Hilton and Marriott take different approach to loyalty benefits at new budget brands
It may not be quite exactly the battle of the budget brands as originally envisioned, as the world’s largest hotel companies appear to be taking different strategies when it comes to expanding into more affordably priced travel segments.
Hilton, Hyatt and Marriott all launched new extended-stay hotel brands geared toward budget-minded travelers in recent weeks. But, dig a little deeper and it appears even these budget brands will cater to different types of travelers and loyalty benefit strategies.
Hyatt’s new Hyatt Studios brand appears to be more about expanding Hyatt’s reach into a slightly more affordable segment of the market than its current Hyatt Place and Hyatt House lineup, the company’s two most affordable brands.
Hilton and Marriott, however, appear to have the biggest differences between brands, though the outside public might initially believe they're similar options.
Hilton's latest budget brand
Hilton’s Project H3 (a real brand name is still in the works) extended-stay hotel brand, where rates are expected to be around $100 per night, will offer Hilton Honors elite benefits to travelers who book directly with Hilton. While an earlier version of this story, based on materials initially supplied to TPG from Hilton, indicated all Hilton Honors elite benefits would be offered, a company spokesperson later indicated following publication the on-property elite benefit strategy is still in the works.
There will also be a flexible payment slider where guests can choose any combination of points and cash to book a stay.
Hilton anticipates the new brand will cater to travelers who stay for 20 nights or more per stay.
The biggest draw for points and miles travelers will likely stem from the ability to earn elite status from a stay at Project H3. Hilton Honors members will receive elite qualifying nights and earn base points from their stay. There will be bonus point kickers for every 10 nights a guest stays at Project H3.
It takes 25,000 base points to earn Hilton Honors Silver status, while 75,000 base points are needed for Hilton Honors Gold status. Hilton Honors Diamond status kicks in after a member earns 120,000 base points.
One thing to keep in mind is whether Hilton floats a lower base point earning rate at Project H3 like it does with Tru and Home2, where guests earn 5 base points for every dollar spent compared to the 10 base points per every dollar spent at the company’s other brands. Hilton is still evaluating the earning structure for base points accrued from Project H3 stays, a company spokesperson told TPG.
Marriott’s new addition to the budget hotels landscape
It’s a slightly different story over at Marriott, which launched its MidX Studios (also a working title) brand earlier this week during the New York University International Hospitality Industry Investment Conference.
MidX Studios rates — expected to be around $80 a night — are lower than Project H3, and the company appears to want the brand to be a truly affordable offering in the extended-stay segment compared to its pricier offerings that come with more amenities, such as Residence Inn, Element and the recently launched Apartments by Marriott Bonvoy, a premium and luxury offering in the serviced apartment space.
Given Marriott’s already extensive lineup in higher-end segments of extended-stay hotels, the company is clearly going after a new kind of customer at MidX Studios. While the company indicated a modified approach to how Marriott Bonvoy will work at the hotels, a display for the new brand at the NYU conference indicated there will be no elite benefits offered at each hotel and that guests won’t earn elite night credits with a stay.
“This customer we believe is different in some ways from our traditional Bonvoy consumer in terms of what they want and expect from points accumulation,” Noah Silverman, Marriott’s global development officer for the U.S. and Canada, told TPG at the conference. “They may not be otherwise frequent travelers for business or leisure. The reason they may be staying in one of these hotels may be shorter-term, and so points accumulation probably mean something different to them than it means to others.”
But this doesn’t mean there won’t be any Marriott Bonvoy earnings from a MidX Studios stay, either. It’s just still in the works.
The company is currently exploring ways to offer these guests rewards “more directly” to better reflect their travel preferences, Silverman added.
“We want to continue to grow the presence of the Marriott Bonvoy program, and we think it's an important differentiator for us in this space by comparison to what some others are doing,” he said. “But we also needed to have that tailored to the needs and desires of this guest.”
A tale of two approaches
Hilton CEO Christopher Nassetta in recent months indicated the company’s expansion into more affordable brand segments was partially driven by creating easier on-ramps to the company’s Hilton Honors loyalty program. Get the guests at an earlier age when their budget favors Project H3 or a Spark, the premium economy brand the company launched in January, and they’ll stick around as their spending power grows to something like a Waldorf Astoria, the thinking goes.
Marriott’s guest strategy appears to be more about bringing in an entirely new traveler into the Marriott Bonvoy network. The NYU launch indicated MidX Studios guests will likely book a stay due to temporary work assignments, a need for temporary housing or because they’re scoping out a new city to potentially live in.
But that doesn’t mean Marriott doesn’t think MidX Studios is any less of an entry point for potential Bonvoy members.
“It's really trying to balance the entire equation,” Leeny Oberg, Marriott’s chief financial officer and executive vice president of development, told TPG of the new brand. “It doesn't fit in the typical mold for a classic hotel stay, but as I’ve said before: We're looking forward to, frankly, broadening our group of customers and absolutely being an entry point.”
Why the difference?
Travelers might be wondering why such differences in guest experience are brewing between new budget-friendly brands. After all, they often have less to do with courting travelers and more to do with winning over the folks footing the bill.
Loyalty benefits appeal to travelers, but they do add costs to daily operations.
Project H3 might be a winner for travelers looking for free breakfast and amenities offered to Hilton Honors members. However, by providing these perks, operating expenses for the hotels increase, resulting in higher rates (thus, the $20 nightly price difference between MidX Studios and Project H3).
Marriott already has brands that fit that model with Residence Inn, Element and even TownePlace Suites.
A truly limited-service offering like MidX Studios costs a lot less to run — and therefore a lot less to build and operate. That’s a big draw for hotel owners who might be looking for a lower-cost option to park in their real estate portfolio.
Looking for free breakfast to go with your extended stay, Bonvoy members? Pay a little more and consider a stay at TownePlace Suites or Residence Inn.
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There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.