Here’s Why Hilton HHonors Has Variable Award Pricing Within Each Category

Yesterday I had the chance to sit down with Mark Weinstein, Hilton’s Global Head of Loyalty & Partnerships.

Ultimately I have mid-tier Hilton HHonors status thanks to their co-branded credit card, and I do stay at Hiltons occasionally. While Hyatt and Starwood are my preferred hotel chains, ultimately they can’t compete with Hilton in terms of their portfolio. Hilton has about double as many properties as Hyatt and Starwood combined.

With that in mind, I recognize that Hilton HHonors doesn’t have to be as rewarding as Hyatt Gold Passport and Starwood Preferred Guest. There’s a reason the three biggest major hotel chains — Hilton, IHG, and Marriott — don’t have elite benefits which are as lucrative as the smaller chains.

But elite benefits aside, one area I’ve often criticized Hilton HHonors is with their award chart. Hilton had a huge award chart devaluation in early 2013 (at least as far as aspirational redemptions go), though on paper they haven’t devalued the program much since.

And the reason they haven’t devalued the program much since is because they don’t have to. Not only do they have 10 award categories, but there’s a huge variance in cost within each category. Here’s Hilton HHonors’ standard room rewards chart:

Hilton-3

For example, anything from a Category 6 to Category 9 property could cost 50,000 points per night. And on paper if Categories 4-9 moved up by 10,000 points each, we’d never know, since technically none of them changed categories, and technically the cost of a stay in a given category hasn’t changed.

I mentioned this to Mark, but his response actually sort of enlightened me, and I think I understand Hilton HHonors better now.

I’m of course paraphrasing here, but his response was basically “paid room rates vary night to night, so why shouldn’t the points rates reflect that? Everyone should be getting roughly equal value out of redemptions, as opposed to some members subsidizing others.”

And the more I think about it, the more I think the approach has some merit. He gave the example of the Hilton Ocean City, which is extremely seasonal. It’s a Category 9 property, because in summer rates there are outrageous. For example, you can pay $529 or redeem 80,000 HHonors points.

Hilton-1

Meanwhile Ocean City is dead in winter, and paid rates are a third as much, while award redemptions are 50,000 HHonors points per night.

Hilton-2

So my impression of Hilton HHonors’ award pricing has changed. Previously I thought this was a sneaky way for them to raise award costs without us noticing, but in practice they’re basically introducing dynamic pricing. While Hilton redemptions aren’t directly revenue based, they do now more closely reflect paid rates thanks to the variance in each category.

Let me be clear about something. I love programs where I can maximize value, and that’s why Hilton HHonors isn’t for me as a primary program. I love being able to redeem points in an aspirational way and getting disproportionate value.

For example, it’ll cost me 15,000 points per night to stay at the Hyatt Regency San Francisco, regardless of whether the paid rate is $209 or $524:

Hyatt-Rate-2

Hyatt-Rate-1

Bottom line

I’m not saying I like Hilton’s variable pricing, but I do get it — it finally makes sense to me. Similarly, when it comes to airlines I far prefer programs with award chart based redemptions over programs with revenue based redemptions. That’s because I can get a disproportionate amount of value that way, while other people not as well versed in the program get a crappy value. But that’s also why some people prefer revenue based programs, because they’re at less of an information disadvantage.

All of this is simply to say that there’s merit to Hilton’s system, whether we like it or not. I wouldn’t be surprised if it’s the future of hotel loyalty programs, whereby the redemption cost is tied more closely to the paid rate for a given night, given how much rates can fluctuate.

I don’t think it’s just the airline industry which is headed in a revenue based direction…

Comments

  1. Why doesn’t Hilton just do a fixed point per dollar ratio like Southwest used to do until recently? In your example above, the Hilton Ocean City would be an even better deal at below 30,000 points.

  2. Hilton’s award pricing is, in principle, no different from airlines’ different categories of award seats (“standard,” “saver,” etc), right? The only difference is that different hotels fall into different categories – but this is similar to different classes of service on airplanes.

  3. Starwood could learn a thing or 2. Their award nights are horrible value out of season, and so are their cash and points values.

  4. Not just Hilton. I’ve noticed with IHG that many times “standard” rooms are not available on rewards, only very expensive business or luxury rooms.

  5. This does make sense conceptually, though @Brett makes a good point that if they care so much about this, they might as well just go to a fixed point per dollar system, which would align with Mark’s comment even more.

    My problem with this type of system is that if applied the way Mark explained it, it’s logical, but it also enables stealth devaluations. A hotel “going up a category” is very noticeable as a devaluation of that property, but for any given property, they could easily change the high season/low season distinction without notice or without anyone really noticing (e.g., now 10 months are high season instead of 6 for a given property).

    This is really hard to keep track of overall, because unlike readily available complete lists of which properties are in which category, to see what percentage of the time given properties consider it high or low season, you’d have to do that on a one-by-one basis, so it’s much harder to get caught.

  6. I’ve had plenty of times where I was spending on a Hilton credit card for a hotel night and then the hotel shifted within its category to make that night more expensive as it got full. Makes it very hard to privilege Hilton points over cashback or another currency. Thus, uncompetitive.

  7. If that were the case, HH would make awards available whenever a paid room is available. That is not the case and Mark’s statement doesn’t hold water.

  8. @Lucky sez with a straight face: “There’s a reason the three biggest major hotel chains — Hilton, IHG, and Marriott — don’t have elite benefits which are as lucrative as the smaller chains.”

    That’s just the biggest b.s. and the sad thing is he even believe it is true!!!

    Why do you keep repeating that demonstrable falsehood? Please name those elite benefits that are more lucrative at SPG or Hyatt GP than at HHonors and let’s that debate, yet again.

    It is perfectly fine to say that you prefer SPG and Hyatt to the bigger programs because of some SUBJECTIVE value that you derive out of smaller programs, but you cannot claim that it is because they offer more lucrative benefits than the larger programs. Hyatt GP is the stingiest program in the business, and with just 8th size of HHonors good luck finding a Hyatt program in your path. And, SPG is, by far, the most expensive or least rewarding program in the business in terms of spend per free night…demonstrably.

    The two programs are, in fact, so ho-hum that Hyatt was ranked 9th of 16 and SPG 14th of 16 in the latest JD Power survey, which you did not even mention even though I am sure you would have been all over it if it had substantiated your and other bloggers’ view of putting Hyatt and SPG at the top for reasons that are completely bogus.

    Please stop spreading the canard!

  9. BTW, the last time I checked, SPG does also have “seasonal” award pricing for their top-tier or “aspirational” properties (cats 5-7), which @Lucky is so fond of, and, yet, we have not heard anything negative about that. In fact, simple modeling easily shows that those top-tier SPG properties are, by far, least affordable in the business!

  10. As someone who is top tier with Starwood and Marriott and Hilton, mid tier with Hyatt, I can say I agree with Lucky 100%. Suite upgrades are the most important to me and both SPG and Hyatt are more generous in that way, with or without SNAs or Hyatts equivalent.

  11. As far as JD Powrs credibility on this subject, is say it’s on par with Yelp comments on auto reliability

  12. @Beachfan – It sounds to me like you have been drinking too much of the travel bloggers’ kool-aid. The JD Power surveys have their problems as do most public opinion surveys, but the company overall has a decent a reputation. That travel bloggers disagree with their survey for not putting Hyatt or SPG at the top is no reason to question their results! I happen to believe that travel bloggers tend over-estimate Hyatt and SPG. Hyatt GP is, at best, a work in progress, at worst a joke; and SPG is too expensive for most who play the mile/point game on their own dime. There is no reason to rank them at the top other than the bloggers want them there for reasons that are invariably bogus when scrutinized…

  13. Please refrain from spreading your vitriol to me. Get some manners.

    I am talking from 100% my own experience based on 30 years as a road warror.

  14. @ Beachfan : as someone who has top tiers with Marriott, Hilton, SPG and Hyatt (only platinum with IHG), I could say the completely opposite thing, but “ONLY based on my experiences in ME (Middle East)”. Most of time without request or very easily with request I get suite with Marriott and Hilton properties, but occasionally with SPG and hardly with Hyatt (unless using my Dia Suite awards). Nevertheless I still remain a more or less SPG and Hyatt loyalist, but at the same time I have been quite surprisingly and pleasantly impressed with benefits that I get from Marriott, Hilton and IHG in the region. So I am seeking Hilton Diamond again this year (and will buy back Marriott status with points lol..).

  15. @jessie

    I can believe that. I’ve done amazingly well in Asia with Marriot upgrades. An occasionally in Europe- but never in the US

  16. I was a loyal Hilton Diamond for several years, but now avoid them like the plague. Every time I try to book a hotel, the category they show has no relation to the points they want to charge. I just tried to book the Doubletree Arctic club in Seattle. The cash rate was about 250-260.00. It is a cat 6, and should be 40,000/nt. It was 129,000 points/nt.! Really??? At that cash price it’s impossible to believe they didn’t have regular rooms available. I tried to book the Maui Waldorf, which for the season showed something like 80,000 points/nt. The cheapest they had was 150,000/nt. I might have just paid the cash price, but don’t want any more worthless Hilton points. I ended up paying more to stay at the Fairmont. I booked 8 nights in 4 cities, which at one time would have included a lot of Hilton stays. Not anymore.

  17. @DCS

    The JD Powers survey is heavy at the top with the largest hoteliers/airlines for a reason. The survey weights its categories as if it were surveying customers about their bank preferences. While the wisest of individuals would focus on banks which give them the best terms, service and product lines (much like what many bloggers try to focus on), the vast majority of people only focus on convenience in terms of finding an ATM/branch and the ease of getting out/putting money in. That said, let’s look at how J.D. Powers weights the categories it uses:

    23% – Account Maintenance / Management (how easy can I access my points)
    22% – Ease of Redeeming Points/Miles (Notice this isn’t a reflection of good award availability for most but a reflection of how easy they were able to find some type of award redemption that suited them).
    18% – Ease of Earning Points/Miles (How easy is it for me to earn some sort of points on a regular basis?)
    16% – Reward Program Terms
    16% – Variety of Benefits
    5% – Customer Service (Seriously, only 5%?)

    Only 37% of the survey is weighted on determining the most rewarding benefits, best program terms and best customer service, while 63% of the survey is some component of determining ease of use/location.

    Again, it’s no wonder that Hilton, Marriott and IHG all finished in the top five given their locations are everywhere like ATMs. Heck, Delta finished tied for 1st with Hilton on the list since service apparently doesn’t matter.

  18. @Christian – I am big-time research scientist in the real world, i.e., the world in which the J.D. Power survey was conducted so I know a thing or two about the statistical inference. We would need to know exactly what questions were asked, including the exact wording, but what J.D. Power found pretty much reflected the preferences of their sample at the time. E.g., ease of redeeming and acquiring points count big; HH is great at that both while SPG sucks, which is consistent with what the survey showed. One of the often cited drawbacks of SPG, but especially Hyatt, is size of footprint — folks like to find hotels at location where they travel — so that would favor large programs. Like I said: We would need to know exactly what questions were asked, including the exact wording, but what J.D. Power found pretty much reflected the preferences of their sample at the time.

  19. @beachfan — If “avoiding to spread vitriol” and “getting some manners” means agreeing with implausible claims that you made “based 30 on years as road warrior” or what bloggers claim about loyalty programs, then no deal.

    You mentioned how you get suite upgrades with your preferred program. If that is the basis of your claims, then you must have missed my report about my being upgraded to a suite 100% of the time in 2014 as a HHonors Diamond: https://milepoint.com/forums/threads/diamond-suite-upgrade-reports.67743/page-2#post-2513107 😉

    There is nothing wrong with having a preferred loyalty program, but there is everything wrong with touting the superiority of that program compared to others based on thin or no evidence.

    G’day!

  20. I would buy the whole range thing for seasonal purposes if it was actually practiced rather than just preached. For example, the Hilton Luxor (a category 4) is, as far as I can tell, 30,000 points every day of the year. Is it high season every day of the year, even the summer when it is 110 degrees every day?

  21. Instead of sucking up to Hilton can you please expose their other insidious practices e.g. minimum award stay requirements, and non availability of standard awards while making exorbitant awards available?

    e.g. Hilton Tokyo May 1 – May 2. Queen rooms are available but no queen awards, instead a huge number of other rooms (at vastly greater than standard award rates) are available.

    Similarly I looked at using staying 2 nights at the Grand Wailea in Maui (50K per night standard award) but there was no availability for the dates I was interested in. Changing the number of nights to 3 suddenly made awards available.

  22. Uhhh, obviously dynamic pricing is a HUGE devaluation, and exactly what I was going to protest after your comment (“though on paper they haven’t devalued the program much since”). As a Diamond, a huge benefit to me was to book last-minute, be able to get into a room, and do it on a fixed price. What happens now, is that if I haven’t planned ahead, I get stuck with whatever silly expensive price in points they make up. The manager can comment about it being a “subsidy”, but that’s the whole freakin’ point of a loyalty program. Otherwise, I can just hold on to my cash and choose whichever hotel I want based on best available price. And there’s hardly a reason not to, since I can retain the free breakfast with Hilton pretty easily (as they practically give away Gold status).

  23. @ rrgg — But for the most part they do. They have fully dynamic pricing, whereby even when a standard room isn’t available you can redeem points for it.

  24. @ DCS

    I agree with you about needing to know the specific questions asked and would take it a step further needing to know if all individuals are rating all the chains or just the chains with which they hold accounts. As the survey is attempting to measure customer satisfaction, I would hope it’s just the latter. Like you, I work with surveys on a regular basis professionally as a hotel consultant with a national firm working on the development of new hotels. I did my graduate school dissertation on brand loyalty and understand the need for better information before developing a basis for recognizing the statistical significance of the study.

    My only point of contention is that you bring up the study as a means of proving that the bloggers are under some kind of conspiracy to prop up Hyatt and SPG. Wouldn’t pointing to the results of the Freddie Awards be a more indicative approach to proving this since the categories are more directly defined in relation to what people are judging? It’s worth pointing out that while Delta and Hilton were tied for number 1 in “customer satisfaction” by JD Powers in the study, Delta failed to get a single nomination in any category for the Freddie Awards and Hilton was shut out of winning any category. Hyatt won the best Elite Program while Starwood won best redemption ability. To their credit, Marriott won best overall program.

  25. @DCS, I certainly don’t question your satisfaction with Hilton as a Diamond member. I’m just amazed at your success getting suite upgrades with Hilton, as it’s the complete opposite of my experience with them. I’ve forgotten how many years I’ve had Hilton Diamond status, but it must be close to 10. In that time, I can recall getting only 4 suite upgrades: twice at the Hilton in Colombo, Sri Lanka on 1-night paid stays (they never gave me a suite upgrade on the award stays I had with them), once at the Palmer House Hilton in Chicago, and once several years ago at the Chicago Conrad after they walked me the first night of my stay. Unrelated to the topic of suite upgrades, I dropped down to Hilton Gold status this year, and I’ve not noticed any difference in my treatment as a Gold compared to my treatment as a Diamond.

    My success rate with suite upgrades as a Starwood Platinum member aren’t spectacular, but I do manage to score 2-3 per year, my most recent at the Westin Sydney during Mardi Gras. Marriott doesn’t promise their Platinum members suite upgrades, and in the years that I’ve had Platinum status they’ve been faithful to that (lack of) promise; I have a 0% suite upgrade record with them.

    Suite upgrades aren’t the only factor in my satisfaction with a frequent guest program, but it is one of the factors that contribute to my having the greatest satisfaction with SPG, despite Starwood not having as extensive of footprint as Hilton or Marriott.

    I find it fascinating how diverse people’s experiences are as top-tier elites in the different programs.

  26. @Christian – The Freddie Awards can be also be criticized as (a) being a sampling of mostly folks who are into the mile/point game and get their “news” primarily from the very bloggers who tend to favor Hyatt and SPG for reasons that seldom stand to scrutiny, and (b) being like an election campaign in which the candidates actively ask for votes. That last point is significant because I have never received an email from Hilton asking that I vote for them in the Freddies, but as one with elite status also in Marriott Rewards, Hyatt GP and SPG, I have received emails from all three programs asking for my vote in the Freddies. In addition, I have seen posts by Hyatt representatives asking for votes on large bulletin boards like MilePoint ahead of the Freddie Awards, which, therefore, are not a random sampling of the real world and would tend to favor programs that advertise and/or have a small but highly motivated following and advocates (like travel bloggers) as small programs in almost every industry do. In short, I believe that the JD Power survey is more “objective” in that it is based on a more random sampling of the real world than the Freddie Awards 🙂

  27. @Ken – A wholeheartedly agree with you on this: “I find it fascinating how diverse people’s experiences are as top-tier elites in the different programs.” 😉

    Cheers!

Leave a Reply

Your email address will not be published. Required fields are marked *