“Buy low, sell high.” Or, in the points world, “Buy cheap, redeem expensive” might be more appropriate. That’s the common refrain we hear and aim for. But what if that’s not really the best value? What if the cheaper rates are the ones we should be redeeming our points for? How would that skew your views??
I’ve previously looked at a revenue-based airline program in this context and the cheaper flights were the ones to book on points to maximize value. A bit unnerving and counter to the common theme. But what about hotels? How do they fit in the mold? Here are some interesting numbers from Starwood Preferred Guest average room rates as shown through the searches performed on Hotel Hustle.
The data is quite counter to the typical story being told. The cheaper rooms are, on average, the best redemption values. By far.
And in some ways that makes sense. Cheaper rooms are the ones the company wants to fill no matter what as they’re likely to spoil so getting anything for them – points or cash – is a win versus having it stay empty. But there’s also the exclusivity factor at play. Should we be surprised that the SPG Category 6 & Category 7 hotels have a 18.3% rate of no awards available in this data set, compared to only 11.5% for the lower category properties? When the properties are not getting reimbursed from the program at a rate which more closely covers the marginal costs it should be somewhat expected that access to those bookings are harder to come by. In Starwood‘s case that comes in the form of limited numbers of specific room types or other games with inventory, but it absolutely happens.
“But there are Cash & Points awards,” you’ll hear. And those are the bestest value ever. Perhaps, though the data does not necessarily bear that out. Partly because C&P availability is but a subset of regular award availability (good thing I have alerts for it) and partly because the numbers are still tied to the room rates. And it doesn’t necessarily add up in your favor as much as you’d like to think. (n.b. – C&P CPP calculated as (Cash Rate-C&P Cash)/C&P Points; there are lots of ways to approach that one but this is the method I chose as it is most consistent)
So, does this mean that there are no good redemptions at luxe hotels? Of course not. They definitely exist and I’ve seen more than a few results in the Hotel Hustle data which suggests travelers are finding them. But it also raises the question of just where the best results really are. For SPG it would appear that lower category hotels are where the sweet spot is. Even if they aren’t the luxury properties your aspirations have you reaching for.
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This is really cool. I would love to see this for some other programs as well. In particular, Club Carlson, Hyatt, and Marriott.
Again, really cool stuff.
Working on other programs as well. Turns out that Hotel Hustle is all sorts of cool in many ways. 😀
I just saw the IHG one. Interesting that the pattern is consistent across both of them, so far. I am particularly curious about Club Carlson and Hyatt.
The effect is even more pronounced because, at the top end, most people aren’t really receiving $500+ in “value” since they’d never pay that much anyway; whereas at the bottom end, you really are trading off 3000 points for a $100 room because most anyone considering this would actually pay that.
Really cool analysis. I expect this will be even more pronounced for Club Carlson!
This sure matches my experience.
So a 2% cash back option would steadily beat SPG points, at least for hotel redemptions, yes?
Well, not if you’re redeeming at the awards which are above 2cpp, of which there are still plenty. And not if you earn through actions other than credit card spend/churn.
Exellent post. This is a big YMMV thing but looking at a trip I’ve been researching, the research backs up what your saying. For example, in Bangkok:
aloft is cat 2 @ 3000 points; about $100/night
St Regis is cat 6 @ 25k point; about $225/night.
This is a rough example but that being said, I can get about $800 in value by using those points at aloft vs. 1 night at St Regis worth $225. While this isn’t the Big Mac index where it’s a largely identical product everywhere on earth and there’s a vast difference between the two properties, the point is that I’m better off paying cash for St Regis and use points for aloft.
This squares with my experience. Unfortunately, many of my favorite Cat 2 hotels moved to Cat 3 in the last couple of years….not surprising.
Another “sweet spot” with Cat 3-5 is “fifth night free” awards. These move what would be a 2 cents/point redemption up to 2.5 cents/point – a much better value.
Definitely have seen the same for Marriott and IHG (10,000 point rooms)
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