Why I'm not so nervous about Marriott's upcoming switch to dynamic award pricing
Change and uncertainty are usually bad, especially when a loyalty program is involved.
And although we know Marriott Bonvoy is ditching its peak, standard and off-peak award chart, there's still a lot we don't know about Marriott's switch to dynamic pricing. For example, how will nightly award rates be calculated? Just how high will we see award night costs go at aspirational properties on peak-season nights? And will the value of Marriott Bonvoy points significantly decrease?
I'm usually pessimistic about loyalty program changes, especially when dynamic pricing is involved. But, strangely, I'm not feeling too nervous about the upcoming Marriott Bonvoy switch to dynamic award pricing. Here's my reasoning.
Most properties will stay within current bands at first
When announcing its impending switch to dynamic pricing, Marriott Bonvoy said we shouldn't expect massive changes in March. Instead, award nights at 97% of Marriott's properties will only fluctuate within the current off-peak to peak ranges for the remainder of 2022. Specifically, each hotel will set its own nightly award rates within its current off-peak to peak range.
So, I expect most travelers will continue to redeem at approximately the same rates for the rest of 2022. After all, most properties will continue to offer award nights that stay within the current off-peak to peak ranges through the end of 2022.
But 3% of properties will become fully dynamic next month. And as of now, we don't know what this dynamic pricing will entail. This uncertainty makes me a little nervous, but I'm comforted that we can use this 3% of properties to get a preview of Marriott's dynamic pricing before it is widespread. In turn, we can use this information to adjust our future hotel loyalty accordingly.
Related: 10 Marriott properties to book now before the award chart disappears
We'll get a preview with 3% of properties going fully dynamic before the rest
We don't know which properties will fall into the 3% of properties that will no longer have any award night cost bounds as of an unannounced date in March.
Many Marriott loyalists believe these properties will be the most aspirational high-category properties where it's currently possible to get excellent value when redeeming Marriott points. However, I suspect Marriott may also use this hybrid period to test out award pricing at various properties.
Of course, the version of dynamic pricing we see at 3% of properties in 2022 may differ from what Marriott rolls out for all properties in 2023. Even so, I expect that what we see this year will answer some important questions around the move to dynamic pricing, and give us an idea of how Marriott will approach this new pricing methodology in 2023 and beyond.
For example, will dynamic award rates be closely tied to paid rates? If so, we can learn how Marriott will likely value its points going forward. We'll also see if award rates drop or spike at the last minute independently of cash rates. And more broadly, we can assess how award rates for a specific stay vary from day to day and week to week as the stay dates approach.
And this information can inform our decisions — especially regarding what type of value the Marriott Bonvoy program will hold in 2023 and beyond.
Related: 7 ways to maximize Marriott Bonvoy award night redemptions
Hotels may have reasons to offer inexpensive award nights
It's unclear exactly how Marriott reimburses its hotels — most of which are franchises — for award nights. TPG reached out to a Marriott spokesperson in late 2021 for a story about how much hotels get paid when you redeem points. At that time, TPG received the following response from Marriott:
The reimbursement rate is based on multiple factors for each day. Here are some but not all factors:
- Hotel occupancy for that day.
- The hotel's total average daily room rate for that day.
- Type of hotel.
- Member status is irrelevant.
Of course, the spokesperson noted that the factors listed aren't all of the factors. But you'll see that the number of points redeemed is missing from the list. It's general knowledge that most loyalty programs reimburse hotels for the average daily room rate if the hotel is at high occupancy, and for a much lower rate if the hotel isn't at high occupancy.
As such, if hotels are allowed to set their own award pricing — as Marriott said 97% of hotels would be able to do while staying within the off-peak to peak range for the rest of 2022 — it could be in a hotel's best interest to offer low award rates under select circumstances.
For example, assume a hotel is close to the high-occupancy threshold to get reimbursed the average daily rate. The hotel may not want to drop its paid rate. But the hotel might be willing to offer up inexpensive award nights to boost its occupancy if it doesn't think it would otherwise sell the rooms at above its average daily rate.
Likewise, if a hotel knows it will have open rooms, it may see value in offering modestly priced award nights to fill rooms. In short, unless Marriott ties the reimbursement rate to the award night cost, I suspect properties may drop award rates to fill rooms that would otherwise remain empty.
On the flip side, properties that often sell out may not be as incentivized to offer award nights, especially at the last minute when the going rate would be significantly higher than the average daily room rate. And properties that don't like dealing with award stays may increase the rate to discourage guests from redeeming points.
Related: The economics behind hotel loyalty programs (with insights from a former Marriott VP)
I don't make high-category redemptions
I fully admit that I'm not all that nervous about the loss of Marriott's award charts because I don't make high-category, aspirational Marriott redemptions. I've even used the last few months to consider whether there are any aspirational Marriott Bonvoy redemptions I want to make before the award charts disappear. For example, I considered booking a stay at Al Maha, as I'm sure those awards will jump once that property uses dynamic pricing.
In the end, I didn't find any high-category aspirational redemptions I want to make now. In short, I don't think an award night at a Category 7 or 8 property is worth it even at current pricing. But I know many award travelers disagree and prefer to redeem their points for high-category aspirational redemptions that may become more expensive under dynamic pricing.
Related: These design-focused boutique hotels are now part of Marriott Bonvoy
Inexpensive hotels may start offering competitive award pricing
As some regions rebound from travel restrictions and decreased tourism quicker than others, I've come across many Marriott hotels with low cash rates. It can be difficult to justify redeeming points at these hotels even if they are in a low category.
For example, for a recent stay at the Category 2 Four Points by Sheraton Bogota, I had the choice of paying about $58 per night or redeeming between 10,000 and 15,000 points per night. Based on TPG's valuations, I would have needed to redeem between $80 and $120 worth of Marriott points per night. So, I opted to pay $58 per night and earn points on my stay.
I used to see similar issues with IHG hotels before the IHG Rewards program went dynamic. And in the case of IHG, I've still found a lot of value under dynamic pricing. So, I'm hopeful that Marriott's dynamic pricing will make redeeming points — and getting each fifth night free on award stays of five nights or longer — a more valuable option for inexpensive stays.
Related: Quick Points: Save big by catching hotel and airline price drops
Flexibility should help
I expect that my flexibility will help as Marriott moves to fully dynamic pricing. For example, Marriott has multiple hotels in most major cities, and I'm typically not tied to one property or neighborhood.
So, I'll continue to sort by award cost and then quickly compare the current award and paid rates to decide which property provides the best value for the award cost. While doing so, I'll also consider whether it would be better to book a paid rate.
I'll also use Marriott's calendar search to find lower-than-usual award nights. I expect the calendar search tool may be more useful than ever when using a free night award or points to splurge. After all, I could plan a trip around award pricing for the right redemption and award cost.
Finally, despite my Titanium Elite status, I'm not solely loyal to Marriott. In most destinations, I have hotels across various programs to choose from. If redeeming Marriott points doesn't provide good value, I can check World of Hyatt, IHG Rewards, Hilton Honors, Choice Privileges and Wyndham Rewards properties. I usually check competitors before booking award stays with Marriott anyway.
Related: Flexible free night certificates from Marriott and IHG are coming — but it's not all good news
I'm exhausted from loyalty program changes and devaluations
Frankly, I'm also tired of being upset about loyalty program changes and devaluations.
Yes, it's fair to be upset when a beloved program makes decisions that force you to either accept less value or switch your loyalty. And it's fair to mourn the devaluation of a favorite redemption. But I don't want to spend energy worrying about what might happen as Marriott switches to dynamic pricing.
Instead, I'd rather spend this month booking good-value redemptions for travel into early 2023 while Marriott's categories are still intact. Next month, I'll start looking at whether it's still possible to get excellent value on the 3% of properties that Marriott prices fully dynamically. Then in early 2023, I'll see what type of redemption value I can still get.
I tend to avoid programs that don't provide good redemption value. For example, even though Hilton Diamond is easy to earn through Hilton credit cards, I rarely stay with Hilton since I struggle to get a high redemption value. If Marriott slashes my redemption value, I'll certainly start staying with Marriott less.
Related: Pandemic-era devaluations: What's happened to frequent flyer miles and what may come next
Fall back on Marriott's airline transfer partners
Finally, let's assume that award night redemptions with Marriott become significantly less valuable once the award chart is completely gone in 2023.
Unless Marriott also ends its transfer partnerships with its more than 40 airline partners (or slashes transfer ratios), you should still be able to find valuable redemption options for your remaining Marriott points. And, unlike many other hotel loyalty programs that allow you to transfer points to airlines, you can get high value when transferring Marriott points to airlines.
This good value is why we refer to Marriott Bonvoy as one of the major transferable currencies. Plus, for some international airline loyalty programs (such as Asiana, Japan Airlines and Korean Air), Marriott Bonvoy may be your only widely available option for transferring rewards into the program.
You can transfer Marriott points to most airline partners at a 3:1 ratio, meaning you'd get 1 airline mile for every 3 Marriott points. Marriott will also give you 5,000 extra miles for every 60,000 points you transfer. As such, with most airline partners, you get 25,000 airline miles for every 60,000 Marriott points transferred.
For an overview, check out our two-part guide to maximizing Marriott Bonvoy's unique airline transfer options (here's part two of maximizing Marriott Bonvoy's unique airline transfer options).
I've historically had trouble justifying transferring any Marriott Bonvoy points to airline programs due to the redemption value I can get on hotel stays. But I recently transferred a small amount of Marriott points to Asiana to top off my balance and book a United-operated business-class award from the U.S. to South Africa. And if my redemption value on hotel stays drops, I'll certainly utilize Marriott's transfer partners more often.
Related: Here's what you should know before transferring Marriott points to airline miles
Bottom line
Will I be disappointed if Marriott decimates the value that you can get from Marriott points on most hotel stays? You bet. And I'm certainly bummed that Marriott is getting rid of its award chart so soon after adding peak and off-peak pricing.
But I expect the switch to dynamic pricing will hurt most if you enjoy aspirational high-category redemptions or need to travel on peak dates. And luckily, this isn't the case for the majority of my hotel stays.
I'm sure we'll see some high award pricing later this year and beyond in the Marriott Bonvoy program that will cause outrage. But I expect we'll continue to see some good-value redemptions too.
If you're flexible and pay attention to redemption rates when searching for hotels, there's a good chance you'll continue to find good value even in popular destinations. As with IHG's switch to dynamic pricing a few years back, I expect you'll just have to search a little harder to get outsize value from your points.
Of course, I could be wrong. But for now, I'm trying not to react too strongly until we see what Marriott's dynamic pricing methodology looks like.