From the desk of the Devil’s Advocate…
I am thrilled to report (and I am sure you are all thrilled to hear) that this past Friday I successfully completed my Hyatt Diamond Trial. As a result, I now have Diamond status with Hyatt until the end of February 2016.
[If this weren’t a blog, you would hear applause and cheering here. There would also be “You Rock!” chants where appropriate.]
Yes, thank you, thank you. I am truly awesome. My ability to stay in Hyatts for 12 of the most recent 60 nights of my life is clearly legendary. Not to mention my willingness to pay cash for those stays instead of using Hyatt Gold Passport points. (Actually, I did the majority of my nights on Points & Cash awards, but let’s keep that to ourselves, shall we?)
For those of you who might not already be familiar with the Hyatt Diamond Trial, it is probably the most generous hotel status trial/match available right now. Scott wrote an extensive overview of the Diamond Trial back in March, so if you’re interested in the benefits and what’s involved, you should definitely check out the details there.
But between you and me, I think I pulled one over on Hyatt. Because as a hotel customer, I’m not really that great of a catch. Sure, I spend more nights per year in hotels than the average American, but I’m nowhere near the numbers of true business travelers. I’m on track to spend maybe 40 nights in hotels for all of 2014, and that includes a decent number of non-revenue award stays.
To get Hyatt Diamond status without a trial, you normally need 25 qualifying stays or 50 qualifying nights. So at my current pace, even if I spent every single one of my hotel nights at a Hyatt and paid for all of them, I still wouldn’t make Diamond. Which means I probably hacked my way into a pretty sweet status that I don’t really deserve.
Or did I?
I mean, what exactly is Hyatt giving me for being a Diamond, and what does it cost them? How much added revenue am I giving them in return? Have they thrown benefits at a customer who isn’t valuable enough to warrant them? Or have they magically turned a lower-value customer into a higher-value one?
Did I hack the Hyatt Diamond Trial… or did the Hyatt Diamond Trial hack me?
What exactly does it cost Hyatt to provide Diamond benefits?
It’s a little tough to quantify exactly how much the Diamond benefits cost Hyatt (not their value to me, mind you, but what they actually cost). But let’s see if we can break it down a bit. I’ll make the math easy and assume I spend about $100 on average for a Hyatt hotel room. Using that metric, here’s what each individual Diamond benefit might cost Hyatt…
- 30% bonus Gold Passport points
I got about 1.4 cents per point in value for my Points & Cash redemptions, so we’ll call that Hyatt’s cost. That means at the $100 room rate x 5 standard points per dollar x 30% bonus x 1.4 cents per point, the bonus points cost Hyatt $2.10.
- Choice of welcome amenity or bonus points (1,000 points at most properties; 500 points at Hyatt Place and Hyatt House)
I always take the points over the welcome amenity. So add another $14 for most properties.
- Complimentary Internet access and newspaper
I have not read a newspaper since 2007, but I suppose it costs Hyatt 50 cents to provide this service. On the other hand, it costs Hyatt not one extra dime to provide free wireless to Diamond members on their already existing wireless network. So I’m valuing that one at zero.
- Upgrade to the best room available excluding suites
A nice perk for me, but since it’s the best room “available” (meaning unsold), it doesn’t cost Hyatt anything extra for this benefit.
- Regency Club or Grand Club access
This one’s difficult to quantify since a portion of the Club costs are service-based and another portion involves building and maintaining the Club for elites in the first place (unlike wireless service, they’re not selling Club access to non-elites). I’m not exactly sure how to count this, so rather than doing a lot of extensive research and/or guessing, I’m just going to pretend that the club is always unavailable. Yes, that’s completely and utterly unfair, but it brings us to…
- If no club is available, full breakfast in the restaurant
See, being unfair totally makes it easier for me to calculate this. I like breakfast, so I’ll call this a $9 cost to Hyatt. Remember, this is Hyatt’s cost, not what they would otherwise sell it for because I probably wouldn’t buy the hotel breakfast if it wasn’t free.
- If a club is present but closed during your stay, full breakfast in the restaurant and 2,500 bonus points
Since we unfairly assumed the club was unavailable (i.e.: not present), we therefore have to unfairly assume that we never get these bonus points. Cost to Hyatt = $0.
- Guaranteed 4 PM late check-out
Again, I really like this perk, but it doesn’t cost Hyatt anything extra. There’s always enough people checking in late in the day to ensure that no other guests will be inconvenienced by my late checkout.
- Four suite upgrades, up to seven nights each, that can be confirmed at any time prior to arrival (subject to availability)
OK, this is the granddaddy of the Hyatt Diamond perks. Quite frankly, these are so fantastic that they should rename them “Diamond Sweet Upgrades.” I used one of these during our trip to Japan and the suite we got was bigger than the Imperial Residence. And with a better view.
We can’t value this like the “best room available” benefit above because you can confirm these suite upgrades right at the time of booking, which means you’re costing Hyatt the possibility of someone else coming along and actually paying cash for one of them. On the other hand, these suites don’t get booked for cash every single night and sometimes end up sitting empty, in which case the cost to Hyatt is zero in lost revenue. To make it even more complicated, the actual room rate on these suites varies greatly from property to property and even night to night.
So we’re all over the map on this one. I honestly don’t know exactly how to value this benefit, but I’ll just estimate it costs Hyatt $200 in lost revenue per night for a suite upgrade on average. Yes, the suites go for a lot more than that, but again, that’s assuming they would be 100% booked if they weren’t given out as upgrades, which is certainly not the case. Also remember that I’m still paying the rate for the standard room, so it’s only the extra revenue for the suite that Hyatt is losing.
Put it all together and the Diamond costs come to $25.60 per night, not including the suite upgrades. Now let’s assume I book all 40 nights of my hotel stays this year at Hyatt, use all 4 of my suite upgrades during those nights at an average of 2 nights per stay, and take full advantage of my Diamond benefits at each stay.
I add it all up and get $2,624 for the year. That’s what I cost Hyatt for my Diamond status.
What did I give Hyatt in return for that $2,624?
Well, for my Diamond Trial I stayed 12 nights and did Points & Cash for most of them, so that came to around $800 or so for all those nights. But that’s not a fair comparison because it’s not a full year’s worth of stays and I can’t always use Cash & Points to book my nights.
If we extrapolated the same $100 per night metric I used above out to 40 nights of Hyatt stays, then I’d have spent $4,000 at Hyatt’s and gotten $2,624 in benefits. That’d put me around $1,400 in Hyatt’s favor, though obviously that’s not counting all the other costs for Hyatt to have me stay at their hotel in the first place. I can’t possibly know what all those costs come to, but I’m guessing with $1,400 in effective gross revenue, they might eke out a small profit from me. Probably not much though, and they might even lose a little money on me.
But the better question is what will the next 18 months of having Hyatt Diamond status bring to our hotelier/customer relationship? This is where it gets interesting. Because while I like Hyatt a lot, I haven’t stayed with them a ton in the past. Mostly because they just have a lot less properties than Hilton or Marriott, but also because I don’t like to spend a lot of money on hotel rooms. My theory on hotels room is that if you’re visiting a new and exciting place, the last place you should be spending your time is the hotel room. For me, as long as it’s safe, clean, and a reasonable temperature, that’s good enough. Yes, I’ll spend some extra money for a special occasion, but in general, I’m pretty minimal when it comes to hotel rooms.
But now that I have Diamond status, will I be staying at a lot more Hyatts? You better believe it. It might not be every single stay, but you can bet that anytime I have to book a hotel room in the next 18 months, the very first place I’ll check is hyatt.com. I might shop around afterwards and see what I can get in the area that might be cheaper or more convenient, but it’s going to have to be significantly cheaper or a lot more convenient to get me off the Hyatt train.
And of course, that’s exactly what Hyatt wants, isn’t it? Because if they can get me in that habit, they’ve got me exactly where they want me — trained to think of them first when it comes to hotels and everyone else thereafter. In fact, even after my Diamond status ends, I’ll probably still check Hyatt first for hotel rooms entirely out of habit. I’m basically just a trained monkey after all, so if you can get me into a routine where I relate your product or service to a happy experience, well, I want more happy experience, so let’s go there again! (If you don’t believe me on this point, note that the entire city of Las Vegas, Nevada has been built on this exact theory, and I don’t know if you’ve seen that place lately but they’re doing pretty well with it, thank you very much.)
The Devil’s Advocate thinks Hyatt may have lost the battle, but won the war.
When we look purely at the numbers, I’m probably a wash to Hyatt as a new regular customer. Maybe I’m even costing them a few bucks over the next year. But it’s far from a slam dunk in my favor. And over the next 5-10 years, Hyatt has a good chance of coming out on top in our relationship and I’ll end up giving them much more money (and spending more money on hotels overall) than I would have otherwise.
Of course, all the Diamond benefits I enumerated are worth a lot more to me than they actually cost Hyatt. So perhaps we actually hacked each other and everyone won. Just like in elementary school at the end of P.E. class where the bell rings before everyone gets their “fair ups” and the P.E. teacher raises his hands and announces “Everybody wins!” Maybe we really did learn everything we needed to know in elementary school after all.
This Weekend is FTU Advanced…
…and the Devil’s Advocate will be there! For those of you who are attending the Advanced workshops in Chicago starting this Friday, by all means please come over and introduce yourself at some point, as I would love to meet and chat with as many of you as possible. I assume I will be wearing a nametag that says “Devil’s Advocate” or something of the sort, but you can also just find the guy drinking gin and tonic at the bar and that will probably be me. Well, actually, it might be Scott cause that’s his drink too, but in that case just ask him which one is me and he can probably point me out. Hope to see you this weekend!
Devil’s Advocate is a weekly series that deliberately argues a contrarian view on travel and loyalty programs. Sometimes the Devil’s Advocate truly believes in the counterargument. Other times he takes the opposing position just to see if the original argument holds water. But his main objective is to engage in friendly debate with the miles and points community to determine if today’s conventional wisdom is valid. You can suggest future topics by sending an email to email@example.com.