If you follow travel loyalty programs, you’ve probably seen the recent breaking news from Marriott Bonvoy. As of March 2022, it will transition to a dynamic pricing model for point redemptions. While some view this as a deeply disappointing development, I’m cautiously optimistic that my approach to hotel points will not be negatively affected.
Why are so many loyalty programs switching to dynamic pricing?
Over the last few years, many hotel and airline programs have moved away from fixed reward charts. Instead, they’ve implement systems where the miles or points required for a free flight or hotel stay will vary depending on a number of factors, the primary one being the corresponding cash price.
I’m certainly no expert on the economics of loyalty programs, but it’s pretty safe to assume that it makes sense to go dynamic from a financial standpoint otherwise they wouldn’t all be heading in that direction. It also strikes as reasonable from the average member’s perspective. The cheaper the room, the fewer the points needed. It seems logical.
However, those inconsistencies in cash vs. reward rates are also what can make your points worth much more. For example, in the old Aeroplan, a round trip flight from Halifax to Toronto was a flat 25,000 miles – the same as a flight to Victoria, BC. In most instances the former would be a poor deal and the latter would be an excellent one due to the difference in cash price. In the new Aeroplan, flight rewards vary according to the airfare so that flight to Upper Canada is no longer disproportionately high in points, but that trip to the west coast is not going to yield the great value it once did.
Implications for Marriott Bonvoy
In the Marriott Bonvoy program, the lowest and highest category hotels currently hold the most potential for outsized value. Those who like to measure the value of a redemption on a precise cents-per-point basis are the ones most concerned about dynamic pricing or Flexible Point Redemption Rates as they’re described on the Marriott website. Many such members generally aim to redeem at high priced hotels and resorts that would be out of reach otherwise.
Here is the current redemption chart that will soon be a thing of the past:
The conversion to dynamic rewards is undoubtedly a serious threat to the sweet spots. Still, we’ll have to see how things evolve and what the reward rates actually look like once the changes take effect. Right now there is a fair amount of angst on the points forums which is to be expected when a loyalty program announces any forthcoming “enhancements”.
To hedge your bets, if you’re tentatively planning a luxury vacation at a high category Marriott property or a stay at Category 1 or 2 hotel, you’ll definitely want to lock in a speculative booking before the change in case the sky really does fall.
Lessons from Hilton Honors and IHG Rewards
Two other major hotel loyalty programs have already ditched categories for dynamic rewards. The Hilton transition didn’t seem to cause too much upset in the points and miles world and my take on that program remained largely the same as before.
What gives me hope is the IHG experience. Its change to dynamic pricing was probably a net negative for the luxury seekers, but proved to be an overall positive for people like me who prefer to stretch their points into as many free stays as possible.
Before they went dynamic, IHG had gradually reached a point where there were ridiculously high redemption rates at ordinary hotels in desirable locales during times when rates were relatively low. For example, every Holiday Inn Express in Manhattan would be 35 or 40k points in January when cash rates were barely over $100 most nights.
Marriott suffers from the same problem as shown here with a Four Points near Times Square going for 50,000 points with a cash price of $126. That’s absurd in light of the $1000+ St. Regis room for 85,000 points. (Actually, the rates below are for tonight, October 27, and the Four Points has dropped to $117 since I took the screenshot.)
After dynamic pricing was introduced by IHG, it was again possible to find reasonable options for fewer points in popular places if you have flexibility with your travel dates. London, New York, Paris etc. all now have hotels offering free nights for fewer points than before the switch – just probably not at the InterContinental Le Grand (one stay was enough for me anyway.)
It’s important to note, however, that reward pricing is a little haphazard with IHG and doesn’t always align well with cash rates. That’s a good thing and hopefully Marriott will have a similar wildcard factor to its pricing. This would benefit the keeners who don’t mind hunting down deals and are willing to closely track rates as their stay approaches in case the opportunity arises to cancel and rebook for fewer points.
What about high demand travel dates?
A key question is whether this spells the end of high value redemptions on dates when cash rates skyrocket. I’d say this is the most unfortunate consequence of dynamic pricing. If every hotel in town has high cash rates, then the ones operating under a dynamic model are surely going to be high in points as well. So, accumulate some Choice, Wyndham or Radisson points to get around that I guess. Indeed, this could be a case for diversifying your points portfolio and leads into my last bit.
The price of loyalty
It’s interesting to see the reaction to this news. A few folks have an outlook similar to the one expressed in this post but lots of others have their pitch forks out. I suspect some of this bitterness might stem from being too entrenched in one program and expecting their genuine loyalty to be rewarded, perhaps to an unrealistic degree.
Putting all your eggs in one basket has its risks and travel points have been going through both subtle and significant adjustments as long as they’ve been around. Those who claim to be jumping ship to another chain might do well to cast a wider net to explore the nuances and potential sweet spots of even more hotel loyalty programs.
While I can empathize (a little) with those dreaming of overwater bungalows in the Maldives, I don’t feel all that devastated by the news of Marriott going dynamic. It was not unexpected, and in the competitive world of hotel loyalty, they can’t really take away all of the program’s appeal. I’m hoping it will be at least somewhat similar to IHG, in that high end hotels may raise redemption levels but more low to midrange hotels will have acceptable rates. If that’s the case, I will be pleased with the new Marriott Bonvoy. I just want cheap trips.
What I’m also interested to see going forward is what kind of promotions will be rolled out in 2022. Will the hotel loyalty programs feel less compelled to incentivize bookings in light of the uptick in travel? Will Marriott decide to offer an olive branch to the disgruntled loyalists by way of a moderately generous points-earning promotion? It would be nice if they did.