Starwood Raises the Price of Cash & Points Awards — Why That May Not Be a Bad Thing

Starwood posted on Milepoint that they are increasing the price of cash and points awards starting March 5, and also introducing cash and points awards for upgraded rooms including suites.

Here are the current cash and points award prices

And here are the prices starting March 5.

In order to figure out how big a price increase this is, I needed to put the award charts side-by-side and use a common currency (money) to compare simultaneous changes in both cash and points prices. I decided to use a points price of 2 cents for the exercise, but the results aren’t particularly sensitive to that assumption.

The changes represent about a 21% – 25% increase in price depending on category, with no change in category 7.

I still see cash and points as a better deal than standard award nights. But the margin shrinks with these changes.

You can still make bookings under the old lower pricing until March 5 if you wish. These awards are generally cancellable (check and adhere to cancellation requirements so you cancel in time if you don’t plan to keep a reservation). That means you can make speculative bookings, subject to the balance of points in your account, just in case you want to lock in the current lower points requirements.

Still, and while Starwood is taking criticism for this, I at least potentially like it or at least like it enough to offset much of the dislike.

The Price Increases on Cash & Points Awards are Reasonable — If They Mean Increased Availability

Deals We Like calls this the worst news in the miles and points world. I disagree.

I do not like when awards get more expensive. These awards have never gotten more expensive before, in the history of the program. (Which is to say: neither the cash nor points price of a cash and points award for a given category has risen — of course individual hotels have gone up and down in category meaning that cash and points award stays at those particular properties have gotten more or less expensive each yeaer.)

But that’s not just an argument that it’s reasonable to see award chart inflation. I don’t think it really is. There’s been plenty of award chart inflation over time with the introduction of new higher award categories. And my huge beef with the Starwood program is that since suites cost double points, “all suite” hotels cost double points. A category 7 hotel that charges enough for its rooms to be a category 7 because those rooms are suites will then cost double the category 7 points because the rooms are suites. The member is double-penalized.

But this change is likely reasonable because of the economics of how cash and points awards actually work.

Starwood Preferred Guest was the first major hotel program to offer award nights whenever a standard room is available — in other words, no capacity controls. Since then the major hotel chains have more or less matched this, generally over the past 4 years.

The way they accomplished this was to offer the hotels a modest reimbursement for member stays most of the time. A category 3 hotel might get $38 for an award night. A category 4 might get $58, for instance. But what about when a hotel is sold out? Offering award nights costs that hotel real revenue. It might have sold the room for $250 and has to take $38? That’s a problem.

Starwood set up the program to reimburse hotels at their average daily room rate on those nights when a hotel’s occupancy exceeds 95%. When a hotel sells out, award nights are expensive for Starwood Preferred Guest (as we learned from Le Parker Meridien’s alleged fraud).

Cash and points awards are discounts — a member pays fewer points plus some cash which roughly covers Starwood’s reimbursement to the hotel. Starwood Preferred Guest is happy to offer those to its members (since it won’t cost them more) and to its hotels (incremental revenue for rooms that would otherwise go unsold. But they don’t want to offer discounts and then have to pay penalty rates to the hotels that wind up sold out. So cash and points awards are capacity controlled.

Specifically, hotels decide when to offer cash and points. They generally do so when they do not expect to sell out. Because Starwood will not pay the average daily room rate to the hotel for these award nights when it sells out.

Starwood has apparently found that they need to pay more to their hotels to entice reasonable cash and points availability. So they’re explaining the change as the result of “Work[ing] very closely with our hotels.. [to] improve the availability of Cash & Points..”

So a higher price for cash and points awards isn’t great for those hotels and nights when you otherwise could have booked a cash and points award for less. But it certainly is a good thing at hotels and on dates when a cash and points award would never have been offered before but is now offered on more nights.

In other words, we should be able to expect more cash and points availability. So more nights where a discount is available. But the discount isn’t as big. I can live with that tradeoff, although some members will lose out relative to what they had before, some of the time.

Upgraded Rooms on Cash & Points Awards Will Be a Huge Benefit

Starwood offers (at each hotel’s discretion) upgraded rooms and suites for additional points on top of what a regular award stay costs. I rate Starwood’s offering here second best only to Hyatt (since Starwood offers suites for double points, while Hyatt Gold Passport charges a 50% premium).

They also let members upgrade five days out on certain paid stays using points.

But they haven’t allowed the option to book anything other than a base-level room on cash and points awards, except for brief periods as a special promotion. I’ve always wondered why they didn’t roll out this option more broadly, and now they have.

So this is a new and discounted way to get into upgraded rooms, something no other program offers.

And it’s valuable to both general members and top tier elites alike.

  • A general member booking cash and points was destined to be in a base room (unless they negotiated directly with the hotel to redeem additional points at checkin as an instant award — almost always a poor value — or with additional cash).

  • And a Platinum member even couldn’t guarantee a suite at booking on cash and points award. In fact, Starwood don’t let its Platinums confirm upgrades at booking at all except on free night awards (just like any other member). They offer ‘suite night awards’ to their Platinums who qualify by staying 50 or more nights, and those suite night awards confirm up to 5 days in advance. Effectively that lets their elites specify when they care the most about getting the upgrade, and have a much better chance of being upgrade on those stays. That benefit applies on cash and points stays as well. But now cash and points will have a confirmed at booking price, too.

Here we can spend double the points (just like with standard awards) for a suite. The cash portion is a bit more than double for suites, I think that’s a little excessive and would have preferred to see the cash component merely doubled. (Remember, it’s double the new, higher cash component.)

And perhaps I like the changes more than I should or more than the median reader will because I like suites and when I redeem my points it tends to be for aspirational vacation stays where I don’t want to stay in a standard room. So I value the upside here more than most. But I do think this new addition is pretty cool.

As always, compare the price of simply paying for a room to the price of cash and points (or the price of a suite to a cash and points suite award). I recently booked a category 7 hotel for less money on a paid rate than the cash component of a cash and points award at the same hotel. Some hotels are just that seasonal, and category 7 awards tend to offer less value than the real cash and points sweet spots of categories 3-5.

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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Comments

  1. Inflation is inevitable due to actual inflation, but also points inflation, caused by these credit card bonuses.

  2. Sarcasm gary, sarcasm! Trust me, I am not losing sleep over this one, but I do hate when award charts change not in my favor. But you right, with inflation and this option not changing in years, it is expected.

  3. @dealswelike I was just using your framing for contrast 🙂 But you DID title your post “Bad Changes to Starwood’s Cash & Points Redemption”….

  4. @Gary – I know I know! It is a bad change, but definitely not life altering. I might have gone a little dramatic there, but boy do I love my C&P redemptions! Let’s hope the category changes come March are not too bad.

  5. The points portion is a simple 25% increase across the board except for category 7.

    The points portion for basic Cash & Points awards was 40% of the standard award rate before and is now 50% standard award rate for all 7 categories.

  6. If it means that capacity controls go away then it is OK, Else, like everything else, this is a slap for loyalty.

    As Ric points out, BOTH the cash and the points went up ~25%

  7. I think it’s awful Gary.

    In most cases it now costs more than 2 cents per point to “buy” the difference in starpoints between a C&P award and a standard award (figuring an approx. 15% tax). Which means there are very few cases where it would be better to use C&P over a standard award.

    The “good” values are now non-existent values (i.e. for C5, I’d rather pay 12K points than 6K and 2.11 cents per point for the remaining 6K), and the great values (i.e. C4) are now marginal values

    Starpoints are certainly worth less now. Which begs the obvious question…. is the SPG still your go-to card for generic spend?

  8. I don’t know Gary. At best SPG Amex are slightly better for miles than CSP (1.07 UA miles vs. 1.25 AA/US miles the vast majority of the time).

    But if you’re going to have the CSP card anyways, is the difference between the 2 really worth the $65 fee?

    C&P was a big part of my SPG redemption strategy, and it won’t be anymore. It being more available isn’t all that useful if it isn’t a good deal

  9. @RQ depends on the volume of charges whether it’s worth the fee or not, and which airlines you want to transfer to — i like the ability to transfer to singapore (for singapore airlines first class awards) and japan airlines (for the emirates first class award chart)

  10. Gary, you have quite some guts to see a positive sign in this. While I think todays IHG changes have changed some hotels in Asia for the better

    http://www.tjacobi.com/13232755/priority_clubs_new_award_chart_the_good_the_bad_the_ugly.php

    I can’t see a 20% increase help unlock inventory in hotel that so far have not provided much C+P. Most of the highly populated areas like London/New York Hong Kong never really provided much C+P because rates were too low I do not think a 20% increase will change anything.

    The changes at level 4 and 5 really hurt and tremendously reduce the value proposition SPG had so far.

    One can only hope that more hotels will go down in category (though that remains a pretty small chance).

  11. The hits just keep on coming. A devaluation sucks no matter what, you gotta give people a chance to grieve.There will be plenty of time for the “it was inevitable” and “look at it from the corporation’s point of view” later.

  12. @TJ what I’m waiting to see is if the economics of cash and points have changed such that it will be available most of the time (or whenever certain automated criteria are met)

  13. “i like the ability to transfer to singapore (for singapore airlines first class awards) and japan airlines (for the emirates first class award chart)”

    I would think since many of us probably are already racking up a ton of Amex points on your PRG, one would probably rather blow those on SQ than waste a lot of SPG points on that, no? I know I’d rather part with MR’s than SPG’s, even without the 25% bonus.

    As for EK, unless you’re really flying them a ton (as opposed to just a one-off “wow, I need to see those showers and then my life will be complete” moment), I don’t think it changes the valuation much

    I’d say even those of us “addicts” (more so the average joe mileage collector) are in the vast majority of circumstances looking at this as a UA vs. AA/US choice

    Slight edge to SPG for sure, but enough to justify the $65 fee? Ehh…

  14. And that’s besides the fact that I now think the CSP is a better card on the hotel side than SPG Amex

    I now view it as redeeming straight up awards for Hyatt vs. redeeming straight up rewards for SPG (even if I redeem a C&P, it is “worth” roughly the same as a straight up reward)

    Advantage CSP, assuming you don’t predominantly redeem at lower cat. hotels

  15. Gary,

    I ride the fence. I seriously do. The standard room C&P increases represent a substantial devaluation — possible 40% or more. Let’s take a mythical $300/night room at a Category 5 hotel — I pulled the number out of my arse, but at the old rate, gave a value of 4.375 cpp. In my book, that’s solid valid. Not phenomenal, but quite good.

    With the new rate, we get a value of 3.167 cpp. Still decent, but a reduction in value by almost 30%.

    OTOH, now that I’ve started getting accustomed to non-standard rooms (be it “upgraded” non-suite rooms or suites themselves) I’m really, really glad to see these as options. I may not be willing to part with 96000 points for 4 nights in a suite, but I’d consider 48000 + a bunch of cash. And I realize that it’s a lot of cash for Cat 5 levels.

    But, I really do suspect that we’ll be finding premium rooms to be great value.

    Also, it does seem that the places where C&P was a slam dunk were getting fewer and further between. Thailand was one of the few places where that option truly delivered great value. Hong Kong? Good luck finding availability.

  16. If there was truly going to be more C&P availability, I wouldn’t mind the price increase. But, realistically, I think that’s a VERY optimistic assertion.

    With the price hike, C&P becomes less attractive. Heck, for resorts, like in Hawaii, you might now want to take a second look at priceline or hotwire if you don’t have plat status.

  17. My calculations put the devaluation for cash and points at about what Dan estimates. I feel they are trying to monetize the fact that you get elite night credits for cash and points bookings. Priceline & Hotwire still get you your platinum benefits, for now at least.

  18. @Nick you are not entitled to elite benefits on Priceline stays. If you get them that is at the discretion and benevolence of the individual hotel property — you are just getting lucky

  19. They do at least let you insert your Starwood number which allows the property to see your status, which is better than Hilton.

  20. I agree with @iahphx – I’m skeptical until we see if C&P availability really increases substantially, and at other than out-of-the-way locations and such.

    Besides, this has to be something SPG sees a potential help to the bottom line. No one seriously believes it’s being done altruistically to “help” customers get more C&P stays do they? To make us feel good about a promise of more, sure, but I’d be surprised it turns out that way.

  21. Just another reason not to stay Starwood sadly
    I have little use for their point currency when redeemimg for rooms now that redemption frequently seems too high with or without cahs and points.
    Prefer the Chase Ink card over using the Amex card which is ok if your main purpose is earning airline miles when redeeing Starpoints depending on the airline.
    At least with Chase there is a wide selection of partners at every price point.SPG isnt what it once was and its ego and greed is way larger than then the user end experience
    Why doesn’t they just make every property a category 7 and just close the program?save us the bother of increases heading that way

  22. behind this lurks AMEX as well, who just laid off how many workers and has devalued how many things to increase their profits recently (think BCP capped at 6k spend, consumer plat no 20% bonus on flight redemptions, big talk of losing Hilton 6x at drugstores any time now, the supposed AMEX Bonus Mall returning for how long now- which has never returned, etc.). The AMEX SPG card and points are tightly interwoven into this Starwood announcement. AMEX is a shark and on the prowl right now to devalue as many things as it can without pissing off too many cardholders too badly. They are masters at the art of plucking the goose just enough to get the max feathers, but before it screams. AMEX wants to get those profits up again- which already were at best, extremely greedy- as they always have been. No surprise here. Beware many AMEX and AMEX-associated devaluations upcoming. Many.

  23. Increased availability?? Ha ha ha ha ha. Since when has that ever happened in the history of airline or hotel programs? One word – never. The only way you ever see elimination of capacity controls is by paying 2x points. In fact over time we have seen inventory shrink in airline programs.

    Now to be fair SPG is the only program that actually offers no cap controls on pure award nights. Marriott and Hilton claim to do so but you can try to find rooms months out at popular properties and you will see a big zero. Rarely so at SPG, which is why SPG is still better than the rest.

    Points + cash was one of my favorites deals at SPG, it was in fact the only way people like me (who don’t have large SPG balances) could afford a room at Cat 6 property like the St. Regis Princeville. 3 nights for 24k points +$450 – yeah I can swing that – $150 a night seems more than reasonable for one of the best rooms in the world. $180/nt hurts a bit more. But 10k/nt on top of that is a real dealkiller. The Cat 4 city properties that could be had @60 + 4k points are much less of a deal now. Almost better to take a shot at priceline (esp if you are not Plat) and save the points for a 5N award.

  24. Um, they raised the number of points required for a free night as well, not just the cash and points totals. Points for a typical W hotel went from 16,000 to 25,000, for example.

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