Judging by the headlines in my RSS reader last week, I was dreading looking into the devastating, unannounced Hilton devaluation that apparently happened under the cover of darkness. Will this change everything? Will I cancel my American Express card? Will nothing ever be the same again?
And, because it's the travel hacking blogosphere, it turned out to be a big fat nothing, as is almost always the case.
Revenue-based earning was a devaluation
When the major US carriers moved to revenue-based mileage earning, that was a devaluation for folks who earned miles through paid flights: previously, miles were earned based on the distance flown and class of service. Now, they're earned based on the fare paid, regardless of class of service.
Revenue-based redemptions were a devaluation
Delta's move towards revenue-based redemptions was a devaluation, since it removed more expensive flights from the pool of seats available for booking at the lowest level, including partner award bookings.
Reduced and eliminated award space is a devaluation
When my blood pressure is too low I sometimes look for award space on American Airlines-operated flights. The fact that American no longer makes low-level award space available is a devaluation compared to the days when they made any award space available, and of course an even more severe devaluation for loyal customers of the former US Airways.
Reduced fixed-value currency values is a devaluation
When Southwest moved from "about" 1.7 cents per Rapid Rewards point to "about" 1.6 cents per Rapid Rewards point for Wanna Get Away fare redemptions, that was a devaluation, since the same number of points buy less airfare than they used to.
When US Bank reduced the value of Flexpoints from "up to" 2 cents per point to a fixed 1.5 cents per point, that was a devaluation for many customers, since they lost the ability to stretch the value of their points by booking slightly more expensive, slightly more convenient flights for the same number of Flexpoints.
Reduced per-dollar point earning is a devaluation
When Hilton collapsed their "double dip" earning styles into a single earning method, that was a devaluation for Blue and Silver members who earned more points per dollar spent under the old regime.
Did Hilton undergo a 500% devaluation?
What Gary Leff was freaking everyone out about last week was not a devaluation. It was a repricing of individual properties.
For Gary-specific reasons, he did not ask, "how does this affect the value of Hilton Honors points?" He just said, "hotel cash prices rarely double or quadruple the way they seem to with Honors, which is a loyalty program and not merely a currency" [italics his, for some reason].
The example he gives is the Hampton Inn Columbus-Airport, which used to cost 5,000 points per award night, and now costs 30,000 points, the "500% increase" you may have seen people fretting about online.
Fortunately, I have access to the internet, and can pull up room rates at the Hampton Inn Columbus-Airport. I picked the dates of April 8 through April 22, and looked at standard room rates, plus a 17.5% occupancy tax, and compared them to the award rates on the exact same dates.
First of all, the property does not cost 30,000 points per night. While that's the maximum rate charged, there were also nights available for 27,000 and 29,000 points per night. As you'd expect, those lower rates were available on nights when the paid rate was at the lower end of the range.
What did I find? Redemptions rates during the two-week period I looked at varied from 0.431 cents per point to 0.638 cents per point, with an arithmetic average of 0.56 cents per point.
This is, for lack of another word, totally banal. A 0.43 cent redemption is on the low end of what I would look for from a Hilton redemption, and a 0.56 cent redemption is on the highish end (a 3.36% return on grocery store manufactured spend).
This is undoubtedly unfortunate for folks who were used to getting 3.8 cents per point at the Hampton Inn Columbus-Airport, there's no use denying that. Nobody likes to lose their own personal sweet spot. But what are the rest of us supposed to think about a Hilton property with 0.4-0.6 cent per point redemptions? That's a totally normal Hilton property!
Inflation is not a devaluation
My brother sometimes brags about the great deals he gets on Southwest, saying "it costs me 10,000 points to fly from San Francisco to Salt Lake City." But of course he's not getting a great deal, he's redeeming his Rapid Rewards points for a Wanna Get Away fare at 1.6 cents each.
If the cost of jet fuel spiked and Southwest fares doubled, he'd be redeeming 20,000 points and complaining about how much better Rapid Rewards used to be. But it wasn't Rapid Rewards that devalued, it was the dollar that bought less air travel than it used to!
The right way to think about rewards program is:
- How many points do I earn per dollar spent?
- How much value do I get from redeemed points?
A program undergoes a devaluation when the number of points earned, whether through manufactured spend, flights, hotels, car rentals, or movie tickets, falls.
A program also undergoes a devaluation when the dollar value of redeemed points falls, whether that's through reduced award availability, increased award redemption costs, or moving from flexible value to fixed value redemptions.
But a program isn't devalued just because the property you happen to like to stay in increases in cost! That program may no longer be the right choice for you, and if all the sweet spots in the world disappeared (I'm required by blogger law to point out that you can still get 1.39 cents per point on a sample 5-night stay at the Conrad Maldives Rangali Island), then that program might not be right for anybody at all.
But some airport hotel in Columbus realigning their award cost with their revenue cost is not even the beginning of the end of the world. Let's save the drama, shall we?