The category shift in HHonors last Friday is a difficult systemwide, global change to analyze. I decided to restrict my initial observations to my local area of the San Francisco Bay region as a way to take a manageable approach to the changes.
For many travelers the choice of a major hotel program comes down to Marriott or Hilton. Both hotel chains have a large number of upper upscale hotel properties and a geographically diverse availability of hotels in the USA.
I have analyzed the hotel category placement for three areas of the San Francisco Bay region to take a closer look at how the redemption levels for free nights using hotel points compare between these major hotel loyalty programs.
1. Downtown San Francisco
2. San Francisco Airport (10 miles south of downtown San Francisco)
3. Pleasanton/Livermore/San Ramon (30 miles east of San Francisco in corporate headquarters region)
Each of these three locations tend to have high room rates Sunday through Thursday and significantly lower room rates on Friday and Saturday.
The tables show the room rate for Wednesday, January 20 (high rates) and Friday, January 22 (low rates). Downtown San Franciso is the only region of the three areas where the low room rates for January weekends might show a high degree of variance to be significantly higher priced room rates during summer tourist season (July-October).
The Hilton HHonors category changes can be viewed in two ways. Hilton HHonors management has told members the changes are overdue after 6 years of only slight changes to the hotel categories and reward redemption levels. The member redeeming points in 2010 will generally see a 20% to 25% increase in the cost of a free night.
The change in VIP awards allows elite HHonors members to now redeem 4-night and 5-night reward stays at a reduced rate to the nightly cost. Previously these reduced rate VIP rewards were only available beginning with 6-night stays. This is a significant improvement to the HHonors program.
Another way to look at the HHonors program hotel category changes is to compare HHonors to its closest competitor – Marriott Rewards.
I say Marriott Rewards is HHonors closest competitor based on the two hotel chains similar number of properties, a comparable geographic distribution of hotels, and similar market segments within their hotel brands ranging from midscale to upper upscale hotels around the USA and globally.
In a Loyalty Traveler post last month I compared hotels for free nights using points across five hotel chains in New York City. In that post I estimated the relative value of hotel points for Hilton HHonors at US$6 to $9 per 1,000 points redeemed for free nights. I estimated Marriott Rewards at $7 to $10 per 1,000 points.
In general, Hilton HHonors members can earn more points per $1 in hotel spend with 15 points per $1 when choosing Points & Points “Double Dipping” earning preference. HHonors members choosing Points & Miles will earn miles, but then points are earned at the same rate as Marriott Rewards members, 10 points per $1 spent. Hilton HHonors has the advantage over Marriott Rewards in that all Hilton brands earn 10 base points per $1, whereas Marriott Rewards offers 10 points per $1 for most of its hotel brands, but only 5 points per $1 for Residence Inn and TownePlace Suites hotel stays.
The ability to earn points within either program is dependent on other earning variables like the member’s hotel stay pattern (multi-night stays v. single night stays), hotel brands, elite status, loyalty program promotions, and whether the member uses the hotel program co-branded credit card.
The ability to earn points is complex. The redemption of points is less complex. Basically, the comparison of points redemption just looks at the hotel location and hotel category within the loyalty program redemption chart.
Here are three charts showing the hotel reward category for Marriott Rewards hotels and Hilton HHonors hotels in three San Francisco area locations based on the distance from a central location
San Francisco Downtown,
San Francisco Airport,
Cities in vicinity of Pleasanton, California, the corporate headquarters corridor, located 30 miles east of San Francisco.
As Loyalty Traveler I have an axiom: Hotel points only have potential value until redeemed.
The potential value I placed on Hilton HHonors points last month in my New York City analysis was a redemption value of $6 to $9 per 1,000 points. This meant I expect to save between $180 and $270 for a hotel room if I redeem 30,000 points for a free night at a HHonors hotel.
In light of the 2010 changes in hotel categories I may have to reduce this redemption value to $4 to $7.
If you get a higher value than $9 per 1,000 points, then that is a good value for your points with Hilton HHonors and Marriott Rewards. Redeeming points for less than $6 per 1,000 points is not a good use of points, and cash is preferable for room payment. Save hotel points for when a better value is possible.
The $6 to $10 range is what you should look for when redeeming your hotel points and the higher redemption value, the better. Keep in mind that free nights using points also covers local hotel taxes for the room rate in most cases. In San Francisco this saves an additional 15%+ on the nightly room rate. A $200 hotel room redeemed for points in San Francisco actually saves $231 with the room tax also covered by the points reward stay.
This chart shows yellow for room rates and a points redemption value in the range of $6 to $10. Blue shows a range of $3 to $6 and I would consider this to be a low redemption value. In most cases the value of Hilton HHonors points falls in the blue value more often than Marriott hotels in San Francisco. Can you earn points at twice the rate of Marriott Rewards as a Hilton HHonors? Many of the Marriott Hotels have a redemption value twice as high as Hilton HHonors options. These charts favor Marriott Rewards value in all three locations.
Red room rate blocks are a redemption value less than $3 per 1,000 points. I may have to adjust my assessment of Hilton HHonors points valuation. For several years I anticipated getting $10 per 1,000 points value for my HHonors points. I consider it an extremely poor value to redeem HHonors points at less than $3 per 1,000 points. Several Hilton blocks show red for San Francisco over this next week in these tables.
The most striking feature to me of the San Francisco Airport (SFO) hotels is the Hilton San Francisco Airport. This hotel was a Sheraton for the past decade until August 2009. The Sheraton SFO was a SPG Category 1 hotel until it increased to SPG Category 2 in 2006. In August 2009 the property rebranded to the Hilton SFO and is now a high level Category 5 property at 35,000 points per night.
My conclusion is HHonors has severely devalued its hotel redemption, i.e. the value of HHonors points. I don’t think I should have to change my redemption value scale. I urge HHonors members to look for redemption values in the $6 to $10 per 1,000 points spent range. Your hotel reward stay options may make that goal a bit harder to find.