There’s a clear trend emerging in the US credit card market, which in many ways is extremely good news for most customers. More points!

For travelers who’ve invested massive time and effort into hotel loyalty programs, the joy of “more” points, is a bit tainted though, since it means potentially losing out on other things, like hotel stay perks.

The internal struggle to take the points, or the perks, is reaching new heights, as US card issuers up the ante for bookings made directly through their platforms and not directly with hotels. Here’s what it means for your future bookings.

Credit Cards Seek To Control Travel Bookings

When you make a booking through any channel other than the hotel itself, or the hotel’s loyalty program, you’re typically forgoing perks and hotel points. You may get a better deal, but the extra rewards are gone, since the hotel has to pay commission to whoever you booked with, like Expedia, Hotels.com, or Chase Travel.

This week, Chase launched significant changes for the Sapphire Preferred and the Sapphire Reserve cards. Respectively, from August 16th onward, they’ll earn 5X and 10X points on hotels booked through Chase Ultimate Rewards Travel. In most cases, the prices are the same as found elsewhere.

For Sapphire Reserve Cardholders, whose points are worth at least 1.5 cents a piece towards travel already, earning 10X points on hotel bookings is absolutely massive and by most counts, makes this booking method far more rewarding than any hotel loyalty program.

A hotel booking of $2000 via Chase Ultimate Rewards Travel would earn 20,000 Ultimate Rewards Points ($2000 x 10X), worth $300 for any travel purchase through Chase Travel, or good for 20,000 airline miles or hotel points, via the Chase Ultimate Rewards transfer partners, like Emirates, United, Hyatt, Virgin and more.

You’re effectively earning a 15% rebate on hotel spending. For non-elite members of a hotel loyalty program, the best rebate offered, via far more restrictive points than what Chase offers, tops out at around 8%. Most are between 4%-8%, which hardly factors. A top tier guests barely claw back a 15% rebate, at best.

Going further, the rebate hotel loyalty programs offer – via points – is far more limited than earning points with Chase, Amex, Citi or Capital One.

With hotel points, you’re generally stuck using the points for hotels and hotels alone, or for a travel experience curated by the hotel group. A few offer other solutions, but they are far more limited thank banking rewards.

With any of the aforementioned banks, you can use them for transfers into specific airline or hotel points, towards flights, hotels, or even Amazon or PayPal shopping. The ease and breadth of use are almost incomparable.

The Big Dilemma

Chase isn’t the first bank to make a meaningful foray into winning hotel bookings, but its new proposition may prove the most successful.

The big dilemma for travelers, is whether to keep booking direct with hotels, to enjoy things like elite benefits on stays, or the ability to earn points, or to just take the simple rebate from credit card travel programs.

Using the example above, of a $2000 stay earning at least $300 in value via Chase, you’d need to earn value of at least $300 from booking direct or elsewhere to justify booking elsewhere. Some top tier guests may achieve that with free breakfast, suite upgrades and other perks, but most won’t.

Banks Are Circling

Amex Platinum is now offering a $200 hotel credit for each year, when you book via their Fine Hotels & Resorts platform on Amex Travel, in yet another move to lure hotel bookings away from direct hotel channels.

Even the Sapphire Preferred Card, with a $95 annual fee, will offer a $50 credit when you book hotels via Chase Ultimate Rewards Travel.

In 2019, Capital One partnered with Hotels.com, which offers one of the cleanest and easiest hotel “loyalty programs” in hotel world. For a period of time, the two offered an impressive 20% rebate. Hotels.com offers a 10% rebate, and Capital One went to 10X earning on all Hotels.com bookings during the partnership.

Hotels Created Many Of These Dilemmas

Unlike hotels, airlines don’t take away elite perks like free checked bags or lounge access when you book with other websites or businesses, because commissions are so low on airline tickets. Basically, they don’t mind that you book elsewhere, they’re pretty much just happy to have the business.

Hotels very much care who you book with, because commissions which hotels pay can run north of 20% when you book through another site, such as Expedia. Booking direct with the hotel saves the hotel paying out on this commission, which then helps to fund rewards and perks.

With airlines, you get your perks pretty much no matter what – whereas with hotels, you only get your points if you save them money in commission. It’s not exactly “love” and loyalty on your terms.

Banks can more effectively fund rewards (such as 10X) on hotel bookings than many hotels can themselves, because the bank’s travel booking platform earns commission from the hotel you book, and their transaction costs are lower, since they are the one who would usually earn a fee when you swipe your card elsewhere.

If hotels don’t up the ante with perks, and points – and soon – credit card companies may start to win a larger and larger share of bookings, which will eat into people who care about hotel loyalty, and increase commission rates hotels pay out, as people flock to more lucrative programs.

Leave a comment