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Hyatt retooled its "cash + points" award booking calculations last week and it illustrated the perils of building out a loyalty program without expecting members to abuse it.

Series: Business of Loyalty

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The Skift Business of Loyalty covers the world of hotel, airline, and other consumer loyalty programs in the travel industry. Read more coverage of loyalty here.

As travel loyalty programs have evolved over the last half dozen years, the option to book award rooms or flights with a combination of points and miles has become increasingly common. The upside: Adding more flexibility to a loyalty program makes it easier for anyone to use the service. As Hyatt learned late last month, however, the downside is that “cash + points” transactions can also be difficult to manage.

Until last week, the World of Hyatt loyalty program had a feature that allowed members to book award rooms with cash and points by simply billing members half the typical number of award points for the room and then charging a tiered fee for the rest of the rate, depending on the hotel’s category. What many found out, however, was that many of those combinations created amazingly good deals for many rooms in the hotel’s portfolio, especially when rates were high from events like conferences or holidays.

Revenue, too, was also a problem for the cash + points awards. “It’s about cost savings to the loyalty program, shifting the cost of the rooms from the program to the consumer,” says Gary Leff, who runs the popular View from the Wing blog. “Under the old model Hyatt was paying more to properties than with these new awards.”

Hyatt, it seemed, wasn’t fond of how the revenue portion of that equation was stacking up. As of Nov. 1, it officially changed the way its “cash + points” transactions work, and now charges 50 percent of the typical points per room plus 50 percent of the standard daily rate.

Loopholes like these, for many, are part of the attraction of loyalty programs. But as Hyatt just pointed out (and as the airlines have underscored for years), revenue today is more important than loyalty tomorrow.

UPDATE: This story was updated to include a quote from Gary Leff and highlight cost issues faced by Hyatt.

— Grant Martin, Business of Loyalty Editor

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Skift Business of Loyalty Editor Grant Martin [[email protected]] curates the Skift Business of Loyalty newsletter. Skift emails the newsletter every Monday.

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Tags: hyatt, world of hyatt

Photo credit: Hyatt Regency in San Antonio, Texas, on July 9, 2017. Hyatt retooled its "cash + points" award booking calculations. Phil Roeder / Flickr

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