Yesterday I did my best to describe the changes that Hilton is making to their loyalty program. (I still have difficulty writing out Hilton Honors with one H, but then I still call Rewards Network’s dining for miles iDine.)
Readers wanted to know why I was tentative about what these changes mean and wasn’t clearer with significant conclusions. They were all in my post but overwhelmed by the detail of the moving pieces. Some might say I ‘buried the lede’.
So let me offer my framework for evaluating what Hilton is doing.
Hilton effectively already got rid of its award chart in 2013 when they introduced price ranges. They vary the price of hotel awards now based largely on the price of a room.
Here’s the current award chart:
Hilton’s award room pricing is already revenue-based when paid room prices go up, now it seems they’ll also lower points prices when room rates go down.
There are plenty of situations today where premium room awards which are directly revenue-based have been cheaper than awards for standard rooms when hotel prices are low, a pretty absurd situation. This will lower the standard room award prices in those cases.
That doesn’t excite me, it suggests points prices will be close to par with the value of points. It doesn’t mean getting exceptional value for points. It means that points prices you should never consider accepting may go away.
Conrad New York
There are a handful of pockets of value within the Hilton program today:
- The most expensive hotels, where 95,000 points per night actually works out to a decent return on points.
I value Hilton points at $0.004 apiece, and the new ‘slider’ examples I’ve seen have delivered just over this in redemption value. But a $1000 a night hotel delivers over 1 cent per point in value.
- The lowest tier hotels where 5000 points per night might get you an $80 or $90 room.
The changes we’ll see, as-announced, don’t do anything to remove these.
Where there’s likely a reduction in value is the new combination of points and cash compared to older cash and points awards. Cash and points awards are not simply about using some points and some cash that misses the point. Cash and points awards are about getting great extra value for your points on nights that the hotel is looking to fill extra rooms. They make discount award nights available, and you get more for your points than you normally do. With Hilton’s new changes you appear to get average value for your points instead.
Hilton says they are not increasing the maximum price of any hotel, and do not intend to do so. If they increase pricing [effectively moving hotels up in award category, or by changing the prices for each category or increasing the price of the top category] and they do not make an announcement of this in advance they will come under much-deserved criticism.
I suspect that price increases in their ‘hidden award chart’ will eventually happen, if only because of inflation and rising hotel rates over time. The question is whether or not they’re transparent with members about they changes they’re making — sharing clearly and prominently what they’re doing to the currency in advance.
These new redemption changes — letting members use a handful of points for room redemptions, or lighting their points on fire at Amazon.com — help those who don’t have very many points at all. I don’t see them as doing anything meaningful for those who are actually engaged in the program. The changes do not themselves make things worse, although future bad behavior with the currency might and is what we’ll have to watch for.
I also don’t see these changes as improving the program where it needs to be improved. Hilton already offers good return for in-hotel spend. What they don’t offer are consistent and meaningful top tier elite benefits. They haven’t yet done anything to address that, though they say they’re working on it.