Are Hotel Rewards Programs On The Way Out – Supplanted In 3 Years?

There’s a provocative discussion on twitter about whether hotel loyalty programs are on the way out Online travel agency sites will rebate you free stays regardless of chain. It used to be that hotel programs let you earn rewards regardless of where you booked, but that’s no longer true. Now the programs are a reward for where you book – and the hotel programs themselves specify both where you book and where you stay. But they’re a lot less rewarding than they used to be!

prediction: https://t.co/YrTFXhUq1H is going to supplant all hotel rewards programs in the next ~3 yearswhy?business travellers want rewards for their stays but the marquee hotels are – like airlines – still crazy expensive. & booking’s rewards actually work (i was skeptical).

— Spratt (@justinspratt) September 6, 2022

Now, I’ll take the under on the demise of these programs. Direct booking channels have grown, hotel loyalty programs have grown, and continue to drive stays and higher average revenue. Remember that guests coming through online travel agency sites are usually picking largely on price rather than going to the hotel chain’s site and doing less comparisons of price.

Let’s get into the detail, though, because hotel chain programs can still be more rewarding than online travel agency programs – but that’s the fault of the online agency programs to be honest.

General Top Elite Value General Top Elite
Member Earn Member Earn Per Point Member Rebate Member Rebate
Hilton 10 20 $0.0040 4% 8%
Marriott 10 17.5 $0.006 6% 10%
Hyatt 5 6.5 $0.0140 7% 9%
IHG 10 20 $0.0050 5% 10%

That said I don’t see them as a reason to be loyal for non-elites, and third party rebates can be greater, but they won’t be ‘supplanted in three years’.

The author here notes that “until recently I did deals at Uber in this category and we found the exact opposite. And we had access to pretty good partner data.”

  • The close current partner of Uber is Marriott, would anyone be surprised that Bonvoy would be losing traction? But that’s more about Bonvoy than about the competitiveness of online agency programs or about the industry writ large.

  • And that data is perhaps skewed by the pandemic and a lower percentage of loyalty members staying [this was also true at airlines]. We’re seeing a lot of program signups now!

I am not saying hotel programs haven’t squeezed too much value out, creating room for alternatives. Booking.com probably isn’t it.

Marriott especially has driven down value in a quest for lower owner costs. Hilton has been stagnant. Even Hyatt has gone dynamic in redemption pricing which means less of an opportunity to get an outsized value for points, though they still offer good value especially for suites.

Bear in mind that whether a hotel program makes sense for you depends on what you value! If you just want a rebate for your stays regardless of where you stay, a chain-independent program is best. But if you want better treatment, pay attention to the hotel program for its elite benefits. IHG has improved its elite benefits this year, though of course the redemption proposition (which used to be outstanding!) has been decimated.

The reduction in rebate value of hotel programs in a quest for lower costs is a problem for hotel chains. In that sense Justin Spratt is correct. But it’s more of a problem against Airbnb than online travel agencies who still deliver guests to hotels albeit at higher cost.

Expedia does nothing but devalue its program and that’s been the case for years, but their recent trajectory has been to devalue even the programs of the other brands they own. Online agency sites are headed in the same direction – south – as the hotel redemption proposition.

Perhaps the best bet will be the bank sites. Capital One has built a portal which premium co-brand cardmembers earn strong rebates booking through. Chase is building its own portal and expects to be one of the biggest players not just in the bank travel space but in the travel space overall. And they can pour money into rebates because they’re using these programs to drive card spend, rather than to profit off of the difference between hotel commissions and rebates.

I still don’t love booking through a third party when things go wrong, and some hotels will give you the room over the HVAC when you don’t book direct. Which – again – means it comes back to what elements of a hotel stay are most important to you.

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