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:
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.
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.
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:
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…