reward value

Hilton Nordica Reykjavik $224 room for $66 + 16,000 points.

  • $224 – $66 = $158 hotel rate discount by redeeming 16,000 points.
  • Redemption value = $9.87 saved per 1,000 points redeemed.

March 2017 Hilton Points & Money reward value

Hilton Nordica Reykjavik $232 room for $114 + 16,000 points.

  • $232 – $114 = $118 hotel rate discount by redeeming
    16,000 points.
  • Redemption value = $7.37 saved per 1,000
    points redeemed.

Hilton points are worth 25% less this month compared to last month with Points & Money reward night spending 16,000 points for same hotel and same room rate.

The shrinking value of hotel loyalty programs is clear to see in the example of how the price of a Hilton Points & Money reward night in February 2017 in a same hotel comparison is $40 to $50 more per night in March 2017.

 

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. Hi Ric,
    didn’t you have Hilton Diamond status owing to a credit card? If yes, why did you drop it? I still consider Hilton Honors a very valuable program for my style of travel, which is actually quite similar to yours. That is why I’m more than willing to pay 48 Euros annually for a credit card that is attached with Gold status

    – I’m just back from a one week trip to Romania, staying in three different Hilton properties (Hilton/Doubletree/Hampton in Transsylvania), each for 5 to 10k per night.
    -I always buy points with 50% off, so 10000k cost me 50 dollars
    -Overall, the 7 nights cost me 40000 points, staying 5 nights (5 for 4) in one of the hotels (category 1)
    -Stacking it with the 2000 points per night and 500 points app bonus, the whole trip cost me 27500 points, or 138 dollars

    In other words, this trip was an incredible bargain, especially if I consider the suite upgrade at the Hilton and the free breakfast (the main reason why I prefer bargain Hilton properties on points to IHG point breaks). One other thing, while the low density of international hotel chains in eastern Europe can be burdensome, I consider it an advantage, as so few people over there have any status. Hence, with Gold status you get much better perks than with Diamond in western Europe or the US

  2. Never had a Hilton credit card. I earn few points on credit cards.

    I had a Diamond status match from 2015.

    There are good value hotels for reward nights with points in eastern Europe. I get frequent upgrades, including suite at DoubleTree Bratislava, Slovakia last September.

    I may be in Romania later this year.

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