Opening Remarks – February, 17 2010

Opening Remarks – February, 17 2010

My Thoughts

When I got a call recently from Steve Sickel, InterContinental’s senior vice president for distribution and relationship marketing, I thought we’d be talking about yet another promotion from Priority Club because that program is known for its bonus points promotions. It’s no secret, I love bonus promotions, and I’ve enjoyed the constant promotions from Priority Club. But this was a much different type of call than I expected. As many of you now know, Priority Club ran a promotion specifically pointing out recent (unpopular) changes in the Hilton HHonors program. This is highly unusual among loyalty programs, although many have for years included some sort of comparison in their advertising. And who will forget the subtle attempts at stealing elite members from the competition when airlines like United, US Airways and others were in the throes of bankruptcy? Yes, it may be a ‘gentleman’s club,’ but that never stopped any program from trying to gain wallet share … even at the expense of another program’s problems.

In this case, the problem started when Hilton HHonors announced in October 2009 that they were going to institute award level changes to their program. Nothing new, others have done it and it’s been nearly seven years since Hilton last did some major tuning to the HHonors award program. Along the way other programs have made small changes and you could say even frequent small changes. In fact, while Priority Club is enjoying the spotlight for this brilliant marketing move (and yes, I consider it brilliant) in a time when we question all changes, they made changes to their award redemption in 2005 and again in 2007. Hilton did not make similar changes during that period. It’s likely that Hilton adheres to a practice of making singular larger changes rather than constant nickel-and-diming types of changes. And apparently the time had come for them.

Most of the news coverage about Hilton has focused on how Hilton has devalued their program, not where the change now places them among the other programs. The fact is that Hilton HHonors has long enjoyed the highest value for free night awards among major programs. When we ran a program comparison based on member spend back in June and July 2008, HHonors easily was ranked the highest among the many categories for low-spend, moderate-spend and high-spend travelers. HHonors won in the low- and moderate-spend categories and finished among the top two for the high-spend traveler. I revisited those rankings and plugged in the new HHonors award chart and while Hilton does not now rank as high as they did, they don’t fall to the bottom either. If anything, they are with the pack or slightly above, but never below the pack when it comes to value derived from member spend. But again, that’s not what the focus has been on. I’ve been around these programs long enough to know that great value is always of the moment and we’ve all enjoyed this particular ride.

In this case for HHonors, it’s not the message, it’s the messenger. And my message for Hilton is that they might have avoided all this bad press with better planning and timing. The masses, including the media, have focused on Hilton raising redemption levels when hotel rates have gone down. I can’t argue with that. The more knowledgeable media have also focused on Hilton’s lack of transparency. While HHonors gave members advance notice of the changes, the actual list of hotels moving redemption categories was late in coming, as in really late. Many ardent fans of HHonors are also ardent fans of select hotel properties when it comes to redeeming their points for awards. They take into consideration the best value and the positioning of the hotel. By not allowing members a first glance of where these property award changes were going to occur, they lost some respect and trust from members regardless of the actual valuation of their program. As I have noted from members spend research, they are still a program that will work for most members of any hotel loyalty program.

The concept for the promotional strategy from Priority Club is easily viewed as a way to accomplish two goals: 1) attract a disgruntled member base from the HHonors program and 2) provide an even deeper competitive research base for future marketing campaigns. The only way that this works for Priority Club is the intelligence that comes from the many Hilton HHonors statements coming their way as part of the promotion.

As for my interest in all this? Well, I’m a member of both. If my HHonors account balance is among the top 20,000, Priority Club will give me 20 percent of that balance–in this case, the balance that I reported to them is 1,770,867 points. And I don’t even have an HHonors credit card. My guess is that I will fall into the top 20,000 and by the time that this promotion closes at the end of February, I will have a few more points, I’m still looking at adding at least 354,173 Priority Club points to my account. And who knows, maybe I’ve got a shot at the two million point prize, though I’m very sure there’s a few more point millionaires higher than me with HHonors.

So, what’s this all mean to me?

Well, I’m happy with both programs, although I enjoy a more emotional attachment to the Priority Club program than with Hilton. It was Priority Club that really got me going in what I do today. But I have a lot of Hilton HHonors points because as I noted earlier, they have offered a great value in their program for quite some time and I do follow my own advice. Like you, I’m never happy to see changes with my point balance, but have learned to roll with the punches. Does this make me want to quit HHonors? No. I don’t like the change and would have liked more transparency in the actual hotel level assignments, but it’s not enough to make me leave HHonors. It may however, cause me to rethink some stays that might have been added to my HHonors point balance once I fully assess the new member spend comparison for all my hotel programs–and that is exactly what HHonors should be wary of. Sure there will be blowback, but HHonors can weather this storm. I know members of HHonors’ competing programs who aren’t happy with some sort of change in their program too.

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