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I have often thought that IHG Rewards Club’s award pricing is unsustainable. Anybody understanding the basics of economics knows that when the central bank of a country prints money, it often results in runaway inflation (think Zimbabwe or Venezuela). The same applies to loyalty programmes. We love the Accelerate promotion here at InsideFlyer UK, but those 100 million IHG Rewards Club members receiving that many bonus points each year… well, you can imagine that IHG isn’t really in the business of giving away so many hotel rooms – so something must give…
Flyertalk contributor Lionheart has stumbled across an IHG Rewards Club webpage outlining the award pricing changes for 2018 and the news is not good!
The current maximum price for an award night is 60,000 points per night – this applies to high-end Intercontinental hotels such as the Park Lane in London or the main one in Hong Kong. At some point in early 2018, this will increase to 70,000 points per night!
Since IHG Rewards Club haven’t actually made an announcement, we have no idea whether we will receive some advance warning, or whether this new pricing will be implemented overnight.
What to Do?
First of all, take a really long look at this list of hotels. I suspect that you will find a few of your favourite IHG hotels on the list. Those ones will be going up in price! (to be fair, other hotels will be going down in price, except that I can’t find a single one that I actually want to visit…)
If you have any holiday plans, or even just the germ of an idea for a holiday, make a speculative points booking TODAY! Award nights are almost always completely refundable, so you have nothing to lose. That said, don’t go buying IHG points today – the regular price will cost much more than the often-discounted price – but do try to put any existing IHG points balance to good use…
Another tip is to book your speculative stay on a night-by-night basis – i.e. split a week into seven one-night bookings made consecutively. Why? IHG Rewards Club doesn’t let you change award bookings without repricing your entire stay. But if you’ve booked night-by-night, you can cancel any nights you subsequently don’t need (post-devaluation). Upon arrival to the hotel, staff will usually merge those one-night stays into a single longer one…
Conclusion
I’m not surprised that such a devaluation is forthcoming. My lack of trust in IHG is one of the reasons why I prefer other hotel chains. But if you have a substantial balance of IHG points, try to use them before the new higher pricing is implemented. Of course we’ll update you when (and if) IHG makes a formal announcement…
THe point you make about printing money, might lead one to extrapolate that to what is happening at Marriott. I shudder to think how many point they’ve given away in the NFL promo. Each of those following it could easily achieve a free night, and possibly more if some are operating more than 1 account.
At least at IHG you need to do some stays to get the bonus points. Marriott is basically 30 secs on a Sunday. Either NFL is paying them serious money, or Marriott is giving tens of thousands of free nights away.
Interesting point, but the Marriott tweets each week seem to have 35-40K replies. (perhaps a few thousand more participate without replying to the tweets directly? But the total number of followers is “only” 150K) By my math, we’d be looking at say 50 million free points each week. Marriott sells them for 1 cent each, so $500K of “value” per week for 15 weeks or so. That looks like a small piece of the marketing budget to me.
On the current IHG promo I can get 30K points if I stay a couple of nights. I think my full 47K requires me to do at least 3 stays. Some of those stays have to be booked via the app, and thus exclude me going via a cashback site. I’m guessing that indirectly saves IHG money as well.
I’m not sure how many weeks the marriott one is running for, but going with your reasonable guess of 15, a couple can get 30k points for 30 seconds of ‘work’ each sunday. That’s enough for a 1 night stay at a very nice Marriott.
THe IHG spend is on retaining existing customers by incentivising them to make paid stays with them rather than with other brands. The points they give out are at least partially repaid by the added revenue generated.
The Marriott spend is shotgun marketing by printing 750M points (based on your estimates).
Let’s say you spend $200-300 on those two nights to get 30K points. IHG Corporate is going to see a 20% commission at most on direct bookings? The rest goes to the franchise owner. Sure IHG Rewards Club is driving business, but it is also printing 30K points in exchange for $40-60. No wonder they would rather sell us 30K points directly for $150 during promos…
The difference for me is 150K Twitter followers for Marriott versus several million IHG members actually staying and earning Accelerate points.
Anyhow, interesting discussion. Anybody else fancy joining in?
Hmmm, definitely an interesting one. It’s difficult to know how much printing Points for the Marriott twitter promo really ‘costs’ them without having a clearer view of how their accounting works. That said, I would assume that regardless of what the books say, the reality is that the average cost per Point to them is far, far lower than the 1c they sell them for. Then add the potential tax benefit, additional natural spoilage (due to the weekly nature of the promo, many participants will collect a few thousand they never use), etc, and you should be looking at some pretty cheap marketing overall. Whether twitter marketing is effective or not is a separate question, of course.
The question from a simple inflation perspective though isn’t the cost to Marriott really, but the additional number of Points in circulation as a percentage of total annual issuance. If we go with Craig’s 750 million points, I would suggest that is a drop in the Marriott ocean – particularly if they decided to do the twitter promo instead of making traditional promos more rewarding, rather than as well as. Essentially, it’s only if the total number of Points issued this year is higher than originally projected that there would be any inflationary pressure. Even then, issuing ‘too many’ one year wouldn’t necessarily be a sufficient reason to devalue in itself, unless it actually influenced the baseline upwards for future years.
IHG Accelerate is precisely that in action – the same (generous) promos for a number of years will presumably have increased the total pool of points considerably.
Obviously this is all pretty rough and ready stuff – there are a huge number of wider business factors that could play a big part in decisions about devaluations, not least ADR, occupancy rates, brand loyalty considerations (especially with the Starwood merger for Marriott). Companies will generally try to get away with what they can when it comes to this stuff, and with the hotel business doing pretty well overall at the moment, IHG will feel fairly comfortable with the devaluation.
Having spent a load of money on Starwood (and saying that that they saw a lot of that value in SPG members), I imagine Marriott would be more reticent than the other big hotel groups to do anything that might annoy frequent guests, despite the relatively benign market conditions.
Wow! The HI at Chiang Mai is doubling – from 10K to 20K.
You’re right that the places that are going down are the ones that people won’t exactly be beating a path to – like Dabrowa Gornicza in Silesia, Poland.
Indeed – and that hotel is well outside of Chiang Mai. Even the awful Holiday Inn Express hotels outside of Barcelona (but no public transport) are going from 10 to 15K.
A lot (all ?) of the ICs in the US are going to 70K. The CP in Miami, which is pretty good spot BTW, is rising fro 50K to 60K points.
At least several of the European ICs aren’t changing. Porto,Madrid, Amstel remain the same.