You’re Doing It Wrong: Hotel Loyalty… At All!

This is the most “opinion piece” like post I’ve done in a very long time…

However, I tried to apply my same data-driven approach to analyzing the cost of loyalty.

There are many things, like flying business class vs economy that are preferences. But in this post I use a little case study to show that loyalty is objectively a bad idea, and the benefits are not worth it.

You will earn fewer points/free nights and pay more money, with higher commitment and less flexibility with your travel and personal benefits.

I remember I was with the Daraius (founder of MillionMileSecrets) when he was mattress-running in Austin, TX (which isn’t exactly cheap) to stay at Hyatts. He was over 10 stays away… Out of 25!

In other words, he naturally stayed maybe 15 times a year with Hyatt, and “needed” at least 10 unnecessary paid stays. 50% of his stays were solely to get the “benefits”.

I asked him why, and he said for the “free” breakfast and suite upgrades.

He was spending roughly $1,000 that year, to get “free” breakfast next year? And 4 suite upgrades.

Exceptions.

There are always exceptions.

I do think that if you are traveling for business, then obviously you don’t care if the cost is higher. Sure, take advantage of the rewards.

Plus, there could be personal preferences, for example you go to a city often and really like a hotel.

That’s not what I’m talking about in this post.

I’m talking about loyalty for the bazaar logic of “saving” money or added values that are costing you a ton of money

Remember, “you can go broke saving money”.

The Math On That Loyalty

“Free” Breakfast?

If he was 10 stays away he could have no more than 40 nights or 15 stays.

Let’s assume the highest here, and say he actually needs 40 nights a year with Hyatt. How much is 40 free breakfasts worth? Well, let’s just assume $30 for two people – which I think is generous, given that in the vast majority of the countries in the world, and most Hyatts, $30 is way more than the average breakfast for two. Still, we’ll assume it’s an average value and that there are constantly two people.

Actually, this is an insanely generous assumption when you consider that with Hyatt you can upgrade to a Club Room which comes with breakfast and often evening hors d’oeuvres and drinks for only 3,000 Hyatt points (which is a Chase UR transfer partner).

Assuming you were getting $30 in “value” via breakfast, I’d rather spend that 3,000 points to get a nicer room and more benefits.

Thus, I think the max value can be $30 and the average value would actually be much lower.

Suite Upgrades max value

Similarly, I think the max value for this program on “suites” is $60… Although that’s $60 a night, but we’re assuming the average of 3 night stays.

4 upgrades at $60 value, even assuming you’ll actually get 4 nights for each upgrade, that’s an approximate “value” of $960.

Why It’s All Absurd

Here’s what’s absolutely absurd. If you’re willing to pay more per night, lose out on big promos, and even mattress run $1,000…

1) If you’re spending all that money to get suites… Why couldn’t you just pay for a suite when you need it.

2) The average person doesn’t need a suite.

3) There are cheaper ways to do this…

There are cheaper ways to get any benefit.

As I mentioned in my post on 9 Ways To Get Hotel Deals, we got the presidential suite at the Westin in San Francisco for cheaper than a regular room.

If you’re just trying to treat yourself on a low percentage number of your stays, there are cheaper ways to do it.

If you’re not trying to be cheaper… then why not just pay for the suite when you “need” or want it?

Again, I think it’s absurd to think you get $960 of “value” when you can get that benefit without loyalty and for less money. Plus, most people don’t need it.

And it is absurd to think you get $30 of “value” out of the free night benefit unless you’re only staying in expensive cities like New York, London, Zurich… Or really a very small handful of countries in the world.

But the big thing is that most people won’t be able to maximize each of these benefits to their max value. Most people aren’t only staying in London, most people don’t get to use all their suite upgrades on the most opportune hotel.

How Much Loyalty Is Costing

1) You can find cheaper hotels.

The best way I can think of to objectively measure this is to pick random dates in cities I know, and then compare rates with Hyatt hotels I know (just as an example), with a comparable hotel I know in another chain.

The idea here is not Hyatt, but to compare one brand’s rate with being able to choose between many hotels.

A Data-Driven Look At Loyalty Cost

I’ll choose two dates in Austin, a weekend and weekday (May 3 and June 5) because that’s where I live, and I’ve stayed in many hotels here. And I’ll compare the two Hyatt hotels I’ve stayed at downtown, because I know comparable alternatives – the Driskill Hotel and Hyatt Regency.

I’m just booking the lowest rates (member rates, non-refundable, whatever).

I’m comparing these “4 star” hotels with other “4 star hotels” that I know and personally think are nicer. The advantage here, of course is that I can pick any two hotels for each date.

Rates are after tax.

	May 3	July 10
Driskill, Austin	$461.56	$285.66
Hyatt Regency, Austin	$357.67	$223.12
InterContintal, Austin	$294.98	$201.02
The Line	$307.30	$251.95

The average cost per night:

• Hyatt hotels = $332.00 per night
• Other hotels = $263.81 per night

Rounding down, that is an average extra expense of 25%.

Also, know that the Hyatt is on the south side of the river, and is not in the Austin Downtown / more expensive zip code of 78701. So it’s already an overly generous comparison.

The even funnier thing is that I used my Hotwire method to find the InterContinental for $174.09 on these nights! Read the recent post on How To Figure Out Your Hotwire Hotel.

The reality is that loyalty, in this example, is costing more like an extra 100%.

Loyalty here is costing near double and, in my opinion, getting a worse hotel… That’s just the nature of limiting options too.

Test #2: Hong Kong with the same dates

Unfortunately, for the first night, the hotels I was familiar with were sold out, however, I know the city and the areas and chose similarly starred and rated hotels.

	May 3	July 10
Hyatt Regency Hong Kong, Tsim Sha Tsui	$467.80	$188.33
Grand Hyatt Hong Kong	$398.53	$357.58
The Park Lane Hong Kong	$301.50
Conrad Hong Kong	$376.93
InterContinental Hong Kong		$221.39
The Langham Hong Kong		$224.35

Once again, I chose very similar hotels

In fact, I personally like the InterContinental Hong Kong better than the Grand Hyatt Hong Kong… but that’s not really the point and since it’s just a matter of opinion, I’ll point out that they are all 5 star hotels with 4.5 TripAdvisor ratings.

So, besides the fact that in the example discussed, the person only needed 40 nights, the requirement is 50 paid nights… and assuming 50 nights at $100 a night, and assuming you’re paying 20% more for loyalty, that’s $1,000 extra.

2) Missing Out On Chasing The Big Deals & Promos

I personally believe that you’re paying more than 20% by nature of limiting your options, due to missing out on the hotel tricks I’ve written about.

But also, you could be missing out on big promos.

This is much harder to quantify, but the last Hyatt promotion gave up to 1,500 points per night.

Meanwhile, my wife’s IHG promotion this quarter is for 40,000 points in 3 paid nights.

Hmm, 1,500 a night, or 13,000+?

• 1,500 points is 30% of a free night at a category 1 Hyatt.
• 1,500 points is 3.75% of a free night at a top tier Hyatt hotel.
• 13,000 points is 130% of a free night at a category 1 IHG.
• 13,000 points is 18.5% of a free night at a top tier IHG hotel.

Depending on your priorities, the IHG promotion is either 4.3 times better, or 5 times better.

However, I decided to use another metric here, someone else’s value.

OneMileAtATime has a post on the Value Of Points. They give IHG a value of .5 cents each and Hyatt 1.5 cents each.

With this promotion and their valuation, you’re getting $22.5 back with Hyatt and $65 with IHG.

I’m totally fine with assuming that with these promotions, you’re missing out on $42.50 in value per night.

3) Covering nights you don’t need.

I won’t work this into my calculation, but I don’t like the idea of committing a year of loyalty before I know my schedule, before I know the promotions, etc…

Again, since I’m not talking about people who have their businesses pay 100 nights a year, I’m talking about someone who was 10+ stays short with personal travel.

That is a very large margin of error, but it is completely reasonable to think that you can’t maximize your upgrades and benefits to the degree I mention every single night of your 50 nights.

There are nights you don’t need and benefits you don’t need.

Adding It Up, Conclusion, & Summary

Adding It Up

I calculate in a very simple example that loyalty causes one to overpay 20% total, and an average of $42.5 per night.

If you assume only $100 a night at Hyatt (which is quite generous) on 50 nights, then 20% extra is $1,000.

If you assume $200 a night at Hyatt (which is way more realistic) on 50 nights, then 20% is $2,000 extra.

Also, at $42.50 a night in extra value and assuming 50 nights, that’s a loss of $2,125.

And remember, things are always more optimistic on paper.

If I was buying a house, I don’t assume the most optimistic revenue, the most optimistic occupancy rate, the lowest expenses, etc… If you were a friend looking at my spreadsheet, (if you were a true friend with an ounce of common sense), you’d say, “maybe you should draw up a chart assuming the worst, or at least something mediocre to make sure it still makes sense to you”.

Yet, people going for loyalty are likely going to assume the best here.

When we did year round public travel stats, we lived in 4+ star hotel for under $700 a month by chasing deals and promotions, not loyalty (see Breaking Down The Cost Of Living In Luxury Hotels). We were loyal to nothing but the highest measurable ROI, and we did significantly better that a 25% savings.

What makes all this even funnier is that while looking at many of these examples, there were club rooms, breakfast, or suites for only marginally more.

With the IC Austin, the club room, for whatever reason, was $10 more. As I said, there are always other and cheaper ways to get these benefits. In this case, it was cheaper to get a better room and breakfast to not be loyal to one chain.

Conclusion

In other words, I’m certain that you can do better than 25% savings, and I doubt that the promotions will always be that good with a single program, and I doubt you’ll get all of that value out of your benefits.

At least one person out there was willing to spend $4,125 extra (or significantly more) for his status:

$1,000 in mattress runs, $1,000 to $2,000 from paying 20% more by limiting paid options to one program, and $2,125 in lost rewards value.

All to get $960 in suite upgrades (which you can get from Chase points as you need with no commitment), and “free” breakfast, at a hopeful value of $1,500 ($30 with an assumed 50 nights).

Summary

Limiting options is by nature more expensive, and the benefits are worth less than the amount extra you’d spend. Turns out it is significantly more expensive.