Are Points Programs Ruining Luxury Hotels? This Seems Like A Bad Take…

While the thesis isn’t completely wrong (in terms points programs having an impact on the hotel experience, and also impacting economics), I consider this to be a very bad take, and the level of pretentiousness here is next level… let’s unpack.

Are people redeeming points terrible freeloaders?

Okay, that’s not my take, but that’s essentially what’s being argued in this story. Let’s first go over the claims being made, and in the next section, I’ll share my take. The story starts with the following:

Several years ago, at a confidential meeting hosted by one of the world’s top hotel chains, a manager launched into a rant. He ran one of the chain’s flagship ultra-luxury properties and was facing a constant, unfixable problem: guests staying for free on points.

“These folks showed up with coolers full of their own food, and had everything removed from the mini-bar so they could put it in there,” he said. “Their sole goal was to stay in the hotel, and spend as little as possible, making sandwiches at the breakfast buffet”—included in the rate—“then stashing them in napkins for a poolside picnic lunch.” His tirade ended with a plea, recalls Henry Harteveldt, a travel-industry analyst at Atmosphere Research, who witnessed it: Could his exclusive property be exempted from the chain’s awards program, to protect the experience for paying guests? The corporate overlords’ answer was immediate: absolutely not.

The story argues that the bigger loyalty programs, which have hundreds of millions of members, are starting to look more like liabilities than loyalty engines. The argument is that the people redeeming points just “aren’t the same.” Per the story:

A senior luxury-hotel executive agreed. “It delivers, especially for a luxury hotel—in low season it’s exactly what you want.” But they acknowledged the downside. “Every luxury-hotel brand is trying to create a community of like-minded people, so it’s a challenge during high season. The people cashing in the points are just not the same.”

The story proposes a few potential solutions:

-Make redemptions far harder to attain, and the story mentions World of Hyatt’s recent announcement that top redemptions will increase in cost from 45,000 points per night to up to 75,000 points per night

- There’s also the claim that there’s a push across rewards programs to reserve elite benefits for those who spend a lot, citing Hilton Honors’ recent introduction of a new Diamond Reserve tier, with an $18,000 spending requirement

- The ultimate solution is to forgo points altogether, and it’s pointed out how some of the true top luxury brands out there, like Aman, Four Seasons, Mandarin Oriental, and Rosewood, all don’t have points programs

It’s kind of funny to look at the comments on Air Mail’s Instagram post about this, with a bunch of people saying “I couldn’t agree more.” Conveniently, those people are mostly travel agents, who of course don’t get a commission when people redeem points. I’d say they might not be unbiased here.

The argument against points programs is a bit backwards

Broadly speaking, I don’t completely disagree with the premise that association with a points program can impact the guest experience. A while back, I wrote about the concept of luxury hotel “points farms,” and before that, I wrote about mediocre hotels’ loyalty program delusions.

To me, the issue is that some hotels want it both ways. They want the bookings that come from being associated with a major loyalty program, but they also don’t want to dole out the perks, and view the members as freeloaders. That’s really not a very nice way to look at guests.

I won’t name names here, but I remember once meeting a hotel manager at a luxury property, and the topic of Bonvoy came up. I couldn’t believe how he spoke about the program — “Bonvoy members don’t know how to act, I wish we could get rid of them.” I was speechless, because to me, it kind of reflects the delusional arrogance of some in the hotel industry.

Here are the points I fundamentally disagree with in the story:

- The premise of claiming that guests redeeming points are staying for free is ignorant; points are literally always earned at an opportunity cost, whether the alternative is cash back through a credit card, or booking through some kind of online travel agency portal that could get you rewards

- Calling guests redeeming points freeloaders is even worse; this is literally what hotel groups market, so how can you hold it against guests when they redeem their points that the program awards them? Are people who redeem their Starbucks rewards for “free” drinks also freeloaders?

- It’s ridiculous to give one example of terrible behavior (wrapping up sandwiches from the breakfast buffet) and then to suggest that this is simply the norm among those redeeming points

- Ultimately hotel managers are working for the hotel owners, and if the hotel owners don’t think the economics of belonging to a group with a loyalty program maximizes their profitability, then they’re more than welcome to rebrand, and that’s fair enough

- Literally the only reason that people seek out properties belonging to Hilton, Marriott, etc., is because of the points programs; other than that, they’re essentially just online travel agencies, and let’s remember that the benefit of direct bookings is that the costs are way lower, given the high commissions that online travel agencies charge

- The story doesn’t seem to grasp that companies like Hilton and Marriott make much of their profits from their loyalty programs

As I view it, the issue is that many hotels associated with loyalty programs do choose to cut corners because they know they can get away with it, due to their loyal following, and people being on the points and status hamster wheel. But it seems unfair to blame guests for that.

Like I said, it’s absolutely true that many top hotels don’t have points programs, and I do think that contributes to them often providing a better experience. But that’s simply because they don’t have any crutch to lean on, and the only way they can get guests is by offering an amazing experience.

If that’s what hotel owners want, by all means don’t join a major hotel group with a points program. But to suggest that the problem with Hilton or Marriott is the points program makes no sense, since that’s literally the main selling point. If hotel owners aren’t happy with the economics of that, they can of course rebrand.

Bottom line

A story argues that points programs are ruining luxury hotels, and that the “freeloaders” using points don’t act properly at hotels, and managers are fed up. While there’s definitely some truth to points programs impacting the kind of experience hotels offer, it’s not fair to blame the actual guests who buy into the programs for the decisions of hotel owners.

Hilton and Marriott shouldn’t abolish their loyalty programs — that’s one of the dumbest things I’ve ever heard. Instead, if hotels aren’t happy with the economics of belonging to a major program, they’re more than welcome to rebrand.

But this gets at the crux issue — so many hotel owners and managers want the business that these mega hotel groups offer, but don’t want the rewards aspect of it, when in reality, that’s what drives the business.

Ben Schlappig