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.

Daily Newsletter

Reward your inbox with the TPG Daily newsletter

Join over 700,000 readers for breaking news, in-depth guides and exclusive deals from TPG’s experts

Email address

Sign up

By signing up, you will receive newsletters and promotional content and agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.

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.

Related reading:

• The award traveler's guide to Hilton Honors
• The award traveler's guide to Marriott Bonvoy
• What is Marriott Bonvoy elite status worth?
• What is Hilton Honors elite status worth?
• The best credit cards to reach elite status
• Which credit cards offer the most lucrative rewards for hotel stays?