Why Hyatt’s New 40K Per Night Category Could Be A Good Thing

Yesterday for a brief moment the World of Hyatt website was showing a new Category 8 redemption option for hotels, where a free night would cost 40,000 points per night. This alarmed many of us, since currently a free night at Hyatt’s most expensive hotels costs 30,000 points per night.


Hyatt’s current award chart

This would represent a significant devaluation, though at the same time I feel like the writing is on the wall for this to happen eventually. What’s interesting is how Hyatt responded to this, and what it means. Hyatt’s new Category 8 might actually be a good thing.

What Hyatt said about Category 8 hotels

In response to the Category 8 “leak,” here’s what Hyatt had to say:

“We have no plans for any Hyatt-branded hotels or resorts to move to a new Category 8.

As you know, we have been working toward launching an alliance with Small Luxury Hotels of the World that will allow members to earn and redeem World of Hyatt points at participating SLH properties in the future. Given the diversity and caliber of the SLH portfolio, we anticipate that some SLH properties will fall into a new eighth category on our award chart. We look forward to sharing more details when the alliance officially launches.”

The Hyatt & SLH partnership

One of the challenges Hyatt has long had is that their global footprint isn’t as big as their competitors. So I was excited when in August it was announced that Hyatt and Small Luxury Hotels of the World (SLH) are forming a new loyalty partnership.

The launch of this is scheduled for the end of the year, and we know that World of Hyatt members will have the opportunity to earn and redeem points, as well as receive elite night credits, when staying at SLH properties.

This is really exciting, if you ask me. SLH has some incredible-looking boutique luxury hotels, so being able to earn and redeem points while staying at these hotels presents an excellent opportunity.

It looks like SLH redemptions will follow an award chart

When this partnership was first announced, I posed the following question:

Will redemptions at SLH properties follow Hyatt’s traditional award chart, or will each Hyatt point be worth a certain dollar value towards a redemption at an SLH property (hopefully the former)?

I could see this playing out two ways:

  • My concern was that this would just be a fairly shallow marketing partnership, and that it would be a situation where Hyatt lets you redeem 10,000 World of Hyatt points towards $100 worth of room rate at an SLH property, for example
  • My hope was that SLH properties could be booked for a fixed number of points, since that’s the way you’re going to get outsized value at their hotels

Understandably the economics of this are probably a bit different for both Hyatt and the hotels when we’re talking about working with an outside company. Historically the way hotel loyalty programs reimburse hotels for award stays is based on occupancy:

  • If a hotel is nearly full (like over 90-95% occupancy), then the program reimburses the hotel at the best available rate
  • If a hotel isn’t full, then the program just reimburses the hotel a much smaller amount that’s above the marginal cost to the hotel, but not really profitable

My guess is that they won’t have quite as lucrative of an arrangement with SLH.

Still, I consider it to be excellent news that SLH properties will follow a traditional award chart, rather than some bad, dynamic value. Or at least that’s my takeaway based on what has been leaked here.

SLH has some hotels that retail for over $1,000 per night in high season, so I’d be quite happy to be able to redeem 40,000 World of Hyatt points for those hotels. I would have been surprised if redemptions were possible at these hotels for 30,000 points per night.

Bottom line

Hyatt says that they have no plans to move any Hyatt-branded properties to Category 8. That’s not to say it won’t ever happen, but I feel pretty confident that they won’t be doing so for now.

In that case, the only thing to take away from this scare is that it looks like SLH properties will follow a fixed award chart, and I’d consider that to be excellent news, since I feared they’d offer something like one cent per point towards room rate.

So we’ll have to wait and see for the full details of the partnership — what kind of capacity controls will there be, will all hotels be eligible for redemptions, and will hotels be priced higher than they should — but overall I consider this to be good news.

Are you happy to see that SLH properties will follow Hyatt’s award chart rather than having dynamic pricing?

Comments

  1. @Lucky Why do your posts so often excuse devaluation by saying it’s too be expected or was bound to happen?

    On the one hand it’s sort of a lame observation because yeah points tend to devalue. Ok, think everyone knows that.

    On the other hand, with regard to specific programs, your comments seem to subtely excuse poor behavior by saying it’s too be expected. Why should (greater than CPI) points devaluations and ‘screw-you’ airline policies every be expected or excused? Why do those industries get a pass?

    Do you find yourself thinking that Amazon can’t possibly keep providing Prime 2-day free shipping on all items, or that they should get a pass if those deliveries are late every once in awhile? And actually, Amazon has historically added services (photo storage, movies, music) to Prime. Why shouldn’t we expect hotel companies and airlines to also strive to offer more, not less? Hyatt could offer 5th night free on Award stays. Marriott could waive resort fees on all Award stays. Don’t accept devaluations with a cynical nod. These companies are trying to gain our business and loyalty-expect more, not less.

  2. I agree with SEA guy
    Ben certainly remains one of the more talented helpful
    and incredibly detailed and articulate writer bloggers out there
    who I regularly look forward to reading
    Having said that respectfully this is where Gary Leff’s understanding of programs value and history of these programs is clearly better
    His expectations run higher in program values expecting more not less of programs to reward us for our loyalty something as a frequent traveler I know Ben has to
    appreciate as well

    Historically looking back pre Hyatt Visa
    Hyatt had fixed capped rates @ 15000 points for the most expensive hotel
    It wasn’t a revenue based program which it has become more similar too these days
    I see too many consultants and bean counters in their kitchen
    Back in the day if a hotel was sold out of revenue rooms Gold Passport award rooms would still likely be available for program members as they were a different bucket of inventory
    Hyatt had 50% off discount vouchers for revenue rooms that were far better than anything SPG ever offered as the rack rates weren’t artificially inflated to circumvent the exceptional discount

    Now let me say I’m a huge fan of Hyatt and they have been awesome to me
    However currently
    At IHG I receive a 20% rebate after every award stay year round in all hotels
    What did Hyatt come up with? a limited 10% rebate for a few months?
    I’d argue even Hilton does better with multi night awards discounts
    Starwood’s 5 th night free
    No more welcome amenity at Hyatt’s no more G bonuses

    While the good old days aren’t history going forward I anxiously look forward to Hyatt in the New Year and see if they can raise the bar once again against the newly merged powerhouse Marriott that has me eyeing more of my business and the extraordinary Hilton Aspire credit card which mows over the new Hyatt Visa card as improved as it is compared to the former card that died a death in my wallet long
    Keep up the good reporting Thanks
    So devaluations imho should be as expected and guaranteed as Death & Taxes at the end of the day
    Loyalty has always been a two way street which is why American where as a lifetime Platinum member and former Exec Plat they no longer have me as customer after decades of previous loyalty

  3. There is nothing good about a pending devaluation. People who have been earning points towards an award now are further behind. This discredits earning towards a particular program and encourages earning towards a transferable currency that doesn’t get devalued.

    Not looking very good for Hyatt with the negative changes.

  4. @ SEAguy – because they have to follow the cash market… our currency constantly depreciates and they need to as well; if not they get hit on both ends… issuing more points on higher cash prices of room purchases… all the while the redemption of points is worth more (cents per points goes up). Having not done it for 5 years is pretty solid.

    I would complain about the Federal Reserve before any loyalty program.

    Relationship with Chase is key… if that went away I would likely drop Hyatt status.

    Earn em & burn em.

  5. The problem is that once Hyatt opens up that Cat 8, then it’s only a question of time before they move existing Hyatt branded properties into it, regardless of whether that is currently their plan.

  6. Totally agree with SEAguy! Constant bait and switch! And then the bloggers continually downplay these devaluations!

  7. The problem isn’t even the eventual category creep of the hotels. It’s the lack of trust that it won’t happen overnight without notice.

    Once trust is broken, like they just did with points and cash, things just aren’t the same.

  8. Is it so hard to read?
    “The fact that SLH properties will fall under the fixed award chart is excellent news.” That’s what Lucky said and he is right.
    It greatly increases the potential value of Chase points.

  9. @Lars K thank you for being the only person to apparently actually read the post. Seems everyone else is in the reddit habit of only reading the headline and basing all their opinions off that.

    To everyone who still doesn’t get it – Ben is saying Category 8 is a good thing because this means that we will be able to redeem a fixed amount of points towards SLH hotels regardless of their cost per night. The alternative would have been redeeming 10,000 points per $100, meaning a $1000/night hotel could have cost 100,000 WoH points.

    To further break it down for you – Cat 8 is necessary because some SLH hotels would not have been happy being reimbursed for award stays only costing 30,000 points (because they receive reimbursement based upon several factors, one of which is how many points it costs to redeem per night). So they will add a Cat 8 for those ultra-high end hotels.

    There is no devaluation. Period. Stop spreading fake news.

  10. I, too, agree with the first two posters. Ben, the old adage ‘Can’t see the forest for the trees’ comes to mind on this one.

  11. What’s the devaluation? Hyatt properties are still capped at 30k. They are adding a 40k that provides an additional option to stay on points for those with WofH or UR. Yes, one day categories will change, and it will require more points to book the same hotel. But it’s not today. What’s the issue? Do people expect the price at their local grocery store or restaurant to always be the same in perpetuity?

  12. As already stated by DaKine, most bloggers expect inevitable devaluations due to inflation. Over time, a program has to devalue on their side to balance inflation. DaKine already explained that pretty well, so no need to dwell there.

    The secondary reason to expect devaluations *right now* is because of the high loading/occupancy rates we’re still seeing in the travel industry. This part of the equation is absolutely cyclical, but with hotels and planes regularly full or close to it the past few years (and expected to stay that way for the short term) the travel brands can simply get away with devaluations because if one person leaves, there is often another person waiting to fill that spot.

    In the future when the economy inevitably declines, this secondary factor will swing back the other way. Programs can often get away with just keeping things the same in modest declines, but have to really increase benefits in major ones like 2008. It’s no coincidence that it’s been almost that long since we’ve seen anything along the lines of Hyatt’s old “faster free night” promotions where you got a free night certificate after two stays (for example).

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