Luxury Hotel Points Farms: A Category Of Hotels Worth Being Honest About

Points can get you stays at some pretty incredible hotels, and I don’t want to in any way diminish that. There are plenty of properties in the Hilton Honors, Marriott Bonvoy, and World of Hyatt portfolios (among others), that are awesome to stay at.

However, I think there’s an interesting distinction that’s worth making, whereby a subset of luxury points hotels are what I like to call “points farms.” I’ve used this term a few times in passing, and I figure it’s worth dedicating a post to this. Let me explain…

A lot of hotels use loyalty programs as a crutch

Arguably one of the most brilliant innovations we’ve seen in the travel industry (particularly with airlines, but also with hotels) is loyalty programs.

What started as a cost center and an afterthought has turned into a huge profit center and obsession for an endless number of travelers, which drives a massive amount of business. At this point, arguably the major hotel groups have essentially become online travel agencies for an endless number of properties, with their only “secret weapon” being their loyalty programs.

But here’s the thing… a lot of hotel groups (and particularly, hotel owners) know how irrationally loyal people are to certain programs, and as a result, they’ll use it as an excuse to charge more and provide less.

Let me explain it in this way — Four Season doesn’t have a loyalty program, so the company has to win business with every stay, and prove to customers why they should keep seeking out Four Seasons properties. If someone has a bad Four Seasons experience, odds are that they’ll stay elsewhere, which is also why Four Seasons’ service recovery is so good, when things do go wrong.

Contrast that to so many luxury Marriott Bonvoy properties (just as an example), where it feels like they take their customers for granted, and even if someone has a bad stay, they know that they’ll come back for more.

So hotels are totally fine charging astronomical rates, providing mediocre service, nickel-and-diming at every opportunity, etc., because they know people are hooked, and are on the hamster wheel. For that matter, you see very limited brand standards at most of the major global hotel groups nowadays, because many major hotel groups view the hotel owners as their customers, rather than the actual guests.

Let me be abundantly clear — there are lots of incredible points hotels that go above and beyond to take care of customers. But there are also lots that don’t.

What makes a hotel a points farm, as I see it

All of that brings us to “points farms,” a term I’ll define pretty simply. Points farms are hotels that couldn’t charge anywhere close to the cash rates they do if they weren’t associated with a hotel group that had a major loyalty program with a points currency. They’re hotels where a major part of the business model involves people cashing in points, and they use that to cut corners.

Essentially, math works a little differently at these properties. These are properties where the published cash rate in no way reflects reality, or what most people are paying:

• That’s because a large percentage of guests are paying with points, so they only have to sell a much smaller percentage of their room inventory for cash, than the rates suggest
• These are properties where the service level just doesn’t reflect the rates being charged, but instead, those actually paying cash are being ripped off
• Even many people paying cash to stay are doing so irrationally; they’ll pay double the rate of a comparable hotel, all so they can get their “free” $20 breakfast, and requalify for status, so they can have the pleasure of doing it all over again (hey, I’m as guilty of this as anyone!)

Let me give an example, as I just got back from Deer Valley, Utah. A couple of years ago I stayed at the St. Regis Deer Valley, which is probably the highest priced hotel in the area. I’m not saying it’s not a nice property, but the $2,000+ peak season pricing is absurd, and has no basis in reality.

It’s a mass market hotel with little character and okay service. When I last stayed at the hotel, I had a pretty negative experience, and vowed not to stay again, as I stayed in three rooms over two days, due to issues (the fireplace was broken in the first room, and there was no hot water in the second room).

By the time I got moved to my third room, they sent me an apology — an $11.88 bottle of sparkling wine that I had no interest in drinking. To me that is peak “points farm” vibes. Even if someone is redeeming points, you can’t charge $2,000+ per night (or actually $4,000+ per night over the days of our stays) and then have such lackluster service.

That just wouldn’t fly at a property that doesn’t rely so heavily on points guests, that’s staffed by hospitality professionals. If something similar happened at a Four Seasons property, this would be handled completely differently, and I bet at least a night would’ve been comped. But that’s also exactly what makes this a points farm — the hotel doesn’t really care, because they know they can get away with it.

I vowed not to stay at the St. Regis again. So during our current ski trip we decided to also spend a few nights at Goldener Hirsch, an Auberge Collection Resort. Auberge Resorts doesn’t have a points program, and we paid cash. For our nights, the rate was less than half of what the St. Regis was charging, but it was better in literally every way — design, service, ambiance, etc.

So how can the St. Regis get away with charging more than double as much as Goldener Hirsch over our dates? Well, because it’s a points farm. When a vast majority of people are booking the hotel with points and/or because they think it’s worth spending $2,000+ per night so they can get their “free” elite breakfast credit, it’s not a serious attempt at offering a competitive product.

Let me be clear — I’m not saying people shouldn’t be staying at “points farms” if redeeming points. What I am saying is that they should set their expectations accordingly, and shouldn’t be disappointed if the hotel is charging $2,000+ per night without amazing service, because the price doesn’t actually reflect anything close to the average daily rate being paid.

Almost think of it like an American Airlines and Qatar Airways business class ticket being priced comparably — the experiences are worlds apart, and aside from some outside incentive, no rational consumer would choose the former over the latter.

Not all points hotels are points farms, of course

My intent with this post isn’t to rag on points hotels. Quite to the contrary, it’s to recognize points hotels that don’t use their loyalty program as a crutch, and still put in the effort. A luxury points hotel that’s not a points farm is one where people consistently gladly pay the going rate, without a loyalty program being a primary consideration.

Just to give some examples, the Park Hyatt Sydney isn’t a points farm. It’s one of the most iconic city hotels out there, if you ask me, and the vibe and service reflect that. The same is true of the Park Hyatt Tokyo, and even the Park Hyatt Milan (neither of which are likely top five properties in their respective cities nowadays, but they’re also priced a bit lower, and deliver an excellent experience).

This might sound random, but let me give a Marriott example — Hotel Maria Cristina in San Sebastian, Spain, is a Marriott Luxury Collection property, and it’s one of the top places to stay there. People pay the high rates to stay there, because it’s a historic property, with good service, nice rooms, and a central location. The same is true of the St. Regis Longboat Key, since it’s a unique resort in the area, and for a US property, it’s very well done.

As a Hilton example, the Waldorf Astoria Maldives and Waldorf Astoria Los Cabos Pedregal are also top notch hotels that people book without loyalty being a consideration.

There are also some hotels that are sort of points farms, but not really. I think the perfect example is Alila Ventana Big Sur. It’s a great property and a phenomenal use of points — I absolutely love staying there, and I think they try really hard. But there’s no basis for the hotel typically having higher rates than nearby Post Ranch Inn. The only reason rates are higher is because of the percentage of rooms that are booked with points, which means that the Alila property has a lot fewer rooms to sell with cash.

Keep in mind that points hotels have an incentive to inflate their rates, assuming they have a high percentage of guests redeeming points. That’s because if a hotel reaches a certain occupancy level, the reimbursement for award stays is based on the average daily rate. Generally the higher the average rate of rooms booked with cash (even if it’s only a small percentage of rooms), the higher the reimbursement for those redeeming points.

This is an extreme example, but if a hotel is 100% full, and 60% of people are redeeming points and 40% are paying cash, the reimbursement rate is based on the average daily rate being charged to those 40% of guests.

Bottom line

Hotel points can unlock stays at some incredible luxury hotels. I tend to put those properties into two camps, though. As I view it, you have luxury hotels that are popular regardless of their loyalty program affiliation, and then you have luxury hotels that are popular specifically because of the ability to redeem points there.

There’s nothing wrong with the latter concept, as long as we’re realistic about what it is, and why it exists. I say this because sometimes people will stay at a “points farm” that’s charging $2,000 per night, and then they’re shocked at the poor level of service, lack of service recovery, cheap amenities, poor design, etc.

That’s largely because the sticker price is just a theoretical retail price that a majority of guests aren’t paying, because loyalty program members make up such a big part of the guest profile.

There are also lots of great hotels that points can be redeemed at that aren’t points farms, which are popular even among those paying cash, with a higher level of service, etc. Not everyone will agree as to which properties fit in the points farm vs. non-points farm category, but there’s definitely a distinction I’ve noticed, as I stay at different points properties over the years.

Anyone else notice this divide when it comes to points hotels?