The Future of Hotel Loyalty Programs: Are Points Really Worth It?

The Current State of Hotel Loyalty Points

Major hotel chains currently hold over $11 billion in unused loyalty points. This situation incentivizes them to reduce the value of these points while consumers hope to maintain their worth. According to Marriott's latest annual report, about $3.99 billion in deferred revenue is tied to outstanding Bonvoy points. Hilton's figures hover around $2.91 billion, while Wyndham isn't far behind with approximately $1.5 billion. Other chains like IHG, Hyatt, and Accor also contribute to this staggering total.

The Fundamental Value of Loyalty Points

Each year, if loyalty programs do not increase the redemption value alongside room rates, the actual value of these points will gradually decline. Marriott's shift to dynamic pricing, where a room that previously required 50,000 points now costs 75,000 or even 90,000 points, exemplifies how hotel chains subtly adjust redemption values without accounting for it. This situation has become increasingly challenging in recent years due to rising inflation.

Is There a Solution for Consumers?

When thinking about loyalty points, we should view them as an asset that tends to depreciate, similar to airline miles. The best time to redeem points is immediately after earning them, close to the trip you have planned. Keep these three rules in mind: First, only earn points for specific trips, not as a way to accumulate value. Second, when notifications about changes in categories or pricing tables come out, it's the best time to redeem points. Finally, flexibility in transferring points between different programs can serve as a reasonable safeguard against depreciation.

Comparing Loyalty Points and Cash

Many believe that receiving cash is more advantageous than earning points in loyalty programs. However, in reality, many co-branded credit cards with hotels can help you earn 5x to 6x points per dollar spent on everyday expenses. If you spend $50,000 a year on a card that earns 6x points, you could accumulate 300,000 points, worth approximately $2,100 to $2,400 with average hotels. This clearly surpasses a cash-back card that offers 2%, yielding only $1,000 for the same amount spent.

Why Do Hotel Chains Accept This Reality?

Major hotel chains like Marriott, IHG, and Hilton have clear plans to reduce the value of loyalty points. They believe that only a small minority of members truly understand this volatility. The majority of consumers simply earn and hold points without a plan for using them, making it easier for chains to manage their liabilities as the value of points gradually diminishes over time.

For savvy consumers, quickly redeeming points is the most sensible option. The overall figures ensure that hotel chains remain profitable whether consumers redeem quickly or not. In general, increased responsibility will lead to further discounts in the future.

Helpful Information for Vietnamese Travelers

For Vietnamese travelers, when using loyalty points at international hotels, it is essential to note that some programs like Marriott Bonvoy and Hilton Honors maintain certain values over the years. However, understanding how these programs work before accumulating points is crucial. Don't forget to check credit cards linked to international hotel chains, as they can offer greater benefits for point accumulation.

To reach famous hotels, you can fly from Hanoi (HAN) or Ho Chi Minh City (SGN) to major cities like New York, London, or Paris, with round-trip ticket prices ranging from 15 million to 30 million VND depending on the booking time and airline. Additionally, you'll need to prepare for the necessary visas to enter the US and Europe.

Article reference and edited from: Live and Let's Fly