Hilton HHonors sent the following innocent sounding email earlier today. When program sends you an email about changes to the program and points that you should learn about them, they are rarely, if ever, for the better.
What do you think about this change and it is going to affect you? Leave your comment below.
Let’s read this email. The Premium Room Rewards are 99% of the time very unwise option requiring often double, triple or quadruple number of points per night compared to the regular awards. There are occasional glitches, however.
Premium Upgrade Rewards never make any sense if you have any status with Hilton HHonors.
Points & Money Rewards are sometimes a decent deal, but this option was already devalued last year after its introduction.
Of course, there is no mention of these new drastic changes more than an advise to check “important changes” on Hilton’s website.
Hotels Per New Categories
Approximately 75% of Hilton’s properties are in the award categories of 4 and 5.
Point Requirements per Award Category
So, Hilton is introducing 3 new award categories and only the first three will have fixed number of points required throughout the year.
New Seasonal Award Pricing
The number of points required for a free night will greatly vary from month to month within a category. I think that we can expect that within a category most of the nights will be at the higher than lower end. This is just my educated guess based on how these programs tend to work. They can i.e. advertise lower 30K award night for category 7 but vast majority of the months will be available only at 60K level per night.
Hilton has released a tool that you can use the check the prices of hotel awards from month to month. You can access it here.
I calculated the average number of points required for the new category 10 properties (70K to 95K per night) and the average point requirement for the next 12 months is 86291 points/night.
New Award Chart Effective March 28, 2013, at 12:01 CMT
Hilton has made available a PDF of all their properties and their future award categories. Unfortunately, they have not included the current categories of these properties.
You have until midnight on March 27, 2013, to book under the old point requirements as far out as Hilton’s reservation system allows and award availability exists. All the bookings made starting 12:01AM CMT on March 28 will revert to the new chart.
Fifth Night Free Vs Current VIP awards
Hilton is apparently going away with the VIP awards that were only available at Silver, Gold, and Diamond level, and introducing Fifth Night Free. The sweet spot at the VIP awards was at the 6 nights that gave you 25% discount. The new fifth night free is 20% discount at 5 nights.
Category 10 properties
Here’s the list of new category 10 properties and the required number of points required per month under the seasonal fluctuation. You can see the average number of points requires for each of the properties and the change from the current award chart.
Then, I decided to compare the change in VIP awards to 5th night free using these averages. The average number of points required per night have gone up more than 100% in some instances.
You have to also bear in mind that these were calculated using the averages. The number of points required during the “high” season, when people tend to redeem, is likely on the highest end and the percentage devaluation higher.
Current Hilton’s Sweet Spots
I have written about the good deals on Hilton’s award chart previously. Hilton’s program has been heavily skewed for aspirational awards in places in Koh Samui, Maldives, French Polynesia, and Seychelles.
Now, the number of points required for a “free” night is going up from 50% to 80% (or even more) depending of you redemption patterns
Why programs devalue the points?
The outstanding points on Hilton’s balance sheet represent liability. The quickest way to lower the future liability and to book a one time gain is to tweak the award charts.
Let’s assume that Hilton sold $100 million worth of points to Citi last year and booked a profit of 40% of those sales leaving a future liability of $60 million. Now, they change the award charts and the way people use and redeem points. This could lead to a reduction in future liability 50% and Hilton could book a one time gain of their loyalty program of $30 million.
These figures are entirely fictional but represent how these are carried on the books and how the future liability can be lowered.
For those that are redeeming on the high end, the devaluation of Hilton HHonors points can be greater than 100%. These aspirational awards have been the bright spot of the program, but have required the loyal Hilton guest often save for quite some time to reach the required number of points for these awards as they require 6 night stay.
I will try do to a more comprehensive analysis tomorrow and to include category 7, 8 and 9 properties as well.