A new Chinese 6% VAT tax on hotel stays went into effect today. Hilton’s website now reflects the VAT, as it should. However their award searches are showing not just the number of points for the award but also this new VAT based on the payment Hilton HHonors makes to the hotel.
This is an error, of course, since Hilton HHonors awards include tax. But it tells us a lot of the economics of the program.
Reader Peter P. went through and documented these internal reimbursement rates and shared his findings.
- When a hotel isn’t full, it’s reimbursement rate is fixed regardless of prevailing room rate.
- The reimbursement rate appears to be the same for hotels in the same brand regardless of HHonors redemption category. So when Hilton charges you more it isn’t because they’re paying the hotel more.
- For premium room awards, HHonors appears to reimburse the hotel half the cancellable rate for the room. (So while you’re getting about 4/10ths of a point based on room rate usually, hotels are only getting paid about half that.)
- Hotels receive their full nightly reimbursement on 5th night free awards (the fifth night if free for elite members, but the program still pays the hotel for all 5 nights).
Here are the reimbursement rates Peter found for HHonors hotels in China:
- Waldorf Astoria: CNY 306.80 to 312.10 (around USD 48)
- Conrad: CNY 248.90 to 249.70 (around USD 38.50)
- Hilton: CNY 182.70 to 186.70 (around USD 29)
- DoubleTree: CNY 122.70 to 124.40 (around USD 19)
- Hilton Garden Inn: CNY 92 to 92.10 (around USD 14)
Here’s an example where it’s the brand and not the reward category or price that determines the hotel’s reimbursement.
The category 1 DoubleTree Wuhu gets CNY122.70++ ($18.95) for your 5000 point award night.
The category 6 DoubleTree Sanya gets CNY124.43++ ($19.22) for your 40,000 point award night.
Let’s take a look at another example where it’s the brand not the category or room price that determines the hotel’s reimbusement.
The category 2 Hilton Urumqi is getting CNY182.76 ($28.23) per night plus service and tax.
The category 7 Hilton Sanya is getting CNY186.65 ($28.83) per night plus service and tax.
Even though you’re paying 40,000 more points per night (50,000 vs. 10,000) for the Hilton Sanya compared to the Hilton Urumqi, on non-sold out nights those two hotels are getting paid the same amount for your stay.
Meanwhile if you booked a paid premium room at the Hilton Sanya, it might cost you CNY1380 ($213.70).
If you booked a premium room award for that room, Hilton Sanya would get CNY690 — half the paid rate for the same room.
These numbers, of course, what Hilton is showing on its website with the change to Chinese VAT. They’re telling. In general, Hilton HHonors is paying much less for a standard award night than Starwood or Hyatt.