Rewards Adds Silly $5 Redemption Fee

Filed Under: Hotels

While I personally like the value offered by some hotel loyalty programs, a lot of people like the Rewards program, thanks to how straightforward and rewarding it is.

With this, you get a free night after you book 10 nights with That free night is worth the average amount you spent the previous 10 nights, though you still have to pay taxes and fees.

In many ways the program is industry-leading and for someone who isn’t otherwise super invested in a hotel loyalty program, it’s an excellent option. That’s because you can earn free night rewards based on stays at both chain and independent hotels, and the program is also much simpler than hotel loyalty programs directly.

While I wouldn’t consider this to be a huge deal, a negative change has been announced to the Rewards program. As of November 27, 2019, the Rewards program will charge a redemption fee of $5 for every reward night redeemed. This fee won’t apply if you book a free night through the app.

So is this intended to encourage members to use the app, or what’s the justification? As the company explains to members in an email:

We’re making this change to cover some of the costs of running the program, so more than 43 million Rewards members can continue to benefit from this program.

That’s not exactly a very good explanation of the logic of this change. They’re making this change to cover “some of the cost of running the program?” But they’ll also waive it if you use the app?

For anyone wondering about the economics of the Rewards program:

  • They’re essentially offering up to 10% back in the form of a free night
  • is getting at least a 10% commission — but typically probably significantly more — when you book a hotel through them
  • A lot of people who participate in the program never end up earning enough for a reward

Bottom line

While a $5 redemption fee is hardly a huge deal for what’s otherwise a great program, on principle these kinds of program changes really rub me the wrong way.

It’s just such an insult to members to add an arbitrary $5 fee to redeem a “free” night. I guess we should be happy that this is the change and nothing more significant, but on principle, I’d rather see a change to the value proposition of the program rather than an arbitrary $5 fee that isn’t really correlated to anything.

  1. It is a first step. I suppose they could increase it to $7 next year and $10 thereafter. Five years from now it will be $25. And so on.

  2. It probably does cost them more than $5 to make your free night booking if you call customer service. So is this a way of discouraging people from doing that? You’d think they’d waive it if you book on the web site since that wouldn’t cost them anything, but perhaps the idea is they’d rather waive the fee for people who are willing to download the app. If you are like @lucky and hate the fee, you can avoid the fee pretty easily — and then you have their app on your phone, which probably makes you more likely to book through them in the future.

    FWIW I suspect is getting more like 25-30% of the room rate. There’s a reason Marriott, Hyatt, et al. much prefer people to book directly even though their own loyalty programs will offer rebates worth 10-20% of the room rate.

  3. I really do not understand this statement, “Your free night can be redeemed for a stay at a hotel costing at most the average of your previous 10 nights, so in reality very few people are redeeming it to exactly the maximum potential”. I regularly use the free nights, more than any other hotel rewards program, and have never received less than 100% of the maximium potential. It’s very simple. You just need to use the free night rewards for a hotel night that is more expensive than average of the 10 free nights. You just have to pay the incremental amount over and above the amount of your free night award. If you are booking cheaper night, simply do not use the free night award.

  4. Some people don’t have access to the app, for whatever reason. Maybe they only use (or travel with) a non-smartphone or their computer; maybe the app doesn’t work on older versions of Android, which a lot of people still use.
    I don’t see why logging into your account on the website to redeem free nights as you book should cost more. $5 may not sound like much, but if you have a significant number of free nights to redeem, that’s $5 for each and every one of them. It will quickly add up. This is a sh-t fee and their motive seems questionable.

  5. The and Capital One partnership has always seemed intriguing. It’s made me consider getting the Venture card.

    I get “Citi” vibes from Capital One. They seem to make a lot of surprise changes and don’t really have a long term vision for and commitment to their rewards program.

    I wonder how many people do the capital one thing in addition to Amex, Chase, and the major hotel loyalty programs.

  6. Just a way to encourage using the app.

    A long time ago Southwest was trying to get everyone to use their website (before iphone and app days) and they would give you double credits for each booking. It was a pretty good incentive. A $5 difference isn’t really anything to get excited about.

    If they wanted to encourage use of the app they would be better to implement something more dramatic and make it seem more rewarding such as if you do all your bookings online you get a free night after 8 or 9 nights. People react differently to “apparent” rewards rather than being penalized for doing something as the $5 is, even as small as it is.

  7. The advertisement of a ‘free night’ is not 100% right. Some hotels are excluded (at least when I redeemed last time) from the program, the taxes to be paid can be around 20% of the rate and then there’s this silly USD5 fee. I guess a “80% discount on the 11th stay (+USD5 fee)” is more accurate.

  8. Dave. I totally agree…. however, you say you have redeemed quite a few of these which suggests that if you don’t use it “now” because you wont extract its full value, you know you will soon enough.

    A lot of people will achieve their free night once per year…if that. If the average value is $150 and the free night they are looking at is $135-140, I think a lot of casual users will shrug their shoulders and do it.

    The exact same reason why so many FF use their miles against domestic economy flights. It saves me money now!! sure, if I wait another 2-3 months I might get a better deal but the casual user doesn’t always plan that far ahead and would rather the feeling of getting something for nothing.

  9. The word “app” there is ambiguous. It could mean a downloaded app on a phone, or it could mean the website. If the latter than you only pay this fee if you book by phone. Is that what you meant?

    I don’t see the benefit to of you using a phone app over their website. It’s only involving a sales person that increases their costs.

  10. Really lame. We are charging this fee because we want to make more money. Just be honest. I am sure they have somewhere in their terms and conditions that they can do this at any time, but the honorable thing to do would be to make it apply only after next free night that a person redeems.

  11. Because then you have to install the app and all the data they get to collect about you will be a LOT more than $5.

  12. Ten paid nights and one free night is not a 10% discount; it’s a 9.09% discount (one of eleven nights is free). They set an easy-to-fall-for math trap, and you fell for it just as they hoped. But a 10% discount would be one night of every ten for free, which is nine paid nights and one free night.

    It doesn’t seem like a big difference… but a 10% discount is actually 10% more of a discount than a 9.09% discount, so if it’s worth talking about 10% discounts at all, it’s worth getting that right 🙂

  13. The app collects far more data about you compared to the desktop or mobile web site. In fact, Expedia (which owns uses a “customer experience analytics firm” called Glassbox within their iPhone app. It records every thing you see and tap on your screen and sends that info back so they can see how you interact with the app.

    Last I checked, the cowards at Expedia did not provide any comment when asked about Glassbox by tech sites and journalists. Air Canada and Singapore Airlines admitted to using Glassbox within their iPhone apps, but the gist of it is that they didn’t think it was a big deal since it cannot record anything outside of their own apps and they just want to see how you interact with their app.

    That could be fine, except in Air Canada’s case, it wasn’t properly masking passport and credit card numbers when Glassbox was recording people’s screens. So you just have to hope that the employees who review the screen recordings are good honest people who won’t steal your info. Or that the screen recording are properly encrypted in case of a breach. But why take that chance?

    I am an IT guy, and time and again I tell people that ask me about privacy that not everything needs to be an app. It’s that simple. In most cases, the mobile web site version of a service can be just as useful and fast, if not faster, than the app of the same service. Personally, I will only install an app if the feature it provides is difficult, nearly impossible, or just not practical to do from the mobile or desktop version of the site from my iPhone or iPad.

    I am not saying using Safari, Chrome , or Firefox on your phone/tablet doesn’t have it’s own privacy issues, but in almost all cases, it’s far better than the app. There is a reason why all companies push you to use their apps instead of logging in using your phone/tablet’s web browser.

  14. @Ham, thank you. This was a very interesting comment.

    Another reason would want you to use their app (instead of website) is to avoid paying affiliate fees.

  15. I’d use their app, but it’s one of the worst in the industry. The website is so easy to navigate. The app, especially on the phone is cramped and almost impossible to use.

    Charging loyal customers $5 it’s petty.

  16. The programme also has a status programme which I find can be more valuable than the chains’ own ones. After 30 nights in a year, I have gold

    You have to look for properties which offer VIP benefits. All then offer space-available upgrades as well as hotel-specific benefits. At the Starling in Geneva, for example, I got a CHF20 F&B credit (which I used for two glasses of white wine from room service — the only limitation is that you can’t use it for breakfast) and a double room upgrade. That’s a particularly well-run hotel, but I’ve had a few other experiences that are almost as good. Expedia must do something to reward those that participate well.

    If there’s a problem, I’m also quite impressed by the 24/7 gold service desk, based in India and with very responsive agents

    I’ve had Hilton Diamond for years and it’s rarely that good (although they do offer free breakfast). After a particularly awful experience at the Hilton Paddington ten days ago, I complained through the app and have still had no reply at all

    I used to have IHG Spire Elite but decided that elite was more useful and better value

  17. The hotels app has some serious privacy issues associated with it. The deal never was very good and is now slightly less good but what alternatives are there? Staying at only certain chains for their rewards end up being more expensive in the long run.

  18. Mark,

    Yes I have Gold with as well. It’s gotten me a coupe of upgrades.

    Funnily enough I had a bad experience at the London Paddington Hilton as well, although were good about fixing it.

  19. I have been using for over 9 years and 99% of time had great experiences with them (any problems were the hotels’ fault, but they could have been more proactive). I also redeemed many free nights over time.

    I think this change should be read in conjunction with the way the app shows results. In the app, it is much harder to do comparison shopping over a larger number of properties in major cities (even they’re not as great as for the obscure ones).

    Therefore, by encouraging use of the app, they steer people even more towards the hotels they would like to promote.

    However, I don’t mind the change for once, because the solution is very simple: search on the desktop and finish the deal on the app.

  20. I find searching for rooms on my phone hard. The space is too small. I would have less issue with it if I could get my laptop versus calling to reserve a room. That makes sense. But telling me, I need to use my phone instead of my computer hurts people who are older adults.

    I agree with the commenter if’s goal is to shift people to their cell phone from a laptop using an incentive versus a punishment. For a great company, this is psych 101.

  21. I did a bit of math and @sid was correct. It’s not 10% discount and I fell for it.
    Previously the way I think of it was, say I stay in $100/nt hotel, I collect $10 credit so it must be 10% off. (Lets exclude tax for simplicity sake!) If I use the 10% discount code, I would pay $90 but don’t collect anything.
    For 11 nights, using the 10 night one free would cost me $1000 ($100 x 10 + $0 x 1). But if I had use the 10% discount code, it would be $990 ($90 x 11). So its cheaper to use 10% discount code, also means stay 10 get 1 free is not 10% discount but 9.09%. Trap!

  22. It’s called data analytics, Lucky. They’ve determined that either their most profitable customers book through the mobile app and most probably they see an increase in bookings from the app vs bookings coming from any other means. It’s not just about what is cheaper, Ben, it’s about analytics based on behavior patterns and they have the data not us.

  23. I remember the original rewards program. It was the same ‘stay 10 nights get one free’, but rather than the free night being up to the average spend, it was ANY stay up to $450.

    Myself and a friend used it on a road-trip across the states to say at the Four Seasons in Vegas. The majority of our other stays had been Super 6’s and the like. It was the best value I think I ever got out of a loyalty programme!

  24. $5 ?… A good reason never to install the App on your device so you don’t become their captive client when looking around at competitors and booking an accommodation online.
    Same with Booking .com ,Airbnb and others.
    When people have the companies app,they no longer look around and compare services and prices ,they just use the app.

  25. I personally find the programme good. I used it a lot myself personally and also as the owner of a small sized organisation (60 staff) get our office manager to book all travel using my account. As such not unusual to get 10-20 free nights a year. Which is nice. I always price check mine via Trivago and if I find a better deal log a request and they have matched it 100% of the time. So fairly confident I am not over paying to much or at all. This fee is a little annoying but it’s not a major hardship as it’s only the reward nights and I will just use the app as already have it installed. I have found the gold rewards team to be very efficient as contact centres go so that’s also well worth it the few times I have used it.

  26. Azul Brasília Airlines offer better prices for booking thru their App insted of their own site and call center. Same reason here at least for the Android App I use.

    You can still book thru website because the charges Will only apply for rewards books.

  27. Miles ahead,

    Doubtful. Being obsessed with phone apps is basically a thing for kids. So my kids do everything through apps but they don’t have a big spend compared with me, who uses the website.

  28. I’ve found Hotels.commprices are typically higher than other OTA (booking, agoda). So I always double check the prices with other sites, and also there are some hotels only belong to one or two of the OTAs, often times I would just book with and get 6% cash back from cash back sites.

  29. I really avoid booking .com as they hide travelers negative reviews/reports of Hotels & accommodation(clients’comments set by default on “What the clients loved about the place” instead of “from the oldest to the latest comment) and group them by languages so American clients don’t see the reviews of German or French clients.
    Good idea to always double check prices indeed and not leave our credit/debit cards details on those sites.

  30. There’s a lot of bad math surrounding and rewards.

    Folks have already pointed out their rewards program is structured as Buy 10 Get 1 “Free” is a ~9% discount not a ~10% discount. Folks have also pointed out that you still have to pay all taxes and fees on your “Free” night and the discount you get is based on the pre-taxes/fees total of your 10 paid nights. The two synergistically work together to reduce the discount. If you spend $100/night for 10 nights but that’s structured as $90.00 room cost (as quoted when you searched on and $10 service fee, you’ve earned only $90 toward your 11th night. So you paid $1010 to get 11 nights, and $1010 divided by $1100 (what you would have paid for the 11 nights without the rewards program) calculates out to an 8.18% discount.

    A lot of bloggers who earn Capital One Venture Card affiliate referral fees are also eager to promote that and the Capital One Venture Card’s partnership earns 10x points. What they fail to point out is that since the Capital One Venture Card earns a baseline of 2x points no matter where you spend the money to acquire those hotel room nights, the partnership yields an incremental 8x, not 10x.

    That said, for non-work travel where I’m not booking using hotel family frequent guest program points, I find I use about half the time. It can be a good value, but I think of it as a 16% discount (with some benefit deferred into the future) when comparing to other options, whereas many would like to claim “IT’S AN AMAZING 20% DISCOUNT!”

  31. Additional thoughts:

    * The $5 is annoying but as a retroactive change to already earned awards, it’s offensive. could make it merely annoying but not offensive if it didn’t apply to already-earned awards.

    * Psychologically, I find that $5 award redemption fee to be a modest barrier, and I expect that it will moderately change my consumer behavior in the future.

    * My example would have a guest paying $1015 to get $1100 of nights (if booked on but without using the award program). That reduces the payout from 8.12% to 7.73%. So noticeable, but not earth shattering.

  32. If they had any sense, they’d REWARD you for redeeming REWARDS via their “app,” rather than PUNISH you for LOYALLY using their website like I have for so many years.

    This has SERIOUSLY rubbed me the wrong way. I’m not installing the app for sure now, and will likely reduce my use of them entirely, as a result of this stupid move.

  33. If you check, you will see that the prices are higher in the app on a lot of hotels. So, in reality, they get you either way– just a matter of how much.

  34. It does make sense – companies have to pay exorbitant fees to Google, Kayak, and other aggregators when you make your way to their site via these 3rd parties. When the cost of getting a customer to the site is 1-2% of their potential spend (whether or not they actually make a purchase) and you are giving back 10% in rewards, and you receive 15-20% commission on bookings made through the site from properties, suddenly you are not making enough on a single booking to cover the related costs. The $5 fee is most likely intended to offset the acquisition costs that they don’t actually have to pay if you book through their app. That’s why a LOT of e-commerce companies make purchasing through a rewards app more rewarding than purchasing from their website, because they are hoping that will help shift people away from clicking through Google ads, etc. which cost a lot each time. (Basic SEM)

Leave a Reply

If you'd like to participate in the discussion, please adhere to our commenting guidelines. Your email address will not be published. Required fields are marked *