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Best Hotel Rewards Program

Hotel RewardsHotel rewards programs are important, both to the travelers who join them and to the chains that run them. Roughly 18% of frequent travelers become loyal to a given hotel brand primarily because of its rewards program, according to Deloitte, and the average Millennial business traveler is actually willing to pay an extra $41 per night to stay at a hotel that belongs to his or her loyalty program. What’s more, hotel chains reap an average of 50% more revenue from customers who belong to their loyalty programs than those who do not, according to a study from the Center for Hospitality Research at Cornell University.

Questions nevertheless remain in the minds of many consumers. For instance, is it really worth pledging allegiance to a specific hotel chain when travel-comparison websites and disruptive lodging services could yield lower prices on a case-by-case basis? And, assuming that it’s feasible to commit to a given chain, how does one go about identifying the most-rewarding option?

While much ultimately comes down to personal preference and geography, it is possible to cut through the complexity inherent to hotel rewards programs and compare options on equal footing. In the interest of helping consumers make more-informed travel decisions and ultimately maximize their savings, CardHub did just that. We compared the rewards programs operated by the 12 largest U.S. hotel chains in terms of properties owed using 21 key metrics, including point expiration policies, the presence of blackout dates, brand exclusions, rewards value and more. These metrics collectively speak to each program’s expected value for travelers with three different hotel spending profiles: Light ($487 per year), Moderate ($779 per year), and Heavy ($1,461 per year).

Complete results can be found below, along with a custom calculator that will allow you to personalize the results based on your own budget.

Main Findings

  • Wyndham Rewards is the best hotel loyalty program for travelers of all spending levels, earning an overall CardHub score of 71.85 for each profile.

CardHub Score By Traveler Type

 

  • When you only consider the value of rewards earned through each program, without taking into account any other important characteristics, such as blackout dates and point expiration policies, Wyndham Rewards is still the best program across spending levels, followed by Drury Gold and La Quinta. By this metric, Starwood Preferred Guest is the worst program for all spending levels.

Rewards Value Per $100 Spent

 

  • Best Western is the only hotel chain that offers points that do not expire due to account inactivity. All other hotel points expire after 12 to 24 months of inactivity.
  • None of the hotel rewards programs allows members to earn points on reservations booked through third-party websites, such as Kayak.com or Expedia.com.
  • One-third of hotel programs do not allow users to redeem points for award nights at all hotel brands and properties.
  • Buying points is a generally a bad deal, with program members having to pay 19% more than their points are worth on average. Consumers who do not have enough points to book a room are better off using the “points and cash” option offered by all chains.

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Personalized Recommendation

Many aspects of a hotel rewards program are binary in nature: a program either has a certain feature, or it doesn’t. However, much also depends on the amount of money that you spend with a given hotel each year. And while the Light, Moderate and Heavy hotel spending profiles used in this report cover roughly 60% of people, according to Census and Bureau of Labor Statistics data, it’s certainly understandable if you want a more personalized recommendation.

The following calculator will provide just that. Simply input the amount that you budget for hotel stays each year, and we’ll apply the methodology and data used for this report to your individual situation.

Annual Amount Spent On Hotel Stays
Best Program
Wyndham Rewards
CardHub Score: 71.85
Runner-up
Hyatt Gold Passport
CardHub Score: 67.94

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Detailed Findings

The following table illustrates the number of points that each hotel rewards program received in the scoring categories included in our methodology.

Scoring Categories Maximum Score Hilton HHonors Marriott Choice IHG Wyndham Club Carlson Starwood Preferred Guest The Ritz-Carlton Hyatt Best Western La Quinta Drury
Total Number Of Hotels 6.00 3.47 3.13 4.93 3.83 6.00 0.81 1.29 0.03 0.48 3.23 0.65 0.06
Country Coverage 4.00 3.59 3.33 1.30 3.70 2.59 3.70 3.93 1.07 1.70 4.00 0.11 0.04
Total Number Of Hotels In Top 10 Us Cities 3.00 2.64 3.00 1.93 1.71 2.05 0.22 0.71 0.06 0.53 0.93 0.48 0.02
Total Number Of Hotels In Top 10 International Cities 2.00 1.22 1.01 1.29 2.00 1.28 0.48 0.62 0.08 0.19 1.87 0.03 0.00
Value Of Rewards Heavy Traveler 25.00 15.08 24.42 23.45 15.68 25.00 18.05 1.99 18.45 23.91 13.86 23.98 23.91
Value Of Rewards Moderate Traveler 25.00 12.08 17.36 18.48 12.62 25.00 13.35 1.99 18.45 18.45 9.71 23.98 23.91
Value Of Rewards Light Traveler 25.00 12.08 17.36 18.48 12.62 25.00 13.35 1.99 18.45 18.45 9.71 16.99 23.91
Earning Points For On-Site Expenses 3.00 3.00 3.00 0.00 3.00 0.00 3.00 3.00 3.00 3.00 0.00 0.00 0.00
Do Reservations At All Of A Program’s Hotel Brands Earn The Maximum Number Of Points? 5.00 0.00 0.00 0.00 0.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00
Third-Party Booking 7.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Brand Exclusions 2.00 0.00 0.00 5.00 5.00 5.00 5.00 0.00 0.00 5.00 5.00 5.00 5.00
Room Redemption Volatility 2.00 0.20 1.50 1.52 1.60 2.00 1.32 0.35 1.87 1.50 1.65 1.70 1.73
Blackout Dates 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 0.00 7.00
Percentage Of Hotels With Award Night Availability 6.00 5.52 5.36 4.56 5.67 5.18 5.97 5.49 5.55 5.78 5.72 5.90 6.00
How Far In Advance Can Reservations Be Made? 4.00 4.00 4.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Short-Notice Reservations 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
Points Expiration 5.00 0.56 1.67 1.67 0.56 1.11 1.67 0.56 1.67 0.56 5.00 1.11 0.56
Ease Of Achieving Top Membership Status 2.00 1.29 1.18 1.87 1.06 2.00 1.26 1.03 0.00 1.69 1.76 1.87 2.00
Number Of Transfer Partners With No Fee 2.00 1.53 1.33 0.53 1.37 0.63 0.80 1.30 1.33 0.87 0.77 0.30 0.07
Can Points Be Purchased At Fair Value? 2.00 0.00 0.00 2.00 0.00 2.00 0.00 0.00 0.00 0.00 0.00 2.00 2.00
Can Earnings Be Shared Between 2 Or More Accounts For Free 2.00 0.00 2.00 0.00 0.00 0.00 2.00 2.00 0.00 0.00 2.00 2.00 0.00
Can You Reinstate Lost Earnings? 2.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.00 0.00 0.00
Valuable Membership Level Perks Heavy Traveler 5.00 3.00 2.00 3.00 2.00 1.00 4.00 1.00 1.00 3.00 2.00 3.00 0.00
Valuable Membership Level Perks Moderate Traveler 5.00 2.00 1.00 3.00 1.00 1.00 1.00 1.00 1.00 0.00 0.00 3.00 0.00
Valuable Membership Level Perks Light Traveler 5.00 2.00 1.00 3.00 1.00 1.00 1.00 1.00 1.00 0.00 0.00 2.00 0.00
Total Heavy Traveler 100.00 56.10 67.94 64.04 58.18 71.85 64.30 39.27 50.11 64.21 65.78 57.14 57.37
Total Moderate Traveler 100.00 52.10 59.88 59.07 54.12 71.85 56.60 39.27 50.11 55.75 59.63 57.14 57.37
Total Light Traveler 100.00 52.10 59.88 59.07 54.12 71.85 56.60 39.27 50.11 55.75 59.63 49.15 57.37

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Ask The Experts: Assessing The Value Of Hotel Rewards Programs

Hotel rewards programs can be difficult to understand and compare, given the often-opaque complexity of their terms. And while this may prompt hesitancy in the minds of time-crunched travelers worried about getting ripped-off, the appeal of travel subsidies in the form of free nights is a powerful opposing force. For a deeper understanding of what both consumers and hotel chains get from these programs and how they impact the behavior of both parties, we posed the following questions to a panel of leading hospitality and consumer studies experts. You can check out their bios and responses below.

  1. Who benefits more from hotel rewards programs: consumers or hotel chains?
  2. How do hotel rewards programs impact consumer behavior?
  3. Do you think consumers under- or overvalue the benefits of hotel rewards program membership?
  4. To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?
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Patrick J. Holladay

Assistant Professor in the School of Hospitality, Sport and Tourism Management at Troy University – BrunswickWho benefits more from hotel rewards programs: consumers or hotel chains?

The winners here are the hotel chains successful in creating consumer buy-in to rewards programs. Satisfied consumers will continue to use that hotel chain to build reward points. It is much more cost-effective to maintain the consumer base than it is to procure new customers.

How do hotel rewards programs impact consumer behavior?

Great rewards programs create customer loyalty and repeat patronage. Return customer spending behaviors tend to focus more on purchasing quality services and generally are less concerned with premium prices.

Do you think consumers under- or overvalue the benefits of hotel rewards program membership?

Current research indicates consumers overvalue benefits of hotel rewards program membership. Consumers primarily try to maximize points without giving thought to the value of the final rewards against their actual costs.

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

With no significant changes in branding, image and familiarity to the individual brand then mergers, acquisitions and alliances seem to have a minimal impact on hotel loyalty.
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Zongqing Zhou

Professor in the College of Hospitality and Tourism Management at Niagara UniversityWho benefits more from hotel rewards programs: consumers or hotel chains?

Both parties benefit from the rewards programs. The increasing popularity of these rewards programs is evidence that both consumers and the hotel chains see values and benefits in these programs. For consumers, these programs, like the frequent flyer programs from the airline industry, are free to sign up and are easy to use. For the hotel industry, it is a very efficient way of encouraging loyalty as well as collecting customer information for the purpose of analytics, revenue management, marketing and customer service. I would say that the hotel industry benefits more from the rewards programs than the consumers, considering the fact that, with the advance of the information technology, the hotel industry is able to do more with the consumer data or big data than in the past.

How do hotel rewards programs impact consumer behavior?

At the core of the rewards programs is the promotion of loyalty from the consumers. By loyalty, the hotel industry hopes to achieve the following purposes (impact consumer behavior):
  1. To encourage the frequency of stay;
  2. To extend the length of stay;
  3. To increase consumer spending;
  4. To retain old customers;
  5. To have the old customers to spread good words for the hotels;
  6. All of the above affect the bottom line of the industry, revenues and profits.
How effective the rewards programs are depends on many factors. What makes answering this question difficult is the fact that almost all hotels today offer similar rewards programs which evens out the effects of any rewards program across the board, just like the first frequent flyer program created by American Airlines was quickly matched and evened out. Having said that, some researchers have found that when customers perceived that a hotel company was making an investment in them, they would be more likely to embrace the rewards program of that company and therefore making the rewards program more effective. An interesting finding from the same study shows that consumers care more about the company’s investment in love, status and information with the company’s rewards program than investments of money.

Effectiveness of a rewards program can also be different depending on types of consumers. For consumers who travel frequently, it makes sense for them to enroll and use the program since the benefits and value of the rewards programs can present themselves quickly to the consumers. For consumers who do not travel often but only occasionally, the benefits and value of the reward program might not be that obvious and worth the time and effort to use and manage it.

Do you think consumers under- or overvalue the benefits of hotel rewards program membership?

Depending on the types of consumers. For frequent travel consumers, they would tend to overvalue the benefits since they might have lost other opportunities to try other rewards programs. For less travel consumers, they tend to underestimate the value since over a lifetime, the rewards programs can add up to bring great value to them.

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

To a certain extent, mergers, acquisitions and alliances increase the value and benefits of a rewards program. This is especially true in the case of a hotel chain that owns different brands covering a wide range of social and economical consumers and when one single rewards program applies to all of its brands in the chain. It makes the use and management of the rewards program simpler for the consumers and the accumulation of points more quickly for redemption and thus discernible benefits present themselves faster. On the other hand, it might reduce the competition and therefore the decrease of the offers and conditions on the part of the hotel industry, making the rewards programs less appealing.
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Agnes Lee DeFranco

Professor and Conrad N. Hilton Distinguished Chair in the Conrad N. Hilton College of Hotel and Restaurant Management at University of HoustonWho benefits more from hotel rewards programs: consumers or hotel chains?

Both, especially if the rewards programs are designed and managed properly. Hotels want loyal and repeat guests and guests enjoy the benefits of things like free Wi-Fi, newspapers, room upgrades and free stays.

How do hotel rewards programs impact consumer behavior?

If a hotel simply has a guest join a program and does not manage the program well, it will not do much to foster a guest’s intention to rebook with the same hotel or brand. In today’s world, when there are so many hotel brands to choose from, it is up to the hotel to keep that relationship growing and moving in a positive direction. The only way that hotel rewards programs will impact consumer behavior positively is to continue to cultivate that relationship, which includes taking actions such as sending monthly account updates, announcing specials for stays, sending well wishes for birthdays and thank yous after a stay, and providing easy access and booking mechanisms on hotel websites, e-check-ins to avoid lines, a choice of rooms before arrival (much like seat selection on airlines) and smart phone entries so they can go directly to their rooms. It is more about how hotels interact with the guests, how guests co-create their hotel stay experience — especially through smart phone apps — and how hotels recognize that relationship that will help build upon a rewards programs and, ultimately, impact consumer behavior.

Do you think consumers under- or overvalue the benefits of hotel rewards program membership?

Consumers nowadays are very astute and discount savvy. They will go where they see the best value. The value proposition is also very personal, as is a brand affiliation. The more a hotel can capture that loyalty and work with their guests to co-create their stay experience, the stronger that loyalty bond will become. Consumers know what brands want their business. It is really up to the hotel companies, while cultivating that relationship, to also educate their guests about the value of their loyalty programs, so that the benefits will not be overlooked or undervalued.

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

Brand alliances are not a new concept — they are very similar to airline code sharing. These alliances are good for consumers because it allows them to experience another brand. The secret for brand alliances — while increasing guests' options — is to make sure that guests are not lost to an “ally.” As for mergers and acquisitions, it is important to make an honest assessment of the loyalty programs for both hotel companies and to then take the best of each program to enhance the new product offered to guests. The back-of-the-house merger (in this case all the information systems) is as important as the name change for continued consumer brand loyalty. This, of course, needs to be done with a great deal of strategic planning. The point of a merger or an acquisition, after all, is to grow the company by adding on a new company, while not losing guests in the process. As long as the “new and improved” loyalty program recognizes and appreciates the individual guests and their loyalty to both brands — and continues to keep building and managing that relationship — this is a win-win for all parties.
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Jack Samuels

Professor of Marketing in the Feliciano School of Business at Montclair State UniversityWho benefits more from hotel rewards programs: consumers or hotel chains?

Anything that gives the consumer freebies is worth something. Of course, as with all rewards programs, they built loyalty to certain brands. So, basically they are a win-win proposition in the marketplace.

How do hotel rewards programs impact consumer behavior?

Certainly frequent travelers are more apt to stay with one company over another, however, infrequent travelers seem more bent on price than rewards programs. This is why in part airlines have gone to adding a lot of fees. Those fees encourage travelers a great deal to stay with one product. You can also say this about hotels because you get so many extra things when you are a frequent hotel person especially in the full service/business segment. This does not necessarily hold true for less than full service properties as they tend to give all services to all travelers.

Do you think consumers under- or overvalue the benefits of hotel rewards program membership?

Frequent travelers value the rewards travel programs greatly. Infrequent travelers do not value them much and tend to go with lowest prices.

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

Mergers are exciting news for a frequent traveler on either side of the merger because you will now have more properties to stay in. They can be frustrating at first as we don't know exactly how the merger will work, but usually in the end the customer as well as the company benefits.
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Rebecca Walker Reczek

Associate Professor of Marketing in the Fisher College of Business at Ohio State UniversityWho benefits more from hotel rewards programs: consumers or hotel chains?

It’s really a mutually beneficial relationship in many ways. Hotels use reward programs to try to ensure customer loyalty. It takes a lot more effort and money to acquire a new customer than to retain the ones you have, so incentivizing customers to remain loyal to your firm is simply good business. Customers, of course, benefit from the perks they earn in terms of free nights, upgraded hotel rooms, etc. However, there are potential downsides for both groups as well. Customers chasing the next reward or next level in a loyalty program may feel compelled to stay only at properties owned by the chain where they are a loyalty program member, even if it means forgoing a cheaper price or a more convenient location at another chain. The downside for firms is that customers who are members of a rewards program, particularly those who are elite level members, likely have very high expectations of that chain and have been conditioned to expect rewards. It can get to the point where particularly loyal customers may not even perceive rewards as perks anymore, but rather as something to which they are entitled.

How do hotel rewards programs impact consumer behavior?

It depends on the segment of consumer we’re talking about. Some consumer segments are not interested in hotel rewards programs because they tend to book travel on a site like Travelocity or Orbitz where they can see many chains’ properties at once and book solely based on price or location. Another segment may be highly loyal to a specific hotel chain precisely because they value the perks that come along with a hotel’s rewards program. These consumers can become very frustrated, even angry, if a chain changes an aspect of the rewards program they have come to value. This segment is an important one for hotel chains because they represent very loyal customers but chains need to recognize the potential for customers in this segment to feel entitled to rewards and special treatment compared to customers who are not members of the loyalty program.

Do you think consumers under- or overvalue the benefits of hotel rewards program membership?

Many consumers probably join loyalty programs expecting to earn rewards that they never actually earn. The hurdle to reach elite status in many programs is actually quite high if you are not on the road many nights out of the year. So I think many consumers join programs expecting to get a lot more value out of them than they actually do. The contrast to that are the road warriors who stay enough nights in hotels to earn elite status. These consumers come to value room upgrades, free drinks, club passes, etc., as they make traveling more pleasant. Ironically, they might not value free hotel nights as much as consumers who travel less frequently.

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

If mergers, etc. lead to changes in how rewards are administered (either in terms of number of nights required to earn a specific reward or to qualify for a status level), then loyal customers may end up dissatisfied with the new rewards program that emerges. Satisfied loyal customers are unlikely to switch brands once they are heavily invested in earning rewards and status in a given loyalty program. However, if the terms of the program change, as a result of a merger or alliance, all bets can be off, as formerly loyal customers jump ship to other chains offering rewards programs that they feel have better terms. Some may even switch out of anger if they feel betrayed by the changes in the program. Competitors may even take advantage of this by offering elite level loyalty program members the same status level that they had with a hotel chain pre-merger as an incentive to encourage brand switching.
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Mahmood A. Khan

Professor of Hospitality and Tourism Management in the Pamplin College of Business at Virginia Polytechnic Institute and State UniversityWho benefits more from hotel rewards programs: consumers or hotel chains?

In theory, it sounds like consumers are benefiting more than hotel chains, but actually hotel chains benefit more. This is because they practically get life-time loyal consumers who get hooked to the rewards program. However, depending on the program and frequency of use, consumers also benefit. Business travelers are the most common beneficiaries of such reward programs rather than those traveling infrequently. Also, other than hotel benefits, other products offered are costly and do not give as much compared to the reward points demanded.

How do hotel rewards programs impact consumer behavior?

The consumer behavior is affected by getting attached to the hotel rewards program to an extent of over-spending or over-staying to fulfill the reward categories. One of the benefits is that they become loyal customers and try to fulfill as much of the requirements that will benefit them. So the usage and consumption behavior is affected.

Do you think consumers under- or overvalue the benefits of hotel rewards program membership?

In my opinion, consumers overvalue the benefits of hotel rewards program membership.

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

Overall it does not affect much, since mergers normally create better alliances with more benefits when combined together with different loyalty programs, which are normally based on the best that either of the merging partners offer.
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Rajesh Bagchi

Associate Professor of Marketing and Richard E. Sorensen Junior Faculty Fellow in the Pamplin College of Business at Virginia Polytechnic Institute and State UniversityWho benefits more from hotel rewards programs: consumers or hotel chains?

It all depends. By and large most programs are designed to benefit firms. Loyalty programs provide one way to reward the most loyal consumers. This also allows firms to segment their customers and provide some kind of premium benefits to their most loyal consumers. So, instead of lowering the price of a night’s stay for all consumers, a loyalty program allows firms to offer some kind of benefit to a small group of favored consumers without lowering price for all. Having said this, consumers can also benefit from these rewards. A gold status or platinum status gives consumers perks (like free Wi-Fi or breakfast or free parking) which can help save money in the longer term (especially, when you are traveling with your family). Furthermore, some programs certainly offer better rewards than other programs. For instance, with certain credit cards, you get more points for hotel stays and other perks.

But, in the long run, the hotel chains end up benefitting a lot more. This is because in many instances, consumers sign up for loyalty programs and make some progress towards the rewards, but do not make enough progress to actually earn the award. In fact, some statistics suggest that while over 1.3 billion loyalty programs exist in the U.S., only a fourth of those enrolled in these programs actually redeem rewards. So, in many instances, consumers put in the “sweat equity” but give up before earning the reward. In my view point, this could end up hurting both consumers as well as firms (or hotel chains). Firms would want to build loyalty, and the only way to do this is to have consumers coming back for more. Therefore, they need to ensure consumers are made aware of the rewards. Another approach could be to offer smaller but sooner rewards. Instead of offering consumers 2 nights free after 10 visits, maybe offering 1 night free after 5 visits could be more motivating. In fact, literature on goal pursuit suggests that this would be more motivating.

How do hotel rewards programs impact consumer behavior?

It does have a positive impact on behavior. Research suggests that when consumers pursue rewards, they accelerate purchases as they get closer to the rewards. This is referred to as the goal gradient effect. So, if you need to purchase 10 coffees to get the 11th one for free, consumers tend to accelerate purchases when they get closer to the rewards (that is, the time interval between, say the 8th and 9th coffee would be smaller than that between the 6th and 7th, and so on).

My research suggests that the points system used to offer rewards can also affect behavior. For instance, companies can choose to offer rewards in different point systems. Consider two airlines — A and B, which require consumers to spend $1,000 to earn a $100 reward. Airline A may ask consumers to earn 100,000 points for the $100 reward, while Airline B may ask consumers to earn 1000 points for the same reward. In the case of A, the reward program may be “earn 100 points for every $1 you spend”, while for B, it may be “earn 1 point for every $1 you spend”. So, in both cases, consumers need to spend $1000 to earn the $100 reward. That is, both loyalty rewards are equivalent in terms of the benefits they offer. Yet, consumers find the loyalty reward program with the lesser number of points required (1000 points) to be more attractive and are more likely to enroll etc. However, once consumers enroll, in these two programs, firms can use different strategies to motivate consumers. In loyalty program A, focusing on the step size (you are earning 100 points for every dollar that you spent) is more beneficial than focusing on the total number of points required (you need 100,000 points to earn the reward). However, in loyalty program B, it may be useful to focus more on the total number of points (oh you need only 1000 points to earn your reward) than on the step sizes (for every dollar you spend you earn one point).

Other research suggests that consumers may value the same reward more if they are asked to earn more points to earn the reward. Now, this may be needed to be balanced with my work that shows that if consumers are told they need a lot of points to earn the reward, they may not enroll.

Do you think consumers under- or overvalue the benefits of hotel rewards program membership?

Consumers have been shown to be poor estimators. They always overestimate usage. For instance, with gym memberships, consumers often overestimate usage. That is, instead of paying a per-use fee (say $5 per visit), consumers will opt for a monthly membership (of say $50) because they feel they will visit the gym more than 10 times. But, often times, they end up underusing (and visit maybe 3 or 4 times). The same may be true with hotel stays also. So, they may think they will end up benefitting more in the longer term and so overvalue their rewards, but given that only one fourth of the consumers redeem rewards, they end up with nothing.

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

Consumers are loyal to a brand — say Hilton. Now, if Hilton merges with a competitor, this might really upset some consumers. So, it can have a negative effect. This might only be the case though if the two brands are seen as being competitors. If not, alliances can be helpful — if the merger is more vertical.
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Wesley Hartmann

Professor of Marketing in the Graduate School of Business at Stanford UniversityWho benefits more from hotel rewards programs: consumers or hotel chains?

Consumers.

How do hotel rewards programs impact consumer behavior?

Business travelers weigh the rewards more heavily in their decisions than if they were incurring the hotel charges themselves (as opposed to their employer).

Do you think consumers under- or overvalue the benefits of hotel rewards program membership?

Based on the above, they may be said to overvalue, but on the other hand they might rather have the dollar differences they'd save by choosing cheaper hotels.

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

Alliances can help aggregate points when tiers exist and that could impact purchases for the few customers on the margin of reaching a tier. Or, an alliance may just offer the convenience of keeping track of fewer reward accounts.
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Joseph C. Nunes

Professor of Marketing in the Marshall School of Business at University of Southern CaliforniaWho benefits more from hotel rewards programs: consumers or hotel chains?

Both can benefit. The key is not all consumers will be winners. The goal of the hotel chain is to reward its best (i.e., most profitable) customers. If done correctly, these programs are essentially a way of offering a differentiated product to different customers based on the value of the customer to the firm. Many programs these days are making incremental changes in the design of their programs moving benefits away from volume alone (e.g., nights stayed) closer to profits, which often corresponds more closely with dollars spent. Observe what is happening in the airline industry as American and United shift from rewarding fliers for miles flown to dollars spent. If firms treat their best customers better, it’s a win-win for both sides, although less profitable customers may pay the cost.

How do hotel rewards programs impact consumer behavior?

These programs are designed to attract future purchases from repeat customers – garner share-of-wallet. They can also lead a customer to make purchases they might not have otherwise made. High volume customers who believe they can reach certain reward or status levels are likely to consolidate their visits with the same hotel chain to get the perks. Low volume customers, who don’t see themselves reaching these levels, will likely be more opportunistic and less loyal (though some may increase their consumption – make that extra trip). This is often a way of segmenting business travelers, who are high-volume and not very price sensitive, from leisure travelers, whose volume is less predictable and who are typically more attuned to price as they are paying form their own pockets.

Do you think consumers under- or overvalue the benefits of hotel rewards program membership?

The firm counts on consumers overvaluing the benefits. Chains typically award points or some alternative currency based on consumption (nights stayed) or spending (dollars spent). Savvy consumers consider what we call the “earn” and “burn” rates – how much do they need to spend to secure the points (earn) and how much does it cost in this alternative currency to redeem a reward (burn). If they are strategic, they might maximize the earn rate as well as the burn rate, or the value of what they get with the points they accumulate. Psychologically, we know consumers often undervalue alternative currencies like points (viewing them as “play money”). Also, points earned through work travel are often seen as more disposable than dollars, and thus people frequently spend them more liberally. Some consumers see rewards as “free”, not equating the benefit with the cost of accumulating those points (staying in a less convenient location, paying a bit more, etc.).

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

A lot depends on how the firms choose to maintain their programs after a merger (i.e., do they keep the programs separate, combine them, adjust status levels, introduce new tiers or additional rewards?). Consider the merger of United with Continental. For many frequent fliers (based on their consumption patterns: number of flights, routes flown, etc.), they suddenly had more ways to earn miles and more routes on which to redeem their miles. They are likely to realize the benefits of becoming more loyal. For others, who previously were not competing with heavier users from the joining firm for perks (imagine a Continental flyer who now vies for mileage seats and upgrades with all of United’s high status fliers) it could make things much more competitive. They are likely to become less loyal, or simply consolidate their flights on another carrier where there are not so many people with higher status. The firm is hoping those customers who stay with them, and further consolidate their purchases, are the “right” customers (most profitable). This is why you will increasingly see loyalty programs rewarding customers based on profitability and not simply volume. They all want the most profitable customers and loyalty programs are one way to compete for this segment.
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Sha Yang

Professor of Marketing and Coordinator of the Marketing PhD Program in the Marshall School of Business at University of Southern CaliforniaWho benefits more from hotel rewards programs: consumers or hotel chains?

It is difficult to compare these two since they are on different measurements: customer satisfaction for the former, whereas profit for the latter. However I can compare hotels with each other, and do the same for customers.

From the supply side, hotel chains are going to benefit more from reward programs in a market with high competition. Currently, many markets are disrupted by the entry of Airbnb, which so far seems to focus on travelers of leisure. Rewards programs are going to be crucial to help traditional hotel chains to compete for this segment.

From the demand side, customers benefit more from rewards programs when they:
  • Know about their hotel preference so that they do not need to try different ones to make comparisons;
  • Have anticipated demand;
  • Have higher search cost (due to lack of time to do price comparison, or ability in doing efficient information search).
How do hotel rewards programs impact consumer behavior?

Like any other rewards program, a hotel rewards program can encourage customers to repeat visit the same hotel driven by the economic incentive from the points. These repeated visits can help customers gain more experience with the hotel, which could lead to more balanced review postings on social media, and more recommendations in the case of positive experience. Furthermore, due to the “lock in” effect from the cumulated points, consumers may search less for competing hotels.

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

In my opinion, they can help increase hotel loyalty for two reasons. Firstly, mergers and alliances can give customers more location flexibility, which is an important factor consumers consider in choosing where to stay. This is especially true nowadays with the rise of the concept of “shared economy” advocated d by companies like Airbnb, which gives customers a huge amount of flexibility in locations. Secondly, mergers and alliances can give customers more variety of rooms for addressing their needs in different consumption occasions, such as business, leisure, touring, abroad, etc.

A caveat of such merger and alliance strategy is that they could lead to consumer incongruent perception about the chain (for example, due to a large quality variability across sub brands), which could sometimes negatively affect consumer loyalty. A key is to build a synergy while highlighting the unique market positioning of each sub brand.
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Susan Gregory

Professor and Coordinator of the Hotel & Restaurant Management Program at Eastern Michigan UniversityTo what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

Hotels build loyalty through economic bonds. Guests are staying because of the rewards and feel that opportunity costs are too high to switch brands. We also know that "road warriors" are more loyal to a specific hotel then the brand as a whole (i.e., love the X hotel in Chicago but love the Y brand when staying in Las Angeles). So they are members of multiple honors programs. These bonds are more emotional, especially if they are frequent guests at a specific hotel.

These loyalty programs are expensive to manage for the brand. With the acquisition of Starwood by Marriott it will be interesting to see how the loyalty programs are managed. They offer different programs. We saw this with the acquisition of Northwest Airlines by Delta. Delta has to assuage fears of loyal Northwest frequent flyers that they were going to lose out on the acquisition.

We all want to be treated special; being a member of a frequent guest program is now expected. I suspect that frequent travelers see the program as a personal bonus. Most employers let their employees keep the award points to use for personal travel.
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David A. Cranage

Associate Professor of Hospitality Management in the College of Health and Human Development at Pennsylvania State UniversityWho benefits more from hotel rewards programs: consumers or hotel chains?

Both benefit. But it probably benefits the hotels more. The cost to them is not high and reward points often go un-redeemed - lowering the cost of the program even more.

How do hotel rewards programs impact consumer behavior?

One of my graduate students did his thesis on this and found it does not really promote loyalty to a given hotel since most frequent travelers are members with most hotels and use whichever one they are staying with on a given occasion.

Do you think consumers under- or overvalue the benefits of hotel rewards program membership?

I think when consumers first join a rewards program, they overvalue it. But as they use it or try to use it, the perceived value goes down over time. As they join more programs with other hotel companies, its perceived value at any particular hotel goes down.

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

If the company culture/personality differs greatly between the two companies, consumers may feel disappointed with any changes made to policies and procedures.
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Nancy Church

Distinguished Service Professor and Chair of the Department of Marketing and Entrepreneurship at State University of New York at PlattsburghWho benefits more from hotel rewards programs: consumers or hotel chains?

Trying to put this in a dollar and cents comparison, I would say that both benefit, but the consumer probably benefits more. In many cases, the hotel has unused inventory, and the rooms given out in their rewards programs are typically standard rooms so the cost to the hotel is the cost for cleaning the room and the linens, and the amenities provided to the guest. The guest would have had to pay for a room otherwise, so the guest would appear to be receiving the greatest benefit. Of course, the hotel also has the expense of operating a rewards program. However, I would add that if the guest using rewards points to stay at the hotel then utilizes the hotel restaurant, gift shop, or other services, then the hotel stands to gain additional benefits.

How do hotel rewards programs impact consumer behavior?

Some consumers are members of only one or two hotel rewards programs. Other consumers are members of every possible hotel rewards program. However, those consumers who travel more and who are loyal to one or two rewards programs benefit the most not only by accumulating lots of hotel rewards points, but also by moving up in a hotel's rewards program tiers and gaining extra benefits and upgrades... so their decisions may often be related to which properties within a hotel's reward program will they choose. Loyal hotel reward program members, especially the most frequent travelers, are often treated with the greatest respect and care, but most people don't fall into that top tier.

Do you think consumers under- or overvalue the benefits of hotel rewards program membership?

Since the consumer doesn't have to pay directly to be a member of a hotel rewards program, the rewards seem to be a nice benefit of membership that consumers may overvalue. Most rewards programs require that you book directly with the hotel rather than using a third party such as hotels.com or priceline.com. It is possible that one could get a better price by going through one of these third party hotel booking firms. Hotel chains, such as Hilton, offer visible benefits (free Wi-Fi, a special check-in line, and bottled water) to consumers who are members of their rewards program and who book directly although amenities, such as Wi-Fi, are typically free anyway in some of their properties (i.e., Hampton Inn). Many hotel rewards programs state that they don't have blackout dates, but most limit the number of standard rooms available for redemption to rewards program members, and I have found that the room provided by a rewards program may not be the nicest standard room available.

To what extent do you think mergers, acquisitions and alliances of individual brands impact hotel loyalty?

Just like the airlines and their frequent flyer programs, hotels are merging and we will see the merging of their rewards programs, too. Just this month, the Accor hotel chain acquired the Fairmont Hotel & Resort Company as well as Swissotel and Raffles properties. Airlines and car rental companies also have alliances with hotels in which consumers can add frequent flyer miles or rewards points if they stay in particular hotels. If the hotel mergers have the effect of reducing the number of rewards programs available, then that should help the consumer accumulate points more quickly in a particular program. Most hotel companies with rewards programs offer the consumer hotel brands at different price points with varying levels of service so consumers in their rewards program can choose the price point and level of service they need for a particular trip. As a consumer becomes more affluent, s/he can choose the more luxurious properties in the hotel chain.

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Methodology

This report compared the loyalty rewards programs operated by the 12 largest hotel chains in the U.S., based on number of properties, using publicly available information and company policies posted online. Where policies were incomplete or ambiguous, we confirmed them with the respective hotel chain’s customer service department. Once data collection was complete, we reached out to the public relations departments of each hotel chain to confirm our findings. All chains confirmed the information, with the exception of Choice, Hyatt and Drury, which did not.

The scoring framework used to evaluate each program, and ultimately identify the best option for different types of consumers, can be found below. Most of the metrics were first graded on a 100-point scale. Generally, full points were awarded to the best-performing program for that metric, while the zero-point level was set slightly below the worst program’s result. Point allocations for more-binary metrics that did not use this 100-point scale are explained below.

    1. Geographic Coverage (total score: 15 points)
      A. Total number of hotels (max score: 6 points)
      We collected the total number of properties each rewards program has worldwide, across all brands according to their official websites.

      B. Country coverage (max score: 4 points)
      We collected the total number of countries in which each rewards program has properties.

      C. Total number of hotels in top 10 U.S. cities (max score: 3 points)
      We tabulated the total number of hotels for each program within a 50-mile radius of the 10 best places to visit in the U.S., according to tripadvisor.com.

      D. Total number of hotels in top 10 international cities (max score: 2 points)
      We tabulated the total number of hotels for each program within a 50-mile radius of the 10 best international travel destinations, according to tripadvisor.com.

    2. Value Of Rewards (total score: 25 points)
    Using lodging expenditure data from the U.S. Bureau of Labor Statistics and household income data from the U.S. Census Bureau and the U.S. Travel Association, we created three consumer spending profiles:

    • Light Traveler: Makes $40,000 – $59,999 per year and spends roughly $487 on hotel accommodations
    • Moderate Traveler: Makes $60,000 – $99,999 per year and spends roughly $779 on hotel accommodations
    • Heavy Traveler: Makes $100,000 – $200,000 per year and spends $1,461 on hotel accommodations

    These profiles, which reflect the fact that U.S. consumers spend an average of 0.97% of their annual income on hotel accommodations, helped us to more-accurately assess the value that members would glean from each hotel rewards program, as they feature graduated status levels that provide different earning rates and redemption options based on amount spent. Temporary promotions, such as holiday deals, have not been taken into account. Earning rates were calculated for the second year of program membership.

    After tabulating the number of points that each type of traveler would earn via each hotel’s loyalty program, we calculated the value of those earnings based on the average value of a point when redeemed for a free night. Average point values were determined by comparing the cost of a three-night reservation purchased with dollars and points, respectively, in 20 of the most popular global travel destinations: 10 domestic and 10 international. Quotes were obtained for weekday and weekend travel during each destination’s high and shoulder travel seasons. Dollar costs were then divided by point prices, and the quotients were averaged to obtain an overall average point value for each program. Fees and taxes were excluded unless a given program’s points were attributable to such costs.

    3. Earning Limitations (total score: 15 points)

      A. Earning points for on-site expenses (max score: 3 points)
      • If members earn the maximum number of points on hotel expenses other than room reservations (such as food and beverage, telephone, laundry, pay-per-view movies, entertainment and recreational facilities) = Full points
      • If consumers do not earn the maximum number of points on expenses other than the room = No points

      B. Do reservations at all of a program’s hotel brands earn the maximum number of points? (max score: 5 points)

      • If consumers are awarded the maximum number of points for reservations at all of the hotel brands under a chain’s umbrella = Full points
      • If consumers are not awarded the maximum number of points across all hotel brands = No points

      C. Third-party booking (max score: 7 points)

      • If consumers are awarded points when booking stays through a third party (for example, booking websites such as kayak.com and expedia.com) = Full points
      • If consumers are not awarded points when booking stays through a third party = No points

    4. Redemption Options (total score: 25 points)

      A. Brand exclusions (max score: 2 points)
      • If a rewards program allows members to redeem their points for any hotel brand within the hotel chain = Full points
      • If a rewards program does not allows members to redeem their points for any hotel brand = No points

      B. Room-redemption volatility (max score: 2 points)
      We divided the minimum number of points needed to book a room by the maximum in order to get a sense of the magnitude of the difference that exists in award night pricing.

      C. Blackout dates (max score: 7 points)

      • If a rewards program does not have blackout dates for award nights = Full points
      • If a rewards program has blackout dates = No points

      D. Percentage of hotels with award night availability (max score: 6 points)
      We determined whether award nights could be booked at each of the properties in a given program within a 50-mile radius of the city center in the 10 best places to visit in the U.S., according to tripadvisor.com, using four different sets of dates that include: high season weekend/weekdays and shoulder season weekend/weekdays.

      E. How far in advance can reservations be made? (max score: 4 points)

      • If reservations can be made 1 year in advance = Full points
      • If reservations cannot be made 1 year in advance = No points

      F. Short-notice reservations (max score: 4 points)

      • If reservations can be made 36 hours in advance = Full points
      • If reservations cannot be made 36 hours in advance = No points

    5. Additional Features & Policies (total score: 15 points)

      A. Point expiration (max score: 5 points)
      We determined if and when points expire due to account inactivity with each loyalty rewards program.

      B. Ease of achieving top membership status (max score: 2 points)
      Based on the lowest room rate collected for each hotel program, we calculated the total spending needed to accumulate the requisite nights / stays / points for top membership status.

      C. Number of transfer partners (max score: 2 points)
      We identified the total number of travel partners to which points can be transferred free of charge.

      D. Can points be purchased at fair value? (max score: 2 points)
      We calculated how much it will cost to purchase the maximum number of points permitted per year by each program and how much those points would be worth upon redemption, on average.

      • If the hotel chain earns a profit of 15 % or less on the transaction = Full points
      • If the profit is higher than 15% = No points

      E. Can earnings be shared between two or more accounts for free (max score: 2 points)

      • If earnings can be shared between two or more accounts for free = Full points
      • If earnings cannot be shared between two or more accounts for free = No points

      F. Can you reinstate lost earnings? (max score: 2 points)

      • If you can reinstate lost earnings = Full points
      • If you cannot reinstate lost earnings = No points

      G. Valuable membership level perks (max score: 5 points)
      After initially examining each hotel program, we created a list of membership perks that we believed to be most-valuable to consumers, regardless of membership level. The list comprises: late check-out, room-rate discounts, free health club and spa access, free room upgrades and priority / express check-in. We then used our consumer profiles to determine which perks each type of consumer would receive via membership in each program. Each perk is worth one point, which means that a program offering all the aforementioned perks would receive a full score.

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