While it's fairly straightforward to quantify the value of a loyalty program in terms of "payback," that doesn't account for all the other special perks and experiences that travelers may value.
For the second consecutive year, Wyndham Rewards topped the annual Hotel Reward Payback Survey conducted by travel consulting firm IdeaWorks Company.
In its survey, IdeaWorks concluded that Wyndham Rewards returned, on average, 16.7 percent reward value for every dollar spent on a hotel, up from last year’s 13.6 percent reward value. This means that for every $100 spent on a hotel room rate, a Wyndham Rewards member gets an average “reward payback” of $16.70.
To compile the data for the CarTrawler Hotel Reward Payback Survey, IdeaWorks sent 1,350 reward queries for six global hotel loyalty programs, noting the lowest reward price in points and its corresponding room price in U.S. dollars during the month of August for reservations spanning August through February.
Following Wyndham Rewards in ranking was Marriott Rewards, which retained its second-place ranking from last year. In 2015, Marriott Rewards topped the survey with an average reward payback of $9.40 for every $100 spent. In 2016, that number was 9 percent, and this year, it dropped to 8.8 percent.
Marriott Rewards was followed this year by Hilton Honors (7.5 percent), Best Western Rewards (7.4 percent), IHG Rewards Club (6.7 percent), and Starwood Preferred Guest (SPG) (5.4 percent).
Although Marriott acquired Starwood in 2016, for the purposes of this survey, the two programs were treated as separate entities and the fact that you can link points between the two was not considered.
The survey also examined the relative value of each of the points for each program. For example, one SPG Starpoint is worth about $0.023 while one Hilton Honors point is worth about $0.005, meaning that it generally costs 2 SPG Starpoints for every dollar spent at a hotel, and 15 Hilton Honors points for every dollar spent at a hotel.
One interesting difference in this years’ survey was the exclusion of Choice Privileges and the addition of Best Western Rewards as its replacement. The reasoning, according to IdeaWorks, had to do with the fact that Choice Hotels limits reward bookings for its regular membership tier to a 30-day booking window for U.S. and Canada locations, making it difficult to compare the program with those of its peers. Best Western Rewards has an approximate 12-month window for reward availability.
Why Wyndham Was No. 1
“It’s clear to me that they are making a big investment in their program to make it so rewarding,” said Jay Sorensen, the report’s writer and researcher. “They want to create the best value program available and, based upon our assessment in terms of reward payback, [Wyndham Rewards] is head and shoulders above everyone else. We don’t compare the other elements of a program like having an array of locations or elite tiers and alternative rewards beyond hotel stays, but when it comes to the value provided by the rewards, no one comes close to them. They have created a redemption mechanism that just guarantees that.”
In 2015, Wyndham embarked on a massive overhaul of its loyalty program, making it simpler and more straightforward for guests to earn and redeem points. A guest only needs 15,000 points to stay anywhere within the Wyndham hotel portfolio, with no blackout dates.
Since that relaunch, Wyndham has worked hard to market its program as being designed for the “everyday traveler,” making investments in extensions to vacation rentals and timeshares, partnerships with companies that include Caesars Entertainment, and even trying out online auctions for point redemptions.
Wyndham Worldwide CEO Stephen P. Holmes has often referred to the program as a “blue thread” that connects all of the company’s businesses and, as the company proceeds with its spinoff, splitting itself into two companies — a hotel company and a company comprised of timeshares and vacation rentals — the value of Wyndham Rewards as a connection among both units will be extremely important.
Another interesting thing Sorensen noted was the rate of payback for specific brands and hotel properties. Sorensen said, “What I find stunning is that Wyndham Rewards, in terms of the payback associated with their Wyndham New Yorker property, they broke 50 percent on one of our samples. The payback was 50.7 percent. If you stay there, you get half your room rate back if you were to cash in that same night for a rewards stay. Why stay anywhere else if you’re going to New York City?”
Overall, he said, the payback for Wyndham Hotels branded hotels, including Wyndham Grand, was 24.8 percent, making it the top in terms of payback among the 18 brands (3 from each program) examined in the survey. Wyndham was followed by its sister brands, Days Inn and Ramada. At the bottom was Starwood’s Westin, which had a payback of 4.1 percent.
“You would think that, perhaps, budget brands would have a lower payback than premium brands, but that’s not what we found,” Sorensen said. “It’s not the budget hotel that determines reward payback. It’s the strategy for the guest loyalty program.”
What About Co-Branded Credit Cards?
The survey also looked at the rewards payback for co-branded credit cards associated with each of the hotel loyalty programs and Starwood’s SPG American Express came out on top with a rewards payback of 2.7 percent, beating the Wyndham Rewards Visa, which had a 2.5 percent reward payback.
To assess this, IdeaWorks looked at the points accrued by everyday charge activity, and not activity related to hotel stays or airline tickets which often give cardholders more points, for example.
Those two programs were followed by Hilton Honors American Express (1.5 percent), Best Western Rewards MasterCard (1.5 percent), Marriott Rewards Premier Credit Card (0.9 percent), and IHG Rewards Club Select Credit Card (0.7 percent). The report did note, however, that IHG credit card holders get 10 percent back on all point redemptions and automatically qualify for Platinum elite status in the IHG Rewards Club.
Sorensen said, “In the case of the SPG AmEx, they clearly have made the program very rewarding. The strategy here, with the richness of the credit card program, originates with Starwood. They determine the economic relationship they have with AmEx.”
What will be even more interesting, he noted, is what strategy Marriott decides to pursue as it builds a single loyalty program to encompass Marriott Rewards and SPG, something Marriott has said it hopes to accomplish by 2018. Will Marriott place more emphasis on rewards payback with its new program? Or will it focus more on the credit card rewards payback as SPG has?
How Do Hotel Loyalty Programs Compare to Airline Loyalty Programs?
“The hotel programs are just more rewarding,” said Sorensen, comparing the percentage of reward payback from hotel loyalty programs to that of the airline loyalty programs. Where hotel program payback usually ranges from 5.4 to 8.8 percent, the usual payback for airline programs is anywhere from 3.1 to 8.7 percent, as noted in another survey written by IdeaWorks relating to airline loyalty programs.
“I find that very surprising,” Sorensen said. “Airlines have more control over this than hotel chains do. The hotel loyalty program acts like a bank where properties pay into it and the program goes out and buys rewards at prescribed prices. The pricing the hotel pays the hotel location for is dictated by how full the hotel is. It’s an arms-linked kind of relationship. Airlines operate differently—they own all their capacity with exception of rewards redeemed on alliance partners. They control the means of production of the reward and, on a relative basis [compared to hotels], they are stingy.”
And while hotel companies’ loyalty programs offer more value to consumers in terms of the ability to redeem for free hotel nights, it is interesting to note how those hotels are also adjusting their applications of fees to mirror what airlines have done most recently, especially with regard to cancellation policies.
Is There Such a Thing as the Best Hotel Loyalty Program?
The annual IdeaWorks survey is just one of many surveys and rankings that try to demonstrate which hotel loyalty program is best. Most recently, Marriott Rewards unseated Wyndham as the top hotel loyalty program according to U.S. News & World Report.
Sorensen was quick to point out that his research only looked at one aspect of the programs: How quickly you can redeem for a free night.
“It’s easy to, perhaps, criticize Starwood’s SPG program for having the lowest reward payback,” he said. “But this survey measures just one attribute of these reward programs. For a majority of members, it is the most important attribute — getting a free hotel night. But there are also other factors to consider like the array of locations and brands. And things like elite tiers and customer service. All of these hotel chains are successful companies. The consumer looks at their relationships with hotel brands based on a number of different attributes like rate, quality room style, needs, perks provided by loyalty program, and how rewarding the program really is for them.”
Tags: best western, hilton, ihg, loyalty, marriott, spg, wyndham
Photo credit: The Wyndham Rewards Wyzard. Wyndham Rewards / Facebook