Every now and then I hear a rumor that Hyatt will devalue its Gold Passport points. We’ve certainly seen a lot of devaluation lately with nearly 100% increases to the Hilton HHonors award chart, some adjustments to Cash + Points awards from SPG, and the hit to airline mile transfers from Club Carlson.
As one of the better hotel loyalty programs, it’s no surprise Hyatt has an interest in maintaing the value of its loyalty currency. This means devaluing the currency to require more points per award night if the cost of the hotels we use them for goes up or if there are too many points in circulation.
I don’t think there is really much risk of this, but Travel Blogger Buzz brought up the rumor again just a week or so ago. As someone who enjoys reading his rants while also stockpiling almost a quarter million Gold Passport points, I decided to look into the matter.
Besides, I haven’t made any cool charts in a while. I like making charts.
I compared the number of points required for an award night across six major loyalty programs. In the figure below, you’ll see several dots representing different award tiers for each program. There are also two horizontal lines. The wider one on the bottom is the mean (average) cost per award night. The narrower one at the top represents one standard deviation from the mean.
For this particular analysis, mean doesn’t matter much — I think it would be important to create a weighted average that reflects how many properties are in each tier, and I’m not so concerned about this issue that I’m willing to invest the effort right now. Instead, I’ll take a rough approach and base my conclusions on the range and distribution of award costs.
(If you want to argue about some of the award costs: Hilton and SPG have some seasonal variation. I usually picked the lower value but chose the higher value for the top tier to represent the full range. I also added a 75K level for Marriott to represent Ritz-Carlton properties. If a program had special discounted rates, “Points Breaks,” etc., I left those out.)
While this first chart is nice, raw points don’t really tell us much. Hilton awards oodles of points per stay. If you choose the Points + Points earnings option, you get 10 points per dollar, plus a bonus 5 points per dollar. (Points + Miles earns just 10 points per dollar.) Club Carlson awards 20 points per dollar. Hyatt and SPG are closer to 3.
The next thing I did was adjust the chart in terms of dollars spent. I ignored any elite status bonus. I ignored points earned through credit card spend. This chart just says, “If an average person walks into a hotel, how much will he have to spend to earn a free night on his next trip?” I call this Spend per Free Night.
The chart has tightened quite a bit! Most programs require somewhere between $500 and $5,000 in spend to earn a free night. Their award levels also tend to be evenly distributed. SPG is an outlier with some very pricey awards in Categories 6 and 7 (the 8th point is a seasonal award). Ritz-Carlton is also an outlier compared to other Marriott awards. Club Carlson is cheap no matter where you stay.
My original question was whether Hyatt is going to devalue its points. I’m doing this without looking at the number of award nights booked in each category, the cost of paying hotels for those nights (which does not necessarily reflect their published rates), and all the other sources of revenue for the loyalty program (e.g., issuing points through credit cards).
But I think we can get a good idea by looking at how much revenue Hyatt generates in the process of awarding each free night award compared to other programs.
Let’s narrow our focus to just three programs: Hyatt Gold Passport, Club Carlson, and Hilton HHonors. Hilton just completed a huge devaluation of its program earlier this year. I think we can look at them as an extreme example of a program that is not going to be devalued any time soon. Club Carlson, as I’ve said for a while, hands out points like a crack dealer trying to attract new customers outside an elementary school. Cheap points are easier than paying for advertising, but I expect the gravy train will eventually end.
Hyatt is somewhere in between. This is good! You don’t want them to look like Club Carlson, which could double its award chart at any minute and still have cheaper award nights than Hilton. (Club Carlson is even worse than it looks because elite members get larger bonuses than at most other programs.) Most people agree, however, that Hilton went too far. Even with manufactured spend, the free nights cost too much.
So let’s explore how Hyatt compares to more moderate players. IHG Rewards doesn’t have the most impressive elite benefits, but their award chart resembles most other programs. Marriott, too, has a nice distribution and range if you omit Ritz-Carlton. (Hilton and SPG have more outliers, but remove them and they also look similar.)
I really don’t see much evidence in Hyatt’s award chart to suggest that their award nights are undervalued. It costs about $1,000 to $4,500 in spend for a free night at one of their brands. IHG is much the same. Marriott is much the same. There’s no clustering at the top or bottom.
You could counter that I cheated by removing some of those outliers from other programs. Hyatt has some excellent Grand Hyatt, Park Hyatt, and Andaz hotels in its top-tier Category 6. You probably need to stay at a Ritz-Carlton to find comparable redemption opportunities from Marriott’s loyalty program. SPG also has some pretty amazing properties at the top. The same might be said for Hilton, but out of almost 4,000 properties, there are only 10 in its top category. Hyatt has 14 in its top category out of just 500. Remember what I said about the usefulness of a weighted mean?
Forgiving these deficiencies, I still see the potential for a 10-20% devaluation of Hyatt Gold Passport. This would mean raising the cost of award nights in Category 6 from 22,000 points to about 25,000. Alternatively, Hyatt might add a Category 7 for 26,000 points and leave the rest of its award chart intact. (I came up with this number because the current gap between Categories 5 and 6 is 4,000 points).
But an increase of about 3,000 points on the high end is not really cause for concern. It’s maybe $50 extra using a valuation of 1.7 cents per point. This would not be an end-of-the-world scenario.
Hyatt has been keeping a close watch on its program and, I think, purposely avoids situations that would force it to devalue its loyalty currency. One example is the free nights it provides to Hyatt Visa cardholders. These expire after a year and are just nights. If Hyatt awarded points, it would be more likely to create a situation where too many points chase too few rooms. Hyatt also doesn’t participate in many unrelated programs like dining rewards. Finally, people complain about the loss of popular promotions like Faster Free Nights, but I say give Hyatt credit for being smart enough to provide just enough incentive without unnecessarily padding our loyalty accounts.
I don’t see much reason to be concerned about Hyatt. It’s a low-risk play in the loyalty game. Others, like Club Carlson, may be high-reward but are also high-risk. Maybe that’s where the doubters should focus their attention.