Sunday Reader Question: Which Is Better - Hotel Points or Free Nights From Hotels.com?

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TPG reader Gregory asks a simple but very interesting question when it comes to getting the most value out of your hotel stays:

"What is better/more valuable: to get 10% off virtually every booking at hotels.com (aka "free 11th night") or collect points through hotel chain loyalty programs?"

What Gregory's question really boils down to is what kind of value you're looking to draw from your hotel bookings. If you are simply looking to book hotel rooms at the best prices, then your best bet is probably Priceline. That said, by booking through Priceline or Hotels.com, you don't get certain perks that building loyalty with a specific hotel program gets you, such as elite status benefits including upgrades and other benefits like free breakfast or WiFi, as well as earning extra points using co-branded credit cards.

To get a better handle on this, let's first take a look at Hotels.com's Welcome Rewards program and how it works, and then run through spending scenarios to see what you would get through Hotels.com versus the major chains' loyalty programs.

Hotels.com Welcome Rewards
The basic premise is that for every 10 nights you book through Hotels.com you earn one night free, which is a 10% "rebate". This award is available on over 65,000 hotels worldwide with no date restrictions. According to the Welcome Rewards site, You will receive one (1) loyalty credit for each qualifying night's stay. Subject to the exclusions below, bookings made at any eligible property qualify for the Welcome Rewards Program.

While it seems that you get a free night at any hotel after 10 nights, that in fact is not the case. The value of the free night will be based on the ten (10) non-expired loyalty credits associated with the reward night. The maximum value of the free night will be equal to the average daily rate, excluding taxes and fees, of the ten (10) night stays for which the credits were earned. So if you stay 9 nights in ultra-budget hotels for rates around $80 a night, and one in a moderately priced hotel around $150, the most you'll just be able to redeem for would be an $87 hotel room. You are responsible for paying for taxes, fees, meals, incidentals and any other costs associated with the booking or stay. If you use the free night for a night’s stay that costs more than the maximum value of the free night, you must pay the difference - so at least you can get a discount based on your 10 nights if you do want to redeem for a higher-priced room.

Note: You should always double dip and go through a shopping portal, like Chase Ultimate Rewards for an additional 4 points per dollar spent with Hotels.com. Topcashback.com also offers 5.5% cashback, though I'd rather have the Ultimate Rewards points.

Why Hotels' Websites Might Not Be So Bad
While 10% off all your Hotels.com bookings might seem like a good idea at first, you can usually find many discounts to be found by booking through a hotel's website directly. These could be AAA rates, corporate rates, AARP rates, all of which usually are 10% off if not even a greater discount, meaning you've basically just beaten Hotels.com's rebate. A lot of hotel companies offer other deals such as stay 2 nights, get the 3rd free, which is already a 33% discount as well, also beating Hotels.com's Welcome Rewards rebate, and the great thing is all of these rates booked from the hotel's site will earn hotel points.

Again, if all you're looking for is the cheapest available room and you don't care much about elite status, you can probably still find a lot of value on Hotels.com and getting the 11th night free is just the cherry on top. But personally, I find a lot more value to be had from elite status, including upgrades and other perks (like points that can get free nights at expensive properties) that more than equal a 10% rebate.

A Comparative Spending Scenario
Let's take elite status out of the equation and just calculate how much value you would get from spending $5,000 on Hotels.com versus the major chains.

Hotels.com: Because the 11th night free basically equates to a 10% rebate, spending $5,000 would mean you get a rebate of $500 worth of additional hotel stays in free nights.

Hilton: Thanks to Hilton's signature Double Dipping, you can earn 15 HHonors points (for points and points) on every $1 you spend. So that would equate to 75,000 HHonors points. That's enough for one night's stay at a Category 7 Hotel like the Hilton Waikoloa Village in Hawaii ($274/night in July) and an additional night at a Category 3 property like the DoubleTree Colorado Springs ($115/night in July). Or you could use 60,000 of those points to stay for one night during high season at a Waldorf Astoria property like the Trianon Palace in Versailles (starting at $220/night in July) or the Waldorf Astoria Shanghai on the Bund (starting at $364/night in July).

Hyatt: Gold Passport members earn 5 points per $1 spent at Hyatt, so those $5,000 would get you 25,000 points. You only need 22,000 points to stay at any of Hyatt's top properties including TPG favorite, the Park Hyatt Paris Vendome, where rooms are going for 730 euros ($923) this summer.

Marriott: Marriott Rewards members earn 10 points per $1 they spend at Marriott's hotel brands, so $5,000 would net you 50,000 points. Their top-tier Category 8 properties only require 40,000 points, though, so you could easily redeem for a night at one of them like the Renaissance St. Pancras Hotel in London where rooms are going for 250 GBP ($393 USD). You could also redeem for a Tier 3 Ritz-Carlton property like the Ritz-Carlton Tokyo, where rooms are going for $585 this summer.

Starwood: Without elite status, SPG members earn 2 points per $1 they spend at Starwood properties, so that $5,000 would get you 10,000 SPG points. You could redeem those for a free night at a Category 4 property such as the Sheraton Denarau Villas in Fiji where rooms are $465 and up this summer.

Co-Branded Credit Cards
So that was the basic spending scenario, but keep in mind, you get even more bonus points on money you spend using co-branded credit card such as the SPG Amex (2 extra Starpoints per $1, so $5,000 spend would equal 20,000 SPG points total) or the Chase Hyatt Visa (3 Gold Passport points per $1, so $5,000 in spend would equal 40,000 points total) Add in elite status bonuses, and your points balances really start to add up and pull in even more value.

Hotel Promotions
Let's also not forget that hotel chains also tend to offer periodic bonuses and promos. For instance, Starwood's current Nice Choice Promotion offers an option where if you stay 10 nights, you get 1 Free Weekend Night (Cat 1–5). On the surface this might not seem as good since it is only a weekend night, but this in addition to all the Starpoints you would earn booking with the hotel directly. You can also take advantage of fifth-night-free award redemptions at chains like Starwood and Marriott, meaning you're getting another 20% discount on points you use.

Generally, I find the most value booking with the hotel site directly using discount codes so you can earn hotel points as well as any extra points with your credit card for booking the hotel and to have those nights count toward elite status. Sometimes its also beneficial to book through credit card hotel sites like American Express Fine Hotels and Resorts and Visa Signature hotels then I will book through American Express since you get a room upgrade (most often to a suite), complimentary continental breakfast, 4pm late check out and an additional hotel benefit such as a $100 credit per stay, again pulling in a lot of value for my stay even though I might not be earning points on it.

However, if your main goal is booking hotel rooms as cheaply as possible and still getting some sort of rebate or bonus, then Hotels.com's Members Rewards could be a great program for you, but it's worth mentioning that you might even want to consider Priceline or Hotwire, where you can get some cheap hotel deals. In any case, the bottom line is that you should definitely be getting some kind of value from your hotel stays, whether it's points, discounts or free nights.
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