IHG Rewards Club Award Category Changes 2014

Last week IHG Rewards Club announced that 100 hotels would be going down in cost by 5,000 points per night as of April 15, 2014. My first thought was “okay, and I assume that means 200 hotels are going up in price?”

Nope, as it turns out IHG Rewards Club was legitimately just lowering the award redemption rates at ~100 hotels by 5,000 points per night.

LoyaltyLobby has the full list of properties going down in cost. Of the 100 properties, a vast majority are Holiday Inn and Holiday Inn Express properties. There’s one InterContinental and there are a handful of Crowne Plaza properties.

IHG-Points-Decrease
The InterContinental Shanghai Puxi decreased by 5K points

Why do hotels (typically) shift award redemption levels?

I’ve written in the past about how hotel loyalty programs compensate hotels for award stays. For the most part the major chains simply have management contracts for hotels and don’t actually own them. They’re getting paid a portion of revenue for slapping their name on the hotel and providing management services, marketing, and loyalty programs, but that’s the extent of it. There are of course exceptions, but most chains don’t own a majority of their hotels.

If you redeem points for a stay at a hotel, the loyalty program reimburses the hotel for it. If the hotel isn’t close to full then the reimbursement rate is very low, only slightly above the marginal cost of the stay. If the hotel is quite full, though (typically over 90%), the loyalty program reimburses the hotel at or close to the average daily rate.

So category adjustments are typically based on the anticipated average daily rates at hotels, and I would assume also partly based on anticipated occupancy (since even if a hotel is really expensive, it’s not costing the loyalty program a whole lot if it’s never full).

So why did IHG Rewards Club not raise any award costs?

The above hopefully makes sense, but it doesn’t explain IHG’s actions here. Hotel occupancy and average daily rates are up this year, not down. For example, Marriott recently announced their annual category adjustments, and of the hotels that changed categories, 78% went up and 22% went down.

I think IHG Rewards Club did this as a gesture of goodwill. Last year was the worst year I can remember for hotel loyalty programs, as we saw devaluation after devaluation:

IHG Rewards Club has over 4,600 properties. I think they decreased the cost of ~2% of those to make us feel good, which I appreciate. My guess is that the properties they chose to lower the costs of are also among the ones that the fewest points are redeemed at.

Or does someone have a different theory on this IHG Rewards Club change?

Regardless, kudos to IHG Rewards Club!

Comments

  1. I’m wondering more and more why the heck I changed to Hilton Honors from Priority Club a couple years ago… why ‘o why

  2. i’m liking my US Bank card more and more… not that i would even need to stay at any of the hotels that went down but it’s a very friendly gesture they did.

  3. When I worked for Starwood, I used to submit the award redemptions to corporate. I worked at a Sheraton, so it cost either 12k or 16k depending on the season. We would get $85 for each award night, unless the hotel is >95%, then we were reimbursed by the ADR, so more like $200-$300. I’m all these IHG hotels rarely reach that high occupancy!

  4. Hilton is still the easiest for me to earn aspirational awards even after the gargantuan devaluation of these properties, thanks to the churnability of credit cards that earn and transfer to its points.

  5. Ben, I’m speculating that we may see some roll-back on other IHG promotions – such as “flash sales” or “points breaks”. It’s been my sense that current IHG promos – such as the member tailored Big Win – are not as lucrative as the “old days” of lot’s of stackable promo codes that members could register for. When the promo codes were in vogue, it was not uncommon for me to be able to score 20K points for a single night stay at a HIExpress or Staybridge property. I’m IHG Platinum with a little over 1 million IHG points in the bank, and my Big Win offer for this quarter was only worth about 70K. I determined it wasn’t worth chasing except for some of the low hanging “wins”, and focused instead on securing Hyatt Diamond status through 2/16.

  6. Not a Theory, but at least one program is not devaluing something else. Nice for a change, I need to stay in NYC next week, too bad I don’t see any cheaper ones there.

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