The May/June Club Carlson devaluation makes it just another middling hotel loyalty program

Before I get to the meat of my analysis of Club Carlson’s recently-announced devaluation, allow me to briefly mention my general approach when it comes to credit card rewards:

• I prefer cash above all other rewards currencies. I can use cash to pay my expenses, save for the future, and of course pay for travel out of pocket;
• There are times when earning rewards currencies besides cash can reduce the cost of a flight or hotel below the cost I would incur making a similar reservation with cash;
• If those situations occur frequently enough in a specific credit card rewards program, I’ll consider prospectively earning those rewards instead of cash.

The point is that my default mode when earning rewards currencies through credit card spend is cash back, and other loyalty currencies need to offer consistent, out-sized value in order to earn my business. Since the least valuable point is always the one you don’t redeem, I also make sure to redeem my hotel, airline, and proprietary credit card rewards points approximately as quickly as I earn them.

Consider the US Bank Flexperks Travel Rewards credit card. By earning 2 Flexpoints per dollar spent at "grocery stores" or "gas stations” each statement cycle, and redeeming those points for up to 2 cents each towards paid airfare, you might think that a return of up to 4% is a no-brainer (and, indeed, I do earn and redeem a lot of Flexpoints).

But last month I took a $500 voluntary denied boarding voucher on an American Airlines-operated flight. The next time I make a paid American reservation, I’ll use that voucher instead of up to 30,000 Flexpoints. Suddenly I have 30,000 more Flexpoints than I would have otherwise!

Sure, I can redeem them for 1 cent each in cash back, but that’s still a $33 loss compared to putting the same $15,000 in gas station or grocery store spend on my Barclaycard Arrival+ card (or, given the categories, another even higher-earning credit card like my Chase Ink Plus).

The Club Carlson credit cards used to offer consistent, super-sized value

The tool I use to analyze the value of hotel co-branded credit cards is the "imputed redemption value” of award reservations made with the chain: that’s the value you’re implicitly putting on a hotel redemption when you earn enough points through manufactured spend to make an award stay instead of earning cash back with the same spend. The last-night free benefit of the Club Carlson credit cards produced extremely low (that’s good, remember) imputed redemption values for stays of at least 2 nights:

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The only other hotel program which I have found to offer consistent value compared to cash back is Hilton HHonors, when you manufacture gas station and grocery store spend with the Surpass co-branded American Express card. While their 2014 devaluation dramatically raised the points cost of their properties, the exceptionally high earning rate of 6 HHonors points per dollar leaves relatively reasonable imputed redemption values, especially on stays of exactly 5 nights, when elites can take advantage of the 5th-night-free benefit:

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As I wrote on Friday, Wyndham’s new rewards program, which will, starting May 11, 2015, offer free nights at all participating Wyndham properties for 15,000 Wyndham Rewards points, has a single imputed redemption value. Manufacturing a single night at their properties will cost $166.50 in foregone cash back:

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Club Carlson’s program will be fine, if you really want to stay at Club Carlson properties

I have a commenter who always pokes fun at me when I talk about staying at dumps like the Radisson Blu es. Hotel, Rome or Radisson Martinique on Broadway just because the last-night-free benefit made them so cheap.

The fact is, I’m a poor person, so if I want to travel as much as I do, I need to do it cheaply. The Club Carlson credit card helped me do that. New York’s an expensive place to stay, and while I could always transfer Ultimate Rewards points to Hyatt and stay at one of their Manhattan properties, those points have an extremely high opportunity cost since they can also be redeemed for cash or paid airfare, or transferred to the right partner at the right moment. The Martinique made sense for me as an (admittedly run-down) alternative.

But beginning June 1, Club Carlson will not offer the outsized rewards that justified manufacturing thousands of dollars per month on their co-branded credit card. Here’s a side-by-side comparison of the imputed redemption values of Club Carlson stays and their competition, with the cheapest, second-cheapest, and most expensive stays highlighted in green, yellow, and red:

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Note: For Hilton I used a synthetic "mid tier" value of 45,000 HHonors points, which does not actually exist on their award chart; they have an even number of hotel categories.

As the chart clearly illustrates, at bottom-, mid-, and top-tier properties, Club Carlson is consistently the cheapest or second-cheapest chain to manufacture stays of less than 5 nights (top-tier, 5-night Hilton stays do clock in cheaper at $281, as shown in the chart further above), even without the discontinued last-night-free benefit.

The problem is that in exchange for your Club Carlson points, you’ll have to stay at Club Carlson properties, and many Club Carlson properties are dumps. Unless you have a clutch of Club Carlson properties you visit regularly, or a specific property you have your heart set on visiting, it no longer makes sense to manufacture large numbers of Club Carlson Gold Points speculatively.

If you feel like it, buy 3 domestic nights each year for $326.40 (or $351.40)

The Club Carlson co-branded credit cards still offer a single, specific value proposition:

• the US Bank Club Carlson Premier Rewards card has an annual fee of $85, while the Business Rewards card has an annual fee of $60;
• each year you renew your membership with either card, you receive 40,000 Gold Points;
• starting June 1, 2015, each year you spend $10,000 with the card you receive a free night at any Club Carlson property in the United States.

Since the earning rate of the card hasn’t changed, all this adds up to paying $222 in foregone cash back and a $60 or $85 annual fee, and receiving 90,000 Gold Points and a free night in the United States. Even if you have to manufacture an additional $2,000 in order to “top up” your Gold Points to 100,000 each year, you’ll end up paying $266.40 in foregone cash back, for which you’ll receive at least 3 nights at any US Club Carlson property (there are no domestic Category 7 hotels).

Since my partner and I visit Chicago at least a couple times per year, I’ll probably do exactly that, paying $108.80 per night for an annual 3-night stay at the Radisson Blu Aqua Hotel Chicago in downtown Chicago, which is a lovely hotel we’ve stayed at many times before (using the last-night-free benefit, of course).

By way of comparison, the imputed redemption value of the Hilton downtown Chicago properties (ranging from 40,000 to 60,000 HHonors points, depending on the season) is $118 to $178, while a reservation at the three Category 4 Hyatt properties in downtown Chicago would cost 15,000 transferred Ultimate Rewards points (worth $150 in cash).

Conclusion

The Club Carlson last-night-free benefit was so lucrative it justified a lot of otherwise-bizarre behavior. At the end of May, it’ll be gone, and Club Carlson will be just another middling hotel chain, packed with dilapidated, aging properties and struggling for relevance.

It sure was fun while it lasted, though!