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The State of Hotel Loyalty Programs: A Devaluation Story

by on February 20, 2013 · 61 comments

in Carlson, Hilton, Hotel Industry, Hyatt, Marriott, Priority Club Rewards, Starwood

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President Obama gave his State of the Union address last week, and with all the hotel points program changes coming down the pike, I thought I’d give my own State of Hotel Points address – and the state of hotel points is…worsening!

Here’s a recap of the news we’ve gotten so far:

Starwood

Back in mid-January, Starwood announced it would be changing its its Cash & Points redemption options starting March 5, 2013, as well as adding the ability to redeem Cash & Points for upgraded rooms and suites. You can find the current category breakdowns here, but for reference, here they are:

SPG's new cash and points redemption levels.

SPG’s new cash and points redemption levels.

 

Starwood’s Cash & Points redemptions have historically been some of the best hotel point redemption values around, often yielding at least 3 cents per point in value, but often much more than that. That’s going to be a lot harder to achieve consistently since these increases are 20% across the board.
On the bright side, you can now make cash & points redemptions at all Category 1 and 2 hotels worldwide, not just in the US, Canada and Asia-Pacific, as is the case now; and you can use Cash & Points for suites, which is good if you value those bigger rooms, though possibly bad news for elites since it will make upgrades harder to come by.
Marriott
Both Marriott and Ritz-Carlton announced major changes last week. The Marriott changes, which will begin May 16, include there will be a new top-tier category – Category 9 – which will cost members 45,000 points per night, as well as category changes for over a third of their properties around the world.
Marriott's award level categories.

Marriott’s award level categories.

You can see from the full list of changes here, hundreds of hotels that are having their categories raised while just a few are having their categories lowered. In fact, only 1% of hotels are dropping a category while a whopping 36% are being elevated by at least one category. Marriott also points out: 73% of properties remain in its lower-run 1-4 Categories.

If you already have a Marriott redemption in mind and have collected the necessary points for it (or are close), you’d be wise to take a look at the revised category list in case the hotel or resort you’re thinking of is being upped a category and make your reservation now if possible rather than waiting until the redemption level goes up after May 16.

Hilton
As I reported yesterday, Hilton has just announced a major devaluation of the HHonors program effective March 28, 2013 which include new (more expensive) tiers and seasonal (more expensive) pricing, but also a 5th night free benefit for elite members.

Key changes from the announcement page:

  • Reward Categories – We will be expanding to ten hotel reward categories to account for all of the new hotels and resorts that have opened in the past few years. With 3,900 hotels and resorts in 90 countries you are sure to find the perfect place for your next reward stay.
  • Seasonal Hotel Reward Pricing – For most of our hotels and resorts, we will introduce seasonal pricing for reward stays. The amount of points needed for a Standard Room Reward and a Points & Money Reward will vary during certain times of the year.
  • 5th Night Free – Now members with Silver, Gold or Diamond elite status will get a free night* when they book a Standard Room Reward stay of five or more consecutive nights.

The new chart will have 10 categories. You can see what hotels will be in which category in this PDF.

HOTEL CATEGORY HHONORS POINTS REQUIRED FOR ONE FREE NIGHT
1 5,000 Points
2 10,000 Points
3 20,000 Points
4 20,000 to 30,000 Points
5 30,000 to 40,000 Points
6 30,000 to 50,000 Points
7 30,000 to 60,000 Points
8 40,000 to 70,000 Points
9 50,000 to 80,000 Points
10 70,000 to 95,000 Points

There is no mention of how AXON (special award pricing for Hilton Amex cardholders) and GLON (discounts for elite member) awards will be affected.

A Cost Comparison

So taking these new rules into account, here’s how much money you’d have to spend just at hotels in order to earn the points necessary for one free award night at a top-tier property in each chain at base earning levels.

Club Carlson: $2,500 for a free night at a top-tier Carlson property like a Radisson Blu (50,000 points earned at 20 points per dollar)
Hyatt: $4,400 for Hyatt (22,000 points at 5 points earned per dollar spent)
Marriott: $4,500 at Marriott (45,000 points at 10 points per dollar spent)
Priority Club: $5,000 at Priority Club (50,000 points at 10 points per dollar spent)
Hilton: $6,333 for a free night at a top-tier Hilton (95,000 points at 15 points earned per dollar spent)
Starwood: $15,000 for a Starwood Category 7 property (30,000 points at 2 points per dollar spent) or $7,775 for Cash & Points for 15,000 points (at 2 points per dollar) plus the $275 copay.

Top-tier redemptions at base-level earning are just a snapshot of what a hotel program is all about, but they do provide an accurate portrait of what it takes to get a decent return at each, and among others, Hilton went from middle-of-the-road to nearly the top of the pack in terms of how much money you have to spend to stay anywhere aspirational.

The real takeaway here, though, is that with a few exceptions like Club Carlson, no matter which hotel brand you give your loyalty to, you’re going to have to spend a lot more money – whether it’s in terms of the outlay just to rack up the points or the cash copay on a cash & points redemption – to earn enough points to stay at a hotel you want.

A Warning to Hotel Loyalty Programs
As you hack away more and more of the value proposition, I think you’ll realize that consumers are actually pretty smart and will start shifting their spend towards chains that actually reward loyalty and not punish it. This may not come in the form of traditional points, but many boutique hotels offer far more enriching experiences with more amenities and at cheaper prices. This Hilton devaluation was so brazen that I do think it will hurt them dearly in the end when Amex and Citi cardholders reduce their spend or cancel their cards. In fact, if the impact is so negative, I could see those issuers coming after Hilton since there are likely clauses in the contracts that state that Hilton can’t materially change the program (since the credit card companies are buying millions of dollars worth of points that their cardholders can use at a later time and date). I’ll be complaining to both American Express and Citi about the Hilton changes and hope everyone else considers doing so as well if you don’t like the changes.

Home rental/swap sites like Airbnb and VRBO are becoming more enticing as well. I’m currently typing this post from a 2 bedroom bungalow in Los Angeles that I rented for less than a small standard room at the W Westwood or Century City Hyatt. I’m here for a week, so I crunched the numbers and while I would have liked to have gotten the nights towards elite status, I had a friend coming with me and my new puppy, so having my own house made sense on so many levels. The way I envision it, is that I got a monster suite upgrade and saved a boatload of cash.

I don’t mean to be so doomsday with this post, but I do feel that I’d be remiss to not remark that 2013 has been a remarkably bad year so far for devaluations in the hotel points industry.

Have the recent changes made you think differently about your hotel/lodging strategy in 2013 and beyond?

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • Jessica

    Don’t forget Priority Club changed the points required for many hotels also this past January.

  • Sdkaskel

    Looking to burn some HH points this summer in Amsterdam. Has anyone recently been to either the Doubletree or Amsterdam Hilton any have an opinion as to which is nicer?

  • Eric

    The best part of Hhonors for me was ease of getting Gold status. In particular, I loved using that status overseas to get upgraded rooms and access to the executive lounge, not to mention free wifi, breakfast, and 25% earning bonus.

    I don’t stay in hotels often enough to earn a high tier status the old fashioned way. My question is, what is the fastest and easiest way to get a worthwhile status level with one of the other hotel loyalty brands?

  • David

    I’ve stayed at the Doubletree and can vouch for it being nice and modern, with a solid breakfast. Its also right next to the Amsterdam Centraal train station (direct airport link), and the Amsterdam central library (which is pretty awesome). Though when I booked it, rates were 35,000/night. I think its gone up since then. Don’t know anything about the Amsterdam Hilton.

  • Tjo1957

    I have been a HHonors member for years and have held the Citi card for at least 10-12 years. With this devaluation the only reason I am keeping my Citi card is there is no annual fee. I wont be using it though.
    TPG – here is one for you to consider writing about as I have done this in the past and researched the conversions briefly this morning. United has the option to use miles for hotels. I checked a number of hotels today and how many miles it would take. If you get a chance it might be worth looking at rather than accruing hotel miles on a credit card why not accumulate more on Airlines and use the miles for hotels?
    Good or Bad idea?

  • rick b

    For Club Carlson, it’s really only $833 that you need to spend, because with their Visa, you get 30x on stays and one free night means for 2-night stays it’ll be 25k points.

  • Ryan

    Why not just get the Citi HH Reserve and get two free nights in a Category 10, now worth about 190K points?

  • Tjo1957

    Thanks, looks good!

  • Mitch

    It’s not clear what categories those free night certificates will apply at after the devaluation. Right now, it’s Categories 1-7 and select Waldorf=Astoria hotels. Could very well be that you wind up with them only being good at Categories 1-8 or something like that. Also, as a downside, they’re only weekend nights.

  • http://www.facebook.com/colinmchale Colin McHale

    The only flaw i see in the “here is how much you would have to spend” calculation is that it is all based off of base points. If you are spending $15,000 at SPG, there is a high chance that you have status, and your redemption would occur much faster. If that 15k were spent in a year, and you assume $150/night rate, thats 100 nights in a year, and puts you as a platinum with 75 night bonus of 4 pts per dollar.

    Can you re-run your scenarios with how much would you have to spend as a top tier member in each of the programs, in order to redeem a top category hotel? (Excluding promotional points, credit cards, etc.)

  • CW

    What are the best contacts for AMEX and Citi? Just loaded a ton of my CC spending onto Hhonor-cobranded products literally in the last week. Figured I would stick with Hilton but not so sure now.

    They can’t be this crazy? Right? They’ll have to creep the rewards back up to match the new levels…right, right??!

  • CW

    Do you think existing cardholders would be grandfathered in?

  • dee seiffer

    Thanks for all of your work on this, Brian. It is helpful to see it all laid out for comparison. I haven’t been loyal to any loyalty program, but getting cards for introductory offers to get a couple of free nights here and there. I was thinking about trying it though with Hilton. Not now.

  • Rich

    Hotels change policies when the economy permits them. I doubt they care about bloggers and those who are only redeeming pts at high end properties. Also when most competitors are devaluing that makes it even easier. Do you really think Hyatt won’t change things in the next year?

    Most reward programs are to reward loyalty to specific item not to give someone a night at a $500+ hotel because they stayed a bunch of nights at a $100 night hotel.

    Throw in all these bloggers who are just churning points and abusing the system and I foresee substantial cutbacks in both hotels and airline programs in the near future.

  • Jtgray

    If you have other uses for the Amex Platimum, I’d recommend that. It gives you Starwood Gold. If you can use the $200 airline benefit, the annual fee is efffectively $250, and SPG Gold plus other benefits (like lounge access, car rental status, general service (concierge, fine hotels, etc) make it easy for me to justify.

  • Slee_stack1

    Thus far the CC card and program has been great for me. With the 3X points and CC, I earned over 12k points on a single night stay at a $150 rate. You can basically get to 50k points with 4 nights and a $600-$650 (+ room tax) outlay.

  • Eric

    That was the one thing I was considering, but the annual fee is the only thing holding me back. I’m sure this is in another post, so I apologize, but can anyone give me a quick rundown of how the $200 airline benefit works? That’s pretty much the only way I’d consider it. Thanks again

  • Jtgray

    You choose one airline each year. Any non-ticket charges are automatically refunded up to $200 for the year. Only works on the one airline… Refundable items include baggage fees, ticketing/change fees, economy-plus upgrades, on-board purchases, and in many cases, even gift cards. This year I bought a $200 United gift certificate and received a refund in 2 days.

  • wfb

    I agree with you about vacation apartment rentals becoming even more attractive. Recently I rented a beautiful apartment in Rome with two terraces and a collection of art & antiques. This was more Roman than any multinational hotel chain. I have an apartment rental coming up in Lisbon that I hope turns out as well. This isn’t good for short stays since there’s usually a 3 to 5 night minimum. Perfect for dream holidays though.

    Seth, the Wandering Aramean, has always scoffed at hotel loyalty programs. The lone cynic among all the mileage bloggers. More of us will start to think like him.

    I’ll spend my Hilton points & never look back.

  • Luke

    I’m surprised you didn’t include the recent change to tiers for priority club which was also a devaluation.

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  • Mike

    looking at the latest devaluation by Hilton, 10 HH points is not worth 1 cent. That means 1% cash back credit cards are far better than Citi and Amex HHorror credit cards. I will be focusing on earning hyatt , SPG and club carlson points now.

  • Mike

    i have received free breakfast and room upgrade using United and AA miles so many times. many 3 to 4 star room is only 5k miles a night. It was much better than my stay at conrad

  • Gergely Timar

    I second the nod to VRBO. With a family (2 kids + parents) I’d never consider a hotel in places like Hawaii and Bali. You can get a very nicely furnished 2bd apartment for less than the price of a simple room (and you don’t get the cookie cutter chain hotel vibe)
    We only stay in hotels for very short stays and when we want to stay downtown in a big city.

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  • LATVWRITER

    It makes me glad my loyalty is with Hyatt. No changes there.

  • Ryan

    What makes you think they won’t be good at the exact same properties? For me the weekend nights are the only time I’d use them so it’s def a personal preference.

  • Ryan

    I think a serious case could be made if they are denying you the exact same hotels as before but wouldn’t hurt to ask.

  • http://twitter.com/TJonMilesPoints TJ on Miles & Points

    I think BRGs are on overlooked tool to get hotel steals these days. Some are more complicated than others but they do not change according to award chart fluctuations. I just published a number of How-To’s for filing them.

    http://www.tjacobi.com/13232755/how_to_file_a_marriott_best_rate_guarantee_claim_look_no_further_claim.php

  • thepointsguy

    Hotel chains and airlines sell billions in points and miles to credit card companies. If they devalue those points so much, consumers will be less likely to use those credit card products. That is when loyalty programs will realize that hacking away at value will be a bad longterm decision.

  • thepointsguy

    Generally using airline miles for hotels is a bad deal vs. redeeming for valuable saver/ international awards

  • thepointsguy

    I need to BRG more! But always get lazy and forget to look into it.. will check out your page

  • thepointsguy

    Too many devaluations to keep track of, sadly! I’ll cover that in a separate post

  • thepointsguy

    I’d tweet @AmericanExpress and CC @Hiltonhhonors or call the numbers on the back of your credit cards and let them know how unhappy you are and that the changes will impact how you use your credit card.

  • thepointsguy

    That chart is based on no-elite status for anyone, so even though it is easier with SPG, it gets easier with other chains too. But, if you use the credit card and get the 4 points per dollar at 75 nights, it becomes much easier to attain

  • thepointsguy

    I just read reports they will still be good at Cat 1-10… still a valuable signup bonus, but I won’t be spending on the card to accrue more points

  • http://twitter.com/FreeTravelG Free Travel Genius

    What makes you think that it wasn’t the credit card companies driving the change (i.e., requesting a lower CPM for the bulk purchase)?

  • Alan

    I used some AMEX Membership Rewards points and flipped some Priority Club points too, and was able to rent a 5 bedroom palazzo in Sienna for a week for only 60,000 points. Seems cheap. It came with maidservice, free wifi, and a car service too. We had to pay 100 euros a day for the car, but I guess we had to pay for something…….

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  • Jfasc

    For just a casual hotel user like us Priority club to me is still the best bang for your buck. Not only can you choose type and cost of many hotels virtually anywhere, but nany if not all HIexpress have just recently been updated. And with a free night that more than covers your cost of the card it is hard to beat.

  • Etorch

    I think your blog is one of the very best; I can never understand how the so called “business warrior types” have so little empathy for tourists. In this business cycle, they may soon be in that latter category interviewing for new jobs themselves.

  • Bopha

    Not sure if this has already been posted-but the Hilton Honors rep stated that Axon awards would be going away as of March 28th as well. Too bad.

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  • Jeff
  • Jeff M
  • Etorch

    Darn right; year after year they’re grateful for loyalty AND you get a free night at ANY hotel in the chain, not some just some airport express class II in Butte.

  • Etorch

    Am I correct that ONLY Hyatt has NOT devalued?

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  • Cul8rg8r13

    Working in the hotel business for over 20 years, I have to say that I doubt that most business travelers will stop going to Hilton or Marriott Hotels. The reason being, their company is paying for their rooms and their company demands that they go to the hotels that offer the best prices for their companies. I hardly doubt the companies care about points that their employees are earning as long as they are not getting a good rate.

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  • Dave

    I dont see where the issue is in me staying at a $400 Ritz Carlton or Intercontinental on points when I’ve slogged through 20 or 30 stays at some blah Courtyard or HI Express in the middle of nowhere. These hotel companies need to understand that we are not making dozens of nights at category 2 or 3 properties so we can stay at a category 2 or 3 with the points we earned by doing so. If I am going out of my way to pay/stay at 30 Courtyards in a year, you better believe I deserve a night at the Ritz conversely. Even at $150 per dollar per night X 30 stays = $4,500 spent (not counting the added money spent in hotel bars and dining) … why would it be better for me not to stay at a luxury property vs. a lower property. I don’t know about you, but when I stay at a luxury property on points, I am usually eating all my meals in the overpriced restaurant, buying $20 sunblock in the gift store and sipping $15 drinks near the pool. I doubt I’d spent that much at a points stay at a category 2 or 3 hotel such as a Fairfield. I’d be eating free burgers and breakfast there!

  • Dave

    Ever since the devaluations, I am waiting for a company like hotels.com or orbitz to come up with a reward system that will blow the doors off the rewards industry. It’s seriously right there for the taking … these large chains are going to push travelers to shop around by brand if they make their rewards points so hard to cash in. Most business travelers know have their set brand and stick to it. They don’t shop multiple brands to find the best deal … they stay with the one that takes care of them and shop within that brand (ie: Courtyard vs. Fairfield Inn vs. JW) Mark my words, more travelers are going to be shopping within the brands and in a few years hotel companies are going to be begging for business again by offering crazy point bonuses. I don’t know about everyone else, but I no longer count on the reward points to get me stays at nicer properties … so I have been booking outside my normal brand loyalty on business and trying non-chain high end places that make it easier to negotiate the rates. I stay at non-brand 5 star hotels for $200 mid-week vs. paying $189 for a Courtyard that has no flexibility when it comes to rates. That thought would never have even occured to me had the big brands started tinkering with their rewards programs.

  • Dave

    As someone who used to stay at Priority Club (now called IHG) hotels exclusively for 10 years … averaging 80 nights per year, I can tell you that there are better options. Marriott has brand new townhouse style properties called ‘Residence Inn’ that blow Holiday Inn Express out of the water. For around the same price as HI Express and HI … you get free dinners some weeknights including free beer and wine. Priority Club’s customer service is almost non-existant. It is one of the only big chains that outsources to cheap Asian countries who have no ability to correct problems and are told not to transfer callers to any managers. Also, unlike Marriott, Hilton, etc. Priority Club (now IHG) blacks out their reward rooms by claiming all the rooms are sold out when they only offered 1 reward room out of 300 rooms in the hotel before they ‘sold out of rewards’. I can see how a simple, casual traveler would like Holiday Inn … but as someone who was loyal for years, I can tell you that based on recent experience, there are much better places out there!

  • cardsubet

    Not in my case…I’m looking for value now and the points change matters.

  • Darek

    I just tried to use my Hilton points and found out they are pretty much worthless. This is the second – and last – time I will be dropping the HHonors program!

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  • Julie H.

    so do you think we should all transfer our hotel points to airline points? Trying to make the most of my corp travel benefits.

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