It's no secret: I'm a big fan of Hilton, and it's one of the first chains I check for convenient downtown locations, free breakfast with HHonors Gold elite status, and affordable redemptions (well, as long as you're earning 6 HHonors points per dollar spent in the ubiquitous gas station and grocery store bonus categories).
In the last month or so, while planning my winter jaunt to Italy, I've been noticing some odd premium award night pricing, and today finally decided to get to the bottom of it.
What's an "odd" premium award night price?
To give you a taste of what I'm talking about, here's a standard award night redemption at the Hilton Molino Stucky Venice in early January:
Fair enough: it's a Category 8 property, which should price between 40,000 and 70,000 HHonors points, depending on the season (for some reason Venice doesn't appear in the HHonors Points Search Tool so I don't know precisely when seasonal pricing is in effect).
Here's the oddity I'm talking about:
A premium room award (in this case a "King Hilton Deluxe Room") costs fewer HHonors points than a standard award. That's what I'm calling an "odd" price for premium award nights.
While I'm happy to book the discounted rate, I've been digging around trying to find some explanation (was there a European premium room award promotion I missed?). Here's what I found.
Premium room awards are revenue-based
When the Hilton booking engine determines the number of HHonors points required to book a premium room award night, it applies a mechanical calculation, multiplying the revenue cost of the room by a constant HHonors point valuation to arrive at a total cost in HHonors points. For example, here are two premium room awards at the Hilton Portland & Executive Tower:
As you can see, the HHonors point valuation for both rooms is identical to many decimal places, at 0.278 cents each. This may be slightly misleading since I believe they're internally using the total price including taxes, bringing the internal valuation to 0.318 cents each. Since manufacturing spend on an American Express Hilton HHonors Surpass card is only worth it if we plan on redeeming points for more than 0.37 cents each, that's not typically going to be an ideal forward-looking redemption (but may be worth it if you've already banked plenty of HHonors points).
The internal valuation varies by property
The tricky thing here is that the valuation used by Hilton to calculate the number of points required for premium room awards isn't constant across properties. Here's a valuation of 0.36 cents each (0.41 cents after taxes) per night at the Hilton Austin:
Odd premium award night pricing is a natural consequence
Fortunately for us, Hilton doesn't bother checking that the premium room award price is in fact higher than a "standard" award redemption. In all fairness, it usually will be: premium rooms are usually at least a little more expensive than standard rooms, and HHonors points are typically only worth 0.3 to 0.5 cents each for standard redemptions anyway.
Odd premium award pricing results from low premium room rates and high internal valuations. To open up a pricing opportunity, premium room rates have to be fairly close to standard room rates and the internal valuation has to be fairly high.
It's still unclear to me which currency internal valuations are denominated in and how often they're adjusted; sudden currency fluctuations may open up more opportunities for odd premium award nights, but I haven't been able to test that yet.
This post serves more to sate my curiosity than as a call to action, since it's hard to predict when a premium room award is going to end up pricing out cheaper than a standard room. For further reading, here's an example of Loyalty Lobby finding an odd premium award night price in Shanghai back in 2012, and here's a somewhat dated Points Guy mention of the same phenomenon.