Why take 10 nearly useless points per dollar when you can take 10 very useful points per dollar?

Hotels are playing a dumb game with points and loyalty right now, and it’s plausible that they’re doing so without any vision for the tidal wave of industry change that’s headed their way.

Minute by minute, hour by hour, hotels are eroding the value of their loyalty programs, as financial problems from other areas of the hotel business mount. Seriously, can you name a positive change made by a hotel loyalty program in the last year?

Loyalty programs are usually the most profitable part of a hotel or airline operation, so when quick cash is needed, robbing loyalty is the first place hotel leadership lacking in foresight often turn.

Here’s why this time, that might be a huge mistake, as two disparate but highly linked themes in hotel loyalty come head to head in the new battle for travel.

Making The Sausage Of Hotel Loyalty

Hotel loyalty is more complicated than airline or even car rental loyalty.

The loyalty program you earn points or perks from rarely owns the hotel you’re staying in. They are just the familiar face on the marquee helping use their marketing reach to put heads in beds, and in reality the property is owned by independent investors.

These investment partners don’t like the costs associated with giving points to people for their stays, and certainly don’t like the costs of providing free breakfast, upgrades to suites or late check out. These cost them “real” money.

Accordingly, owners of these hotels constantly push loyalty programs to be far less generous with what they make hotels give guests. They want the lowest cost possible, while still having their “cake” that comes with being a part of a major loyalty brand.

Hotel Loyalty Programs Are Playing Ball Now

Hotel loyalty programs are effectively nothing without physical hotels. If all the hotels in their system suddenly disappeared, that would be a problem.

Under pressure from hotel owners griping about pandemic operating costs and labor shortages, hotel loyalty programs are doing exactly what they shouldn’t, and listening to the owners, rather than guests.

They’re marginalizing benefits, making it harder to use points and stripping the main signature amenities of staying in a hotel, like daily housekeeping.

Yes, major hotel brands have discontinued daily house keeping, as a cost cutting measure to appease hotel owners. This makes the thin line between Airbnb and hotels even harder to delineate.

The Tidal Wave Headed For Hotel Loyalty

Unlike airline ticket sales, which offer extremely low commission, hotels face costs of up to 20% commission when you book via an online travel agency such as Hotels.com or Expedia, or via your credit card company.

This is why they only offer points and perks when you book direct, and why they’re so unfriendly to requests for things like late check out when you don’t. 20% is a lot when talking about $1000+ reservations.

The problem is, a system built on these fat commissions allows people outside of the hotel loyalty program to create amazing rewards with their chunk of the commission. This is how sites like Hotels.com offer a free night after 10 nights. They effectively take a 20% commission and give you half back as reward.

Now, credit card companies, which have actual reason to be rewarding (they don’t need to make money on hotel sales) are jumping into the game, and any smart hotel loyalty program would see this as a time to send out a distress call and regroup.

Instead, most seem to be folding, and devaluing their programs, which only makes the credit card offerings stronger. These credit card companies can give their entire trip commission back in cardmember rewards, because they make money anyway.

For hotels, this represents a tidal wave which could eclipse any usefulness found in hotel loyalty programs as credit cards become more rewarding to people for booking through their platform, rather than direct with hotels.

The Wave Is Growing

Yesterday, Capital One launched its first “premium” credit card, the Venture X. The card comes with many notable features, but among the most notable is 10X points earning on all hotel bookings made via Capital One Travel.

10X points from a program like Capital One are worth far more than 10X points from a hotel group, given the underlying value of each point.

In the simplest terms, a currency like IHG Rewards points are worth under 1 cent per point and Capital One Venture Miles are worth circa 2 cents per point. Earning 10 of 1 is doubly better than earning 10 of another.

So when Capital One starts offering 10 points per dollar to book with them, rather than direct with a hotel loyalty program or property, it makes the case for booking direct far weaker. In fact, it’s hard to see a case, unless you’re a top tier elite status guest.

This applies to all hotel loyalty brands, and guests would really have to start weighing the benefits of marginal perks like late checkout – versus earning much better rebates and savings by booking elsewhere, like with their credit card company.

Plus, credit card points can be used as cash back, as airline miles or as hotel points, whereas hotel points are much more limited. This theme only gets worse with recent points chart devaluations from the likes of Marriott and Hilton.

10X Becoming Standard For Credit Cards

Capital One isn’t the only one offering this major 10X earning. In fact, Chase was first. Chase now offers 10X earning on some cards for all hotels booked via Chase Ultimate Rewards Travel. Like Capital One, Chase Ultimate Rewards Points are far more valuable than any hotel currency.

Hotels are devaluing the values of their loyalty points while credit card companies are offering more points to book with them rather than directly with hotels. Eventually, this trend could render hotel loyalty utterly useless, as more flexible and powerful points in greater quantities are dished out.

Why take 10 points per dollar spent from Hilton, which are worth half a cent per point when I could take 10 points per dollar from Chase, which are worth nearly two cents per point. That’s just bad math. Plus, hotel loyalty programs typically give “base” level guests between 5-8% back via points, not 10%, as credit card companies do.

When Hotels Will Be In Trouble

If more and more people are convinced that middle tier status from a hotel, or tiny benefits aren’t worth the squeeze it takes to make the juice, and start booking travel via their credit card’s travel website — hotels are in trouble.

Loyalty is the tool to get people back into hotels, and if people continue to have sub par experiences with hotel loyalty, they’ll become hotel atheists. Meaning – they will choose a hotel based on price and location alone, not on any merits of brand or the relationship.

When credit card companies become the best way to book hotels, rather than booking hotels with hotels, we’ll know that the greed of Hotel CEO’s looking for short term prop ups to balance sheets (raiding loyalty programs) ended up selling out the long term business.

Gilbert Ott

Gilbert Ott is an ever curious traveler and one of the world's leading travel experts. His adventures take him all over the globe, often spanning over 200,000 miles a year and his travel exploits are regularly...

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16 Comments

  1. Great points. With Marriott’s last few rounds of devaluations, even before the pandemic, I’ve stopped booking on Marriott.com and been using the SWA hotels site to help top up my points towards companion pass. I don’t get the Marriott points, but they’ve been pretty useless to me….maybe .5c/point. I find that the hotels are inconsistent with honoring status, and I’ll still get Titanium benefits with my stay (benefits don’t influence me so much with my travel patterns). With Chase’s hotel portal and now Capitol One’s at 10x, I may never book direct again. It’s unfortunate to see the devaluations, as I would annually influence a few hundred thousand in spend to Marriott and that stopped 5-6 years ago. A shame.

    -Lifetime Titanium

  2. As always, a very well-written and spot-on article. Kudos, Mr. Ott.

    Like many, I walked away from Marriott after their CEO told us all he doesn’t need our money, nor does he value us. Fine. Plenty of other players in the game. I switched to Hyatt for the most part, and while very satisfied, the footprint simply isn’t there, and I really dislike the Hyatt Place properties that make up so much of their portfolio. The smoke and mirrors of their SLH partnership simply isn’t worth the hassle of building up toward Globalist.

    As you mention with Capital One and Chase (but also American Express), the credit cards offer far more value, and often times offer rates that include things like breakfast, late checkout, early check-in, etc. Why bother with booking direct when I can get better value, better hotel selection, and better customer service? Bye bye hotel loyalty, hello free agency.

  3. I recently booked a few nights. The redemption rate was 50,000-60,000 points, or about $120 per night. It makes no sense to collect “points per dollar spent” when the redemption rates are so high. Plus, there was note that the hot breakfast is no longer, and is now ONE piece of fruit, a wrapped pastry, and a cereal bar. Thus, I cannot have a banana and an orange, just one or another.

    Also, so many hotels try to dangle the “nonrefundable” rates to save a few bucks, even with member rates like loyalty club or AARP. With airline delays and cancellations, I am not going for it. I will choose the best value based on the refundable rate unless I am using ground transportation and no rain is predicted.

    Finally, where I live in California, hotel rates tend to be VERY high. I looked very hard to find something that was a good value. I will not be going anywhere unless I have some pressing matters.

  4. I just got an email from Hyatt this week saying I will lose all my points if I do not stay in a Hyatt by January 2022? Really? During a pandemic? Toodle loo! They do not have to worry, I won’t stay there again. Ever.

  5. One advantage of being retired after over 35 years of heavy travel is I am lifetime elite on 2 airlines (DL and AA) and lifetime Marriott Titanium. Then you add hotel status from credit cards, status matches or partnerships (e.g., MGM and Hyatt) and I basically have top or next to top status w all hotel programs.

    That has basically freed me from chasing any status or being held hostage by any program. I fly or stay where I want based on price, location, etc. Sure I still have a lot of points/miles but am burning them when I get value abs otherwise paying cash so the OTAs and credit card portals (I have Amex Platinum and CSR cards) make sense. Only issue I have w OTAs for hotels is dealing w a middle man when something goes wrong.

  6. Credit card companies may also lose out – why have a Marriott branded Chase or AMX card? or Hilton AMX. Fewer annual fees sounds great to this consumer as well.

    Will annual free night certificates be worth anything?

  7. How do you think this pans out when you have the highest elite status with each hotel chain? I’m very tempted to get the new Capital One card, but I also have elite status with every hotel chain. The points values, with the bonuses, are very similar to Capital One, and then there’s the benefits of elite status, which I use frequently.
    You also have to consider the double dipping one gets from hotel loyalty points + 3x chase points (or whatever) from the cc company. That’s the real difference maker here.
    I’m concerned about devaluations. And I would like the flexibility of Capital One points.
    But not seeing how this adds up right if one has elite status combined with a decent travel credit card.

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