Loyalty Traveler – June, 19 2012

Loyalty Traveler – June, 19 2012

Redemption Angst

Randy Petersen’s InsideFlyer Opening Remarks last month alarmed me with his statement on hotel loyalty programs. In “People Get Ready, There’s a Change a Comin’…”, Randy said, “Seems to me that by floating the award chart to be based on revenue it might alleviate the seemingly annual angst that many frequent travelers currently go through when hotel categories change.”

A Vision of Revenue-based Hotel Award Redemption

Floating the hotel award chart based on revenue would likely lead to a massive devaluation of points across most major hotel chains. The system of annual hotel award category reassignment based on hotel popularity and average daily rates is one I favor over the revenue-based redemption models currently used by a few hotel loyalty programs.

Le Club Accorhotels, Stash Rewards and Hilton HHonors are three points-based hotel loyalty programs already operating with different models of revenue-based points redemption. The primary consumer advantage of revenue-based redemption models is the ability to book any room category at a hotel using points, even suites.

Le Club Accorhotels does not use award charts. Vouchers are offered in several currencies including $60 or 40 as payment credit for hotel stays at 2,000 Accor points. Since the redemption value of points is fixed, members can only improve their points earning rate with hotel stay and partner activity bonus points.

Currency fluctuation around the globe gives some Accor vouchers higher value–$60 vouchers offer $30 per 1,000 points redemption value, 20 percent more than euro vouchers when 1 = $1.25. Points redemption value is only $25 per 1,000 points with 40 vouchers.

Stash Hotel Rewards pegs the redemption rate for hotel nights to the actual room night price. This true floating of the award chart might seem like a more logical system when a $300 room night requires more points than a $200 room night. This system is more favorable for hotels, but not advantageous for consumers using points-based hotel loyalty programs.

Stash Hotel Rewards publicizes its revenue-based redemption model as easy to use with no charts or complicated tables. I find it far more time-consuming to check individual hotels for special redemption offers and hotel stay earning bonuses. This would be a complicated system in hotel loyalty programs with thousands of hotels like Best Western, Choice, Hilton, Marriott and Wyndham.

In a small sample of Stash Hotels in San Francisco the redemption value of points ranged from $11 to $13 per 1,000 points. With an earn rate of five points per dollar, Stash Rewards offers about $12 in hotel credit for $200 in spend. Promotions can double or triple the points earn rate. This is still relatively low compared to 30 percent or higher rebate value frequently possible in major hotel loyalty programs.

Hilton HHonors is the first major hotel loyalty program to initiate a floating award chart system with Premium Room Rewards. The redemption rates for Premium Room Rewards generally have a maximum value far below the potential value of points redeemed for HHonors Standard Rewards.

Hilton San Francisco Fisherman’s Wharf, HHonors Category 7 hotel, has Standard Reward availability in July for 50,000 points on a $299 published rate. This is $6 per 1,000 points redemption value. A Premium Room Reward night for a $369 rate junior suite is 90,405 points. The points redemption value drops to $4.08 per 1,000 points. A full suite is $469 or 114,904 points and the redemption rate remains $4.08 per 1,000 points. HHonors points redemption value is nearly 50 percent higher with a Standard Room Reward.

Conrad Tokyo in July has a Standard Reward for 50,000 points on a $609 city view room rate. This is a high redemption value of $12.18 per 1,000 HHonors points. Even better is Points & Money Reward for 25,000 points + $89 offering redemption value at $20.80 per 1,000 points. Change the city view to a bay view room and Premium Room Reward cost is 164,991 points for a $673 rate. The redemption value drops to $4.08 per 1,000 points; the same as the San Francisco hotel Premium Room Rewards. As a consumer I like the option of HHonors Premium Room Rewards, but I certainly prefer to redeem points for three nights in Tokyo with a city view rather than one night with a bay view.

Hilton HHonors Premium Room Rewards exemplify what I think will happen if hotel loyalty programs change to revenue-based redemption. Hotel loyalty programs setting a fixed-value redemption rate for points will apply downward pressure on the value of points across all hotel loyalty programs. Point value will float toward the minimum redemption value competitively sustainable.

Hotel category reassignment may induce annual angst; however, the hotel award category system at fixed points, e.g. HHonors Category 7 hotel is 50,000 points, favors the value-focused loyalty traveler.

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