Saturday, January 28, 2012

Hotel Loyalty Program Free Night Redemptions

*Updated May 7, 2013*

One of the biggest difficulties in evaluating which hotel program gives the best value for its free stays is because the point values of each program varies. Hilton points are often seen as being worth less per point whereas Starwood points are generally much more well-regarded. So does that mean Starwood points are the best and Hilton points the worst?

To better understand this problem, it is probably best to look at a few examples.

Starwood Preferred Guest

Starwood's Free Night Award requirements, listed here, outline how many points are required for a free night at the different category hotels in their program. For example, the Category 4 Sheraton Kona Resort in Hawaii charges 10,000 points for a free night that would usually cost about $200 USD after tax. In this case, its fairly clear that each point has a value of $200 / 10k = 2 cents / point. Assuming there is no spending at Starwood hotels (for us non-business travelers), the Amex Starwood card earns 1 point per $1 spent, hence we earn approximately 2 cents value back per $1 (in other words, 2% cashback).

Marriott Rewards

Similarly, if we look at the Marriott award chart here, we can do a similar calculation with say the Courtyard Denver Downtown. This category 4 hotel, requiring 20,000 points per night, generally goes for between $150-$250 / USD per night (lets call it $200). This easily translates to 1 cent / point. Since the Chase Marriott card gives 2 points per $1 on travel/restaurants but 1 point per $1 on everything else, we'll average it out to about 1.5 points earned per $1 spent and hence 1.5% cashback.


For IHG/Priority Club, given the wide-ranging categories spanning category 1 thru 9, redemption values are a bit harder to quantify as the redemption rates sometimes don't quite equate to cash pricing. Taking the Holiday Inn Vancouver Center for example, we would have a cost of $125 or 15,000 points giving a rate of about 0.8 cents / point. Alternatively, the Crowne Plaza Osaka can go for $150 or 25,000 points giving a rate of 0.6 cents / point. As the variation varies quite significantly for IHG properties, we'll use an approximation of 0.7 cents / point. As the Chase Priority Club card has category spend similar to the Marriott card but with gas stations and groceries added, we'll also average it out to about 1.7 points earned per $1 spent and hence 1.2% cashback when redeeming.

Hyatt Gold Passport

Hyatt redemptions are likely the most valuable based on their award chart as a Category 2 property Hyatt House Austin costing 8,000 points per night can be had for about $240 in cash working out to 3 cents / point. However, higher end Hyatt properties like the Category 4 Park Hyatt Toronto charges 15,000 points or say $300 per night giving a rate of 2 cents / point. Given the minor variation, we can average this out to about 2.5 cents / point. And since both the Chase Hyatt and Chase Sapphire Preferred cards again have category earning somewhat similar to the Chase Marriott, we'll use 1.5 points earned per $1 spent thus giving us an astonishing 3.75% cashback! I thus worry about a potentially huge Hyatt devaluation (whether it comes tomorrow or 2 years from now, no one knows) and hence I would urge anyone with Hyatt points to use your Hyatt points for redemptions

Hilton HHonors

Hilton, after its most recent devaluation of its program and tweaks to its credit card category bonuses, has brought their program more inline with the competition. A night at the Category 6 Hilton Orlando costs 30,000 points in June at a rate of about $175 translating to about 0.58 cents / point. A night at the Category 9 Conrad HK in the same month can go for 80,000 points or $450 USD thus equating to about 0.56 cents / point. We could go on and on but for the sake of argument we'll use the lower 0.56 cents per point. Given that the fee-free Hilton Amex gives 5 points per dollar for gas/groceries/restaurants and 1 point per $1 on all else, we'll average out to 4 points per dollar for general spending. This gives a rate of 2.24% cashback! Surprisingly good considering the most recent devaluation.

Admittedly, we have only looked at a very small number of hotels for these sample comparison and they cannot obviously reflect the actual redemption value for the specific dates/times/locations/hotels you may be looking for. However, based on the current award charts and the price/point redemption ratios I've generally seen around, my estimation for the value of reward bookings would be as follows:

Hyatt: 3.5% - 4% cashback
Starwood: 2% - 2.5% cashback
Hilton: 2% - 2.5% cashback
Marriott: 1% - 1.5% cashback
IHG: 1.2% cashback

As you can see, Hyatt offers the most value in its redemptions followed by Hilton & Starwood (yes, Starwood has been slowly devaluing its chart to the point that I would equate Starwood and Hilton redemptions). Marriott and IHG clearly fall well behind the pack. In general, I would recommend you get at least as good value as the above before making a free night redemption to make your stay worth it but for me, Hyatt is my current favorite hotel program as far as valuable free night redemptions go.

No comments:

Post a Comment