Are Starwood points too valuable for the program to be any good?

I’ve been a Starwood Platinum for several months now after previously being loyal to InterContinental/Priority Club and Hyatt, and I’ve found the experience interesting to say the least. I’ve spent several days trying to figure out how to describe the program, though whenever I come up with an explanation I contradict myself.

Let me start by saying this — I feel like Starwood over promises and under delivers when it comes to in-hotel elite benefits. Contrast that to Hyatt, which I feel under promises and over delivers.

Starwood promises unlimited suite upgrades based on availability which sounds nice in theory. The issue is, that’s awful for managing customer expectations, since you never know what you’ll get. It means you always have to have your “guard up” when you check-in. Sometimes you’ll automatically be offered a suite, sometimes you’ll have to ask nicely, sometimes you’ll have to argue, and sometimes you’ll just get nothing.

Unlimited upgrades works well with airlines, because there’s transparency. When you board the plane and your upgrade hasn’t cleared, you’ll notice the whole first class cabin is full. In other words, you won’t feel like you got screwed. Conversely, with hotels, you’ll see they’re still selling suites on spg.com at the time you check-in, but the front desk will claim there are none available. You have no way of verifying that.

I’ve had fantastic Starwood stays, like the one I had at the Le Meridien Kuala Lumpur (aside from the initial snafu). As a Platinum member I got an upgrade to a beautiful one bedroom suite, free internet, club lounge access, and even restaurant breakfast at one of the most amazing buffets I’ve ever seen. How can you beat that?


Suite at Le Meridien Kuala Lumpur

At the same time, a few nights later I stayed at the Le Meridien Vienna using points. A basic room wasn’t available, so I had to pay a mild points premium to book an “executive room.” At check-in I was given a room key, and I asked about the potential for an upgrade. “Sir, it has been our pleasure to upgrade you to an executive room,” the agent responded. No, I paid for an executive room. “We have no further upgrades available.” The issue is, if you don’t get an upgrade, you have absolutely nothing to fall back on. The hotel didn’t have a lounge. They don’t provide Platinum members breakfast either. So for all practical purposes, aside from free internet and a welcome amenity, I wasn’t getting any benefits for being a Platinum member.

Nonetheless I had a great stay. The hotel was beautiful, my executive room was nicely appointed with a huge balcony, and I loved Vienna. At the same time, at Hyatt I’ve never had a more or less “benefit-less” stay. If the hotel doesn’t have a lounge I get complimentary restaurant breakfast. I always know what I can expect.


Executive Room at Le Meridien Vienna

And then sometimes stays are just hype. Last week I stayed at the Sheraton Suites in Tampa for a mattress run. The stay was “standard” in every way, and I got everything I expected. It’s an all suites hotel, and I’m not even sure if they have any “premium” suites. I really don’t care, because I didn’t expect an upgrade. But what I find annoying is that they not only put your key into a Platinum envelope (as they do at all Starwood properties), but they placed that envelope into an even larger envelope which read “We have upgraded you to our best available room,” which I had never seen before. What was I assigned? A standard room. Again, I was perfectly happy with it, it’s just the “hype” they try to create.

But here’s where it gets really interesting, in my book. My biggest gripe with Starwood, long before I had top tier status with them, is that high end award redemptions are so damn expensive. For me the value in miles and points comes from being able to redeem for “aspirational” awards, vacations I otherwise couldn’t afford. That means redeeming miles for Cathay Pacific first class, the Park Hyatt Paris, etc. In other words, taking a $50,000 vacation having spent nothing more than miles, points, and a few hundred dollars for meals and taxes.

The issue is, Starwood’s truly high end resorts are priced astronomically high, while their mid tier resorts are bargains. Right now I don’t have any travel planned for a couple of months, so I get antsy and start looking at pictures of hotels and resorts I want to visit. Places like the W Retreat Koh Samui and St. Regis Bali catch my eye. However, they go for 30,000-35,000 Starpoints per night.

Then there are other resorts like the Le Meridien Chiang Rai that I’d also love to visit. Ever since Gary reviewed it a couple of years ago I’ve been dying to visit. That hotel goes for 3,000-4,000 points per night, a tenth of the price of the hotels mentioned above. Even better, you can book the hotel using Cash & Points, whereby it would cost 1,600 points plus $30, which is an incredible deal. The thing is, the normal revenue rate is only a bit over $100USD, so it’s a hotel I could otherwise afford.

Obviously the price difference is huge between the Le Meridien Chiang Rai and the W Retreat or St. Regis mentioned above, and the hotels are in totally different leagues. At the same time, the price differential in points is even greater.

Look at airline award charts, for example. A business or first class award ticket typically costs somewhere around double what a coach award would go for. If you were booking a revenue ticket, a first class ticket might be ten times as much as a coach ticket in cash, while it’s only double as much in points.

Along the same lines, look at the Hyatt award chart. The cheapest hotel (category 1) goes for 5,000 points per night, while the most expensive hotel (category 6) goes for 22,000 points per night. So you’re never paying more than 4.5x as much for one hotel over another, even though the difference in revenue rates might be much more than that (and keep in mind in the example above, the Le Meridien isn’t even a category 1 hotel, so the difference is even greater for other hotels).

The funny thing is, the more I think about it, the more I disagree with just about everything I wrote above to some extent. Starwood’s problem is that they’ve actually made their points too valuable because of the ability to convert them into airline miles.

What am I talking about? Well, Starwood lets you convert points to airline miles in over a dozen programs at a 1:1 ratio. For every 20,000 points you transfer, you get a 5,000 point bonus. In other words, when transferring in chunks of 20,000 points, you’re actually earning 1.25 miles per Starwood point.

Let’s keep the math simple here. US Airways miles regularly sell for 1.5 cents each, and almost everyone that places any value on premium cabin travel agrees that’s a great deal. Pre-tax, that’s a $1,500 business class ticket to Europe, a $1,350 business class ticket to North Asia, a $1,650 business class ticket to Australia, etc.

In addition to the 1.25 miles per point that Starwood offers when transferring in chunks of 20,000 points, US Airways runs at least an additional 25% transfer bonus for transfers from Starwood once or twice a year. That essentially means that a single Starwood point is worth 1.56 US Airways miles. Multiply that by 1.5 cents per mile, and you’re looking at each Starwood point having a value of 2.34 cents.

For me, that’s more or less the opportunity cost of redeeming Starwood points for hotels. So if I use 30,000 points per night at the St. Regis or W Retreat, I’m really “paying” $702 worth of points for the night.  For that rate I can easily book a revenue room, not to mention I’d be earning stay credits and points if I booked a revenue room.

The funny thing is, most people view points as “monopoly money” — they don’t care how many points something is, because they view a points redemption as a “free” trip. In my case, when I book a Priority Club hotel I have two options — I can pay for it with money or points. When I decide whether I want to use points or pay cash, it’s typically more of a function of whether my wallet or my points account is thicker that week. There are limits to that, but I’m talking about stays that would cost $200+/night. That’s because the only “good” deal I can get with Priority Club points is hotel redemptions.

So my point, if anyone’s still with me, is that Starwood makes it too easy to determine the value of their points. There’s a huge direct opportunity cost to every redemption. 1,600 points plus $30 for the Le Meridien Chiang Rai? That’s a steal! 30,000 points for a night at the St. Regis? Hmm, I could have about 50,000 US Airways miles instead.

So I’m guessing there’s a good reason that most hotel programs have crappy conversion rates when transferring points to airlines… they don’t want you to know just how valuable your points are!

Comments

  1. A few comments:
    a) I agree with your comments on how SPG over promise and under delivers 100% I would also add that the SPG hotels in general, do the same thing for the same money usually sheraton, Westin etc are the worst by far. But (to your second point) the SPG points are so valuable when converting to airline miles…

    b) I think your blog is important enough that you should be careful when saying that SPG’s point are worth too much because we ll know SPG is well into social media, forum and blogging research etc. Therefore it would be great for all of us (including you) to maybe edit your post because we would not want SPG to change their airline conversion rate, thank you in advance for your consideration.

  2. The problem is that Starwood pioneered the no capacity control redemption model, and built a high cost redemption program. Their standard hotel reimbursements wind up around a penny per point, which is higher than at Hilton for isntance. And that’s before they reimburse at average daily room rate when occupancy exceeds 90%. As hotels filled up in 2006 and 2007, their costs really shot up. So they adjusted the program with a new category 7, and more and more hotels rose to new higher levels. Including to the 6 and 7 levels where all suites properties are charged double (which penalizes members twice — they are category 6 and 7 because of their room rates, but their room rates are so high in the first place because of their room offerings).

    In the early days before Category 7 — and before Category 6 — and without the surcharge for all-suite room types — there were some exceptional values at the very top end of SPG.

    Hyatt and Hilton and to a lesser extent Marriott were able to match the no capacity control redemption model of SPG building on their lower cost program, and doing it when hotel properties were hurting around 2009.

    Starwood suffers because it was first out of the gate with a high-cost, high-value program, it was a pioneer which got overtaken by costs as the boom years hit, and they really did devalue the program in my view. (And also devalued the mileage redemptions, there used to be several 1->2 transfer options and now only LAN remains).

    The problem with Starwood isn’t that it’s clear what their points are worth. It’s that the reduced the value of those points for top-end hotel stays, compared to what they offered earlier on.

  3. @ david — Hey, at least when the “enhancement” comes they can say with a clear conscience it was “due to customer feedback.” 🙂

    In all honesty, I can’t imagine my little corner of cyberspace would have even the slightest impact on their plans.

    @ Gary — Totally agree, though I have to ask, what is it that actually makes SPG’s category 7 redemptions bad deals (which is why the argument about the relative value compared to airline miles kicks in).

    They do have fifth night free awards, so in theory five nights at a category 7 hotel costs 120,000 points (during low season). That’s 24,000 points per night, compared to Hyatt’s 22,000 points per night. Yes, you earn more Hyatt points per dollar for hotel stays, but both the Hyatt and SPG credit cards accrue one point per dollar. So for the person earning hotel points through credit card spend, the redemption values are about equal, no? Yet I think we would still consider high end redemptions with SPG to be a bad deal (while we wouldn’t with Hyatt), despite the only 2,000 point per night difference. That’s where the ability to convert points to miles kicks in, in my opinion.

  4. The Hyatt Visa is not a good primary spend credit card. It’s good because you need a Visa (or Mastercard) for places that don’t take Amex and for avoiding foreign currency transaction fees. But it’s a mistake to compare the value of the PROGRAMS based on the value of their CREDIT CARDS. I’d say that Hyatt is a more generous hotel earn program, Starwood is a much better co-branded credit card.

    My point about category 7 is high season, double points for the best properties. The W Retreat Koh Samui which you mention is all suites so it’s actually 40k – 50k points per night even though it’s just category 6, and I’ve seen plenty of room rates there under $500.

    Take the Park Hyatt Maldives, 22k Hyatt points per night, you’re earning 5 points base per dollar of hotel spend plus Diamond bonus and amenity. A Starwood Platinum earns 3 points per dollar plus amenity. And then Hyatt runs far more points promotions (even now without the G bonuses).

    Compare that to Starwood in the Maldives, where you’ll spend 60k – 70k points per night! (And I’ve seen under-$600 rates at the W there…)

  5. I also think that lackluster (compared to Hyatt) elite benefits and lack of bargain aspirational redemptions are two separate, unrelated issues. Both ARE program expenses, but status quo prevails for very different reasons.

  6. The funny thing is most SPG apologists (including myself) insist Starwood points are much too valuable to convert to airline miles. One can still usually find a much higher rate of return by using points for their hotels, including cat. 5 & 6 properties.

    I don’t even consider using my points unless I can get a 2.5 cents per point return. Still, like you, I have a hard time spending them on properties that ask for rates under $200. Even with this criterea, I usually burn through as many points as I earn per year.

    I personally wouldn’t have a problem using my points for a cat. 7 property as long as the lowest rate I could find was $750 (compared to low season point redemption). In this case, I would still be getting a better value than the conversion example to US Air above. The bigger problem is that a large percentage of cat. 7 hotels are all suite properties and thus require double points to book, making them even worse values. But that’s a whole different issue.

  7. Those 20K/night properties are very painful…

    I rarely feel good about Cat 5/6 redemptions, as I feel like I’d rather spend the $1.5K-2K for the week instead, and also earn those points.

    But you are right, I think I prefer to transfer SPG points to US Airways and Aeroplan, and spend Hilton and Priority Club points on hotel stays quite freely, b/c that’s all you can really spend them on.

  8. I really have to echo your point on the crappyness of the elite segment. I’ve been SPG Gold for several years now, and I’m almost always disappointed in the room that I get at any given hotel.

    A few times, I’ve had an amazing experience, but those just make the average experience so much worse.

  9. @Jonah Starwood Gold’s only ‘real’ benefits are (1) you shouldn’t get the worst room at the hotel, (2) you earn 50% more points on in-hotel spend, (3) you get 4pm late checkout guaranteed except at resorts and on designated conference dates at other hotels.

  10. One thing that is steering me away from SPG and over to Hyatt / Marriott recently is the “free internet” Platinum amenity is frequently included in the resort fee packages.

    These resort fee packages are going up and essentially “double” charging elites for amenities they already earned.

    For instance the St Regis Puerto Rico charges $60 a day for basically nothing but use of their pool chairs / beach chairs, internet, and fruit / water spritzers at the pool. Ridiculous…

  11. Due to the 25% airline transfer bonus, which is stackable with airline promotions, e.g. the recent US Airways promotion, I never use SPG points for rooms. And like you suggest, because they have such incredible Cat 3/4 properties in Asia at low rates, especially if you go off-season, I never feel the need to use my points for hotel stays.

    Now I would love a breakfast benefit, at the very least at Four Points since it is equivalent to a Hampton, but I still like the current suite policy more than Hyatt.

  12. @The Weekly Flyer – resort fees make my blood boil. SPG does that here in Hawaii and it is essentially just free parking. But if you are not using a car, you still pay it.

  13. I very seldom use SPG pts for rooms either. Like Lucky, I value a starpoint at about $.02 – .0225 each. Most redemptions are crazy expensive. Compare that to my recent NYC redemption – Crowne Plaza Times Square for 15Kpts + $60 earch night. Going rate on that those rooms were $450/night. (And considering I got 45K pts from PC for playing trivia earlier in the year, I consider that a win). And I just booked the Hyatt Kyoto for 18K pts a night for a normal room rate of $450+/night, (and I will get the lounge or breakfast each day as a Diamond). Sorry SPG, I accrue pts through CC and stays for airline transfers like most rational people.

  14. One of my favorite part of SPG is the ability to earn points at their restaurants and bars and still earn starpoints on top of my regular credit card awards. In New York, they have some great options that I would normally go to, and the starpoints are a kicker. At le parker meridien, norma’s has an amazing brunch and their lobby bar is amazing. At the w hotel on lex – whiskey blue is a ton of fun. I also love olives at the w in union square.

  15. My companion is a Hilton Diamond, and EVERY property we go to gives us automatically, a free breakfast, or access to the club lounge where we can have breakfast or early evening snacks. The upgrade to the next room class is also automatic.

    I am a Starwood P, and I must agree with the writer, when I get the upgrades, they are wonderful. The only downside, is that very few times are they automatic. Most, I need to ask, a few times I argued. One Sheraton clerk in Sapporo said flatly, that there were no suites. I had been told I had one during making my reservations, so we asked to have a meeting with the manager. Magically, she came up with an available suite. I’m not sure I want to keep having to go through all this trouble to get my perks.

  16. @Steve – The catch with SPG Plat is that you’re entitled only to a “standard suite,” and a property may have many suites not meeting that description. So the clerk may have been right (as far as suites you’d be entitled to) and the manager more generous than necessary.

    Whather or not that’s what happened in your case, it’s undeniable that SPG’s policies on this score, and the practices of hotels, result in confusion and hard feelings.

  17. I’m confused. You say: “The thing is, the normal revenue rate is only a bit over $100USD, so it’s a hotel I could otherwise afford.”

    I followed your link and it seems the cheapest rooms are about $150. Was this what you meant by “a bit over $100”, or is there a way to book a room for cheaper?

  18. It seems to me from lucky’s post that a great redemption with SPG is the points and cash option which enables a much smaller expenditure of points for a small cash copayment.

  19. @ Clueless about hotels — Plugging in rates in September, I see rates of under 4,000THB, which is under $130 all-in. I know there are sales sometimes, though that’s the “normal” rate I’m seeing.

  20. So, I just booked a night at the Westin LAX for 1600 points + $30.

    I needed a night near the airport. OK, really I needed one on both ends of a trip, so this is really x2. What do you think? Good use of cash and points, or am I banned from Ben’s corner of cyberspace?

  21. So, seems the consensus of your readers is:
    1. Sheraton LAX
    2. Westin LAX
    3 4 Points LAX

    Sheraton LAX is not available for cash and points, so I guess I’ll stick with the Westin. I’m only SPG Gold, so not sure I’d get anything special at the Sheraton anyway.

    When I stayed at the Westin on a bump, I thought it was a pretty nice. But then again, I’m also in a good mood with $400 in my pocket…..

  22. The thing about SPG and Starwood is that they do not (officially) encourage people to redeem at St. Regis properties. Much like the Suite class on SQ, they rather you pay for it than getting it for free. That’s why the redemption rate is so high.

    Otherwise, why isn’t it reasonable to determine the rate of redemption based on the average room rate of the property? I find that very easy to keep the value of every redemption in check, no?

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