Hotel loyalty programs undergo point value changes
By Jeremy M. Simon | Published: December 24, 2006
Reward credit cards that offer points toward free hotel stays may be losing some of their value, based on changes to hotel loyalty programs. Hilton Hotels increased the effective cost for a free night in many of its hotels earlier in 2006, and now Starwood is following suit with similar moves.
Hilton's change saw the company reclassify about a third of its hotels, boosting around 800 into higher categories in its Hilton HHonors loyalty program and dropping 100 into lower categories. Although Hilton did not directly raise the prices for members, such as those using credit cards like the Hilton HHonors Platinum Credit Card or the Hilton HHonors Visa Credit Card, it does require more points for a stay in any of the hotels that moved up in category.
Meanwhile, for users of credit cards like the Starwood Preferred Guest Credit Card, Starwood Hotels is adding a seventh category of award redemption, in effect boosting the amount of points necessary to redeem for free stays at nine of its leading hotels. As of Feb. 1, 2007, a free night at hotels in the new category will cost 30,000 points during low season and 35,000 during high season, an increase of 10,000 points from the existing highest award rates of 20,000 to 25,000 points.
According to hotel companies, which reimburse their individual hotels in dollars for free award nights, the new categories stem from higher hotel rates and, in part, new features or amenities. Hilton reported that its Hampton Inns have been getting improved bedding, while Starwood said it charges the higher points in its new category for properties with special features such as extra-large rooms.
Still, for guests who pay higher rates at chains where they stay regularly in order to earn points, the result is a devaluation of their point collection, since they will be getting less for their earnings for the identical number of dollars spent. In other words, their reward credit card points will have lost value.
Hotels state that such changes are fair because room prices have risen. Hilton HHonors Worldwide explains that as room rates have advanced the amount Hilton HHonors has had to pay for the program has increased. Hilton HHonors adds that it is never trying to make a profit off of award rooms.
The rise in points has, in certain cases, stemmed the jump in national average room rates, which have climbed about 14 percent over the six years ending in October 2006, based on the latest data from Smith Travel Research, which compiles and analyzes information on the lodging industry. Still, looking at Hilton as an example, its major hotel reclassification requires 14 percent to 33 percent more award points.
Hilton says that the greater rise in award-point prices versus cost in dollars is based on high demand for some hotels. Hilton noted that in order to encourage popular hotels to take points for rooms on sold-out nights, the hotel chains reimburses them at higher rates.
Elsewhere, a free night at any of the hotels Starwood is moving into its new highest award category will cost 35,000 points during high season, a 40 percent spike from the existing 25,000. Starwood emphasizes that only nine hotels are being placed in the new category, although in a posting on a frequent-flier Web fsite, the customer service coordinator for Starwood Preferred Services suggests that more hotels will be placed in the category, while very few will be moved down in category status.
Those frequent hotel guests looking to get the most from their points still have some time to redeem at the current lower rates, with Starwood Preferred Guest members able to book at the existing award rates until Feb. 1, 2007, for hotel stays up to 18 months in advance. Reward credit card holders looking to redeem their hotel award points should carefully select their dates, since tacking on a few days to a vacation once the new categories take effect could produce the unwelcome surprise of a charge at the new rates.
- Is it worth keeping the Chase Sapphire Reserve for a 2nd year? – The one year anniversary has arrived for Chase's blockbuster premium card; we break down whether it's worth keeping once you've used the big bonus ...
- Paying for a rental car with debit card: 9 obstacles – Want to rent a car using a debit card? Expect extra hassles ...
- When do credit card rewards, airline miles, hotel points expire? – Your credit card rewards could have an expiration date, and if you ignore that deadline you could be throwing away money ...