Starwood Award Category Followup: A Conversation with Chris Holdren, Senior VP for Starwood Preferred Guest

I had a very nice conversation this afternoon with Chris Holdren, Senior Vice President for the Starwood Preferred Guest program.

He reached out to me after my post on SPG’s decision not to adjust hotel categories for 2010 — which I called a “stealth devaluation” (and which was picked up USA Today‘s excellent Barbara De Lollis).

My original argument was basically that a hotel’s category level in the Starwood program basically rises or falls with its average daily room rate (and Chris confirmed that it is indeed average daily room rate rather than revenue per available room, for all you hotel revenue geeks out there).

Now, with hotel rates lower than in 2004, Starwood Preferred Guest hotel category assignments aren’t being adjusted downward to reflect that.

In my post last week I initially made the claim that the ‘rate bands’ (the average room rate figure tiering to each hotel category) had changed over time, so a (for instance) $165 hotel night might have been category 3 in 2004 but might now be category 4. Starwood Lurker posted on Flyertalk that I was mistaken, and I quickly took down that claim from my post, within an hour or so of making it. I didn’t want to mislead anyone.

Chris checked on things and said that indeed, the rate bands for categories 1-4 had not changed since the beginning of the program. That they only assigned higher categories 6 and 7 to the upper end of what was originally category 5.

How to explain, then, hotels that had seemed to have constant room rates but went up in category? Presumably overoptimistic budget forecasts for those hotels. He explained that hotel categories are determined based on the projected average daily room rate for the year, and those projections might well have not come true for a given hotel.

He made the argument that the current categories reasonably match current room rates, with 180 hotels having dropped in category at the beginning of 2009 when they were forecasting a bad revenue year for hotels. Of course, I noted that perhaps 70 had gone up in category, so on net I guessed only 12% of Starwood hotels were at a lower level than in 2008 despite the worst revenue year in history.

In fairness, he pointed out that Starwood suspended ‘high season’ premiums for redemptions again in 2010, that this was a real benefit to members. I agree, it is.

They made the tradeoff to not bring back high season surcharges at category 5 and higher properties, but also not to adjust categories this year. Some would have gone up, I believe many more would have gone down, and I would have preferred that they let the chips fall where they may based on the formulas they’ve always used. I think members reasonably feel that when category assignments go up when rates go up, they should be able to expect category assignments to fall this year of all years. But it’s true that they’re adding value in other ways, like with the suspension of high season premiums and with the recent introduction of free internet for platinums (of course Hyatt offers free internet to all of their elties already).

Ultimately, I think that if Starwood is changing the way their category assignments work then they should be upfront with their members, own that they’ve changed things around this year and not try to say it’s all about member benefit (“Though rates are expected to generally rise in 2010, we wanted to make sure all of our members are able to continue to take advantage of our 2009 award levels.”)

It’s probably true that Starwood is being held to a higher standard here, members trust Starwood more than many other programs, and I think they were truly caught by surprise with the member reaction on Flyertalk and elsewhere that saw this as a negative move.

Starwood has built up significant goodwill with its members. And changing the way that redemption categories are assigned, in a year in which members were anticipating a big benefit from the way the system has always been structured, erodes that trust — especially when the announcement of the decision seemed disingenuous.

Why does this matter?  Because Starwood’s unique value propositions have been intangibles.  Sure, they were first with no capacity controls on award redemption.  But Hilton and Hyatt have matched that (Priority Club in my experience comes close).  And their elite program includes suites, which Priority Club, Marriott, and Hilton do not.  But Hyatt offers confirmed suites, so Starwood isn’t quite as unique as they once were.

On a given stay, if a Platinum member isn’t upgraded to a suite, they may not get much recognition at all.  Hilton, Hyatt, and Marriott top tier elites can generally count on breakfast, at least, every day.  Starwood offers lounge access, but fewer and fewer properties in the US and Europe at least offer lounges.  When there’s no suite and no hotel lounge, a Platinum is for the most part just like any other guest — with the exception of a 500 point amenity at checkin (250 points at Four Points) and now free internet.

Even so, Platinums were fiercely loyal and I’d argue it’s because of consistent customer service and a candidness that’s unique among hotel programs, exemplified by Starwood Lurker on Flyertalk (and I’d also provide some recognition here to Theytus, Starwood Lurker II, who has been doing an excellent job as well).

Members expect devaluations from mileage programs to some degree, but it comes as a surprise from Starwood.  Perhaps it shouldn’t.  But that’s the unique position that they’re in, that’s an enormously valuable position to be in, and they act counter to it at their own peril.

Holdren seemed surprised by the reaction, thought they were doing right by their members. I hope the conversation was on some level useful to him, even if I’m not thoroughly convinced that SPG’s decision was a very sporting one.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. i’m switching to Hyatt as soon as they have the Hyatt branded credit card. Years ago, Starwood was the clear choice for me, but the only reason I haven’t switched to Hyatt is laziness. This, combined with the Hyatt card, will be the catalyst for me to switch.

  2. Hyatt gives diamonds 2500 points when club floor is not open and gives breakfast and 5000 points wen room type is not available. Also hyatt has generous ffn promotion and generous bonus points with 1000 points amenity each stay. Spg needs to insure guaranteed benefits that marriott,hilton,hyatt do which spg does not.

  3. The focus from the hotel program representatives seems to be focused on the high end hotels as noted here for SPG and with Marriott’s post on FlyerTalk listing only the 20 or so Category 5-8 changes in the March 8 recategorization of 650 hotels.

    What about the movement of hotels out of Category 1 and category 2 over the years in SPG? There are only around 28 or so hotels out of 1,000 left in category 1. Rates are lower now than 2004 and there were more than 80 hotels in category 1 back in 2004.

    Marriott is moving 300 hotels up in award category on Monday. Why has Marriott Rewards not posted which hotels are going up before the award changes?

    Seems to me there are likely plenty of members who would like a heads up on what hotels will be increasing in award category to possibly book a hotel award before Monday’s increase of 5,000 points or more.

    Members who desire better value from their points should have the opportunity to redeem for the best value before the changes are implemented.

    Loyalty members are a good revenue stream for the hotel chains, yet these kinds of decisions baffle me when they are inconsiderate to the needs of valued and valuable frequent guests.

  4. I agree lack of cat 1,cat 2 category hotels is another problem with spg. ts a horrible program to earn points purely on stays.

  5. One thing that caught my eye on your post was that you say that SPG guests are “fiercely loyal” – I’d agree with that. But was also thinking about how the different programs have different requirements for status.

    IIRC, SPG Plat is 25 stays or 50 nights, which as regular business traveler isn’t terribly difficult to hit. It’s also which is half of Marriott’s Plat requirements and close to their Gold requirements. Hyatt has a promo where you can get instant Plat & 15-night Diamond status – http://boardingarea.com/loyaltytraveler/2010/02/21/hyatt-gold-passport-instant-platinum-elite-and-15-night-diamond-qualification/ – Hilton gives silver in 4 stays or 10 nights, Gold with 16 stays or 35 nights, and Diamond with 28 stays or 60 nights…

    Given that, I’d say the SPG travelers are fiercely loyal – but I think it has more to do with the flexibility of the points (the 5k bonus & some really great cash/miles options) moreso than the product/service amenities. Just my 2 cents…

  6. SPG members ARE extremely loyal because, and for some reason this doesn’t get mentioned often enough, no other program has the variety of hotels that SPG offers (especially at the high end). Their hotel portfolio is diverse and offers amazing redemption options internationally. Between Luxury Collection hotels, W’s, St Regis (and some Westins) there is a solid range of choices at the top end. With Cash & Points, many of those hotels are extremely reasonable from a points usage perspective.

    Sure, it’d be great if there was more downgrading of hotel categories (and yes, it’s probably a stealth devaluation). It’s also a stealth devaluation since room rates have been lower, giving you fewer miles for your stays (though as Gary has mentioned, your best bet is to earn through credit card, not through stays). All-in-all, people are happy with SPG because it’s a great program (for the most part).

  7. Ya Mates, if you think y’re gettin a raw deal from SPG, ya ain’t seen nothin compared to SVO (Starwa[r]s Vacation Ownership) where perks are a dropin like flys, property values collapsed 90%, and maintenance fees skyrocketing with no end in sight. Count you’r blessings SPGers (and don’t waste your nickers on SVO)!

  8. Thanks for sharing this discussion. The real issue here, as you put it quite well, is that “On a given stay, if a Platinum member isn’t upgraded to a suite, they may not get much recognition at all”. No breakfast, no confirmed upgrade, nothing special besides a 500 bonus point… And for the best room available, well basically you have to cross your fingers and hope for the best (and/or complain on the Flyertalk forum !)

    And that seems to happen more and more often. I’ve been a platinum for over 5 years and a fierce promoter of SPG. I now find myself complaining more and more about the program, and for the first time I’m seriously thinking of switching to Hyatt.

  9. Gary, to reiterate what your reader Phil (comment #5) said: thanks for sharing details from your conversation with Chris. i think his reaching out to you really does suggest that SPG’s a bit nervous or at least extra-vigilant these days, given today’s cut-throat competition. (thanks, too, for the shout-out!)
    also, your readers raised more great points that i’ll surely follow up on in the weeks to come. (for ex, Hyatt-brand credit card, closed-club-floor point bonuses and SPG Vacation program.) if you have opinions about any of the above, let’s talk…
    cheers,
    Barbara bdelolli@usatoday.com

  10. I’ve been SPG Platinum for 5 years now, and Gold for 7 years before that. This year, I status matched to Hyatt, which will earn a majority of my business. I used to be super loyal and signed up my friends and family for the SPG Amex card, but no more. The reason my loyalty has evaporated is because of the continual devaluations (stealth and otherwise): peak awards, Category 6, then 7, category 5 jumps to 12-16K from 10K points. Then hotels seemed to all jump a category or two around 2007. Why? Okay, SPG runs on dollars, and the dollar tanked and occupancy rates were very high. Now that the dollar is stronger than 2007/8 and occupancy rates are down in 2009/10, we get nothing but peak-rate reprieve?

    Chris Holdren, you should realize that:
    1) competitors are increasing benefits for top tiers, and this year SPG Platinum benefits have actually gone down (thanks for the luggage tags, they ended up in my trash)
    2) if you devalue points based on higher room rates, and then room rates drop a lot, what are we supposed to think when point values stay the same? If you are surprised, you must think we’re stupid for not seeing the explicit point devaluations in earlier years.

    SPG used to be so clearly above everyone else for the reasons listed above: no blackouts, jr. suite upgrades, better properties. Since I’ve visited most SPG properties I’ve wanted to, seems like it’s time for a change.

  11. Been reading this blog since 03, it’s strange how all the sudden people are leaving comments.

    I think the fierce loyalty many of us had to Starwood was largely a vestige of the fact that they were a better program. They aren’t clearly a better program anymore, so I think that fierce loyalty will largely fade out.

  12. There’s only one reason I remain loyal (and not necessarily “fiercely” anymore) is because of SPG cash/points redemption. If Hyatt had that feature I would jump ship completely.

  13. As a 15 yr hyatt Diamond and 12 yr Plat SPG i value the Hyatt program more with the comp breakfast , clubs in more places and FFN are more value to me than the odd suite upgrade. though i do choose my hotels depending on what i require but in this climate is is getting harder to maintain the 2 programs.My main reason for maintaining SPG is the points to miles conversions.

  14. I agree with the gist of most comments. Starwood has been providing a better value proposition for some time but seem to be relinquishing that edge with point devaluation at a time of a stronger competative climate.

    With that in mind, I still consider their portfolio of brands more appealing. Their investment in style at times is a better choice for me than a free breakfast or other perk at a less appealing brand.

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