We know how it generally works for airlines. They make seats available as ‘saver’ awards when they don’t expect to sell those seats for cash.
A year in advance they’ll have some idea what seats those might be, and may make some award seats available when the flights are loaded into the schedule. Very close to departure they’ll have a pretty good idea which seats that haven’t sold will go out empty, which is why the very last minute can be about the best time to book awards (but also a gamble, because sold out flights – which many are nowadays – won’t be bookable at saver award prices).
Hotel programs generally work differently. The economics aren’t always the same but in general most now offer a room for points whenever the base or ‘standard’ room type at the hotel is available for sale.
Hotels used to operate like airlines, they would evaluate which rooms were likely to go unsold n a given night and make only those rooms available as awards. As a result, it could be as ‘tough’ to use hotel points as it is to use airline miles.
The idea here was that hotel programs were compensating individual hotel properties with very little cash for the room nights, just enough to cover costs and then a little bit more, and they wanted to make sure not to trade off with any paid stays the hotel might be able to get.
Starwood Preferred Guest revolutionized the hotel loyalty industry, they introduced what they called ‘true redemption’ which was usually referred to as ‘no blackout dates’ (specific dates where you weren’t permitted to use your points) but it was actually something much stronger — ‘no capacity controls.’ If a standard room was available for sale, you could use your points to redeem for that room.
The way they accomplished this was by paying modest compensation to hotels on award nights, but telling their properties that whenever they actually hit 90% occupancy on a given night, award nights would be paid at the hotel’s average daily room rate from the previous year. Starwood wasn’t paying the retail price of last room availability, but rather treated award guests as any average paying guest. That way the hotel didn’t lose out by giving out award rooms when they ended up being full.
When occupancy rates shot up in the middle to late part of the last decade, that made Starwood’s costs pretty high, they were paying out lots of award nights at the higher room rates to their hotels. And it’s when they introduced ‘category 7′ to charge more points for their most expensive hotel properties.
But they made real inroads in the loyalty industry, enough for other programs to have to respond, such that it’s now standard across most programs that when a standard room is available for sale you can have that room for points.
Hyatt was the second to introduce the concept. Hilton and Marriott have followed, though Marriott’s compensation model for its hotels has been historically different from Starwood’s (the more room nights redeemed at a property, the higher price per night they pay to that property, which is why Marriott categorizes hotels based on redemption popularity rather than strictly on room rates).
Some programs also let you use more points to get access to a better than base-level room. Starwood, Hyatt, Marriott, and Hilton all offer this in one form or another (Starwood is, in general, tops for upgrades to better views while Hyatt offers better redemption value for suites.) IHG Rewards doesn’t offer this at all.
A hotel generally sets aside a certain number of rooms as ‘standard’ and all rooms of that sort — paid or points — should be treated the same. But there are certainly hotels that would prefer not to have award guests, or many of them, and they create ‘artificial’ definitions of just what standard means. A higher floor, 15 extra square feet, or a view might be considered premium (at least considered premium to the hotel, and maybe to some guests, but it’s not always obviously the case that it’s premium).