An interesting discussion came up in the comments section of my St. Regis Aspen review, which I wanted to address in a separate post.
Marriott Bonvoy devaluing in March 2022
As was initially announced in October 2021, major changes are coming to the Marriott Bonvoy program in the coming weeks:
- Starting in March 2022, Marriott Bonvoy will transition to dynamic award pricing, rather than using the current published award chart (which already has some variability, due to off-peak, standard, and peak pricing)
- Between March 2022 and the end of 2022, pricing at 97% of properties will continue to range between off-peak and peak redemption rates
- Starting in 2023, there will be no more limits on award pricing across the board
For context, below is the current Marriott Bonvoy award chart, where award pricing ranges between 5,000 and 100,000 Bonvoy points per night.
Lastly, for what it’s worth, I currently value Marriott Bonvoy points at 0.7 cents each.
The economics of hotel loyalty programs
Before I share my predictions of what Marriott Bonvoy’s award pricing devaluation will look like, I think it’s worth recapping how the economics of hotel loyalty programs work:
- Marriott doesn’t own a vast majority of properties, but rather has a management or franchise agreement with them
- When a member redeems Marriott Bonvoy points, the loyalty program pays the hotel some amount for that stay
- The amount reimbursed is dependent on a combination of how full the hotel is, and what the average daily rate is; if a hotel is nowhere close to full, the reimbursement rate is low (just enough to cover the incremental costs of serving that guest), while if a hotel is close to full (think 95%+ occupancy), the hotel is reimbursed at pretty close to the average daily rate
In other words, Marriott Bonvoy would much rather have you redeem points at the St. Regis Maldives when it’s not full, compared to a Courtyard that’s sold out during a football weekend. The latter will likely cost Marriott Bonvoy more in absolute terms, not even accounting for the former experience likely requiring more points.
I don’t think Marriott Bonvoy will have fixed award pricing
Some people think that Marriott Bonvoy will pull a Delta SkyMiles, and essentially make each Bonvoy point worth a certain amount toward a redemption. In other words, let’s say that each Bonvoy point gets you 0.5 cents toward an award redemption.
In other words, a hotel that costs $100 per night would cost you 20,000 points, while a hotel that costs $2,000 per night would cost you 400,000 points. Personally I feel very strongly that this isn’t the direction the Bonvoy program will go.
Why? That simply wouldn’t make sense based on the economics of loyalty programs. Marriott Bonvoy executives absolutely want you to redeem points, they just want to control costs. Simply making each Bonvoy point worth a certain amount in comparison to the cash rate wouldn’t make sense, because it wouldn’t factor in the single biggest cost variability that the program has, which is occupancy.
I think Marriott Bonvoy award pricing will be occupancy driven
While I have no inside information, I have a feeling that the new Marriott Bonvoy award pricing will heavily reflect the costs incurred by the program:
- For the average, run-of-the-mill redemption, I wouldn’t expect the elimination of award charts to be bad news
- I’d even expect that many high-end hotels will continue to have award pricing that’s similar to what it is today, at least for much of the year
- I suspect Marriott Bonvoy will use historical data on redemptions and occupancy to figure out which awards are likely to be most costly, and price awards accordingly
- Personally I think there will be some unofficial cap on redemption rates; I don’t see Marriott Bonvoy charging more than 200,000 points per night for a standard room, even in peak season (I just made up that number, but that’s my best guess)
- Marriott Bonvoy’s goal (in part) isn’t just to have award pricing that reflects costs, but also in general to shift member behavior so that there are fewer redemptions during peak periods
The good news is that I don’t think all aspirational properties will suddenly become outrageously priced. The bad news is that I think seasonality will have a much bigger impact:
- Currently a Category 8 property costs anywhere from 70,000 to 100,000 points per night
- In the future I wouldn’t be surprised to see lower pricing than that in the off season, if you’re prepared to go to Al Maha Dubai or the St. Regis Maldives in summer, or Gritti Palace or the St. Regis Florence in winter
- However, in peak season I think pricing will be way higher than what we’re seeing right now; so expect that those hotels could cost significantly more than 100,000 points per night
Anyway, that’s just my best guess, and from a program economics standpoint, that’s also what makes sense. I don’t think Marriott’s best properties will suddenly be completely unaffordable when redeeming points. Rather I think you’ll just have to go during non-peak season if you don’t want to pay an arm and a leg.
The Marriott Bonvoy program will be devalued as of some point in March 2022. We’ll see Marriott eliminate award charts, instead eventually introducing dynamic award pricing at all properties.
People have different takes as to what this devaluation will look like. Many people believe that there will be consistent dynamic award pricing, and each Bonvoy point will be worth a certain amount in comparison to the cost of a stay in cash.
Personally my take is very different. I think we’ll see award pricing reflect the costs incurred by the program, rather than reflect the cash cost for staying at a hotel. I think pricing at hotels that aren’t full will continue to be reasonable, while we’ll see a huge increase in pricing at properties in peak season, when occupancy is generally 95%+.
I do think, perhaps naively, that there will be limits on how much will be charged. The most expensive properties currently cost 100,000 points per night, and I think we might see pricing cap out at 200,000 points per night with the new program, give or take. That would do enough to deter many people from redeeming at those kinds of properties, without being beyond unreasonable.
What are you expecting from Marriott Bonvoy’s devaluation?