The current Choice Privileges promotion is so stupid I expect it to become the norm

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I was rummaging around on my Hotel Promotions page (check it out if you have any upcoming stays; current promotions are running as late as June 4, 2019) and noticed some funny language in the terms and conditions of the current Choice Privileges promotion. Once I understood what was going on, I groaned at both the idiocy and genius of the promotion design.

The first “top-up” promotion I’ve seen

How the Choice Privileges promotion works is that you are guaranteed to receive a total of at least 8,000 points when you complete two qualifying stays (a qualifying stay being one booked through the website, app, or over the phone). Your stays should still be eligible for the promotion if you book through an online shopping portal, where Choice has quite broad participation. You’re also guaranteed to receive a minimum of 5,000 bonus points. Here’s what the terms and conditions say:

“Registered members will be awarded a minimum of 5,000 to a maximum of 8,000 bonus points after the second qualifying stay. The number of bonus points awarded depends on the number of base points earned from the two separate qualifying stays, with points varying by hotel. The total of base points plus bonus points awarded, however, will be at least 8,000 points.”

To see how this works, take a real-life example: my two-night stay at the Quality Inn Harpers Ferry in October of last year. I paid $236.55 in room charges on that stay, which as a non-elite member earned me 2,360 Choice Privileges points (I guess they’re so stingy they round down).

If I’d had a second, identical stay, I’d earn another 2,360 points, for a total of 4,720 points, leaving me 3,280 points shy of the 8,000 minimum total points. In that case, I’d earn the promotion minimum of 5,000 bonus points, for a total of 9,720 points. If I’d booked a room rate half as expensive, earning just 2,360 points on my two stays, I’d earn 5,640 bonus points, for a total of 8,000 base points plus bonus points.

As this example makes clear, the value of the promotion (as opposed to the value of the program itself) is higher the lower your room rate: 640 bonus points higher.

A promotion design this dumb has to be a sign

Once I realized what was going on, I knew immediately this won’t be an isolated promotion. After all, despite the assurances of airline executives that they’ll never lose money ever again, nothing has fundamentally changed about the airline industry: it requires enormous, up-front, long-term capital investments and finances those investments by selling individual tickets to customers that are extremely sensitive to prices and the overall condition of the economy.

In other words, when the next recession comes, airlines will lose money hand over fist, just like they have in every previous recession, and will do anything possible to get more customers on their planes. The “rationalization” of frequent flyer programs into revenue-based earning will go out the window, and airlines will start shoveling miles towards anyone willing to buy a ticket.

The “top-up” promotion model is optimized to precisely target the marginal traveler: the airline can still award you 5 miles per dollar you spend on airfare, but, for example, guarantee you’ll receive at least one redeemable mile per mile traveled. Last-minute and business travelers can be handed a nominal minimum (like the 5,000-point minimum Choice is offering), while those buying cheap tickets and without elite status can have their balance “topped up” to the promotion maximum.

Hyatt is burying Small Luxury Hotels, so keep an eye out for good values

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Over at Running with Miles, Charlie Barkowski has been doing yeoman’s work tracking the “Small Luxury Hotels” eligible for Hyatt Category 1-4 free night certificates, meaning properties that cost up to 15,000 points per night. Check that out if you’re struggling to figure out where to redeem your Hyatt free night certificates.

Today, I want to make a few unrelated points about Small Luxury Hotels.

Non-Globalist World of Hyatt members should slightly prefer Small Luxury Hotels

All else being equal, World of Hyatt members, and Explorist and Discoverist elites, should prefer Small Luxury Hotels stays over otherwise-identical Hyatt properties. That’s because World of Hyatt reservations at Small Luxury Hotels come with continental breakfast for two, and at least the possibility of a 2 pm late checkout.

That shouldn’t be decisive for Globalist elites who receive breakfast and late checkout anyway, or if the Small Luxury Hotel property is more expensive, a worse value, or is much more inconvenient. But as a tiebreaker for the casual Hyatt traveler, it’s worth keeping in mind.

Hyatt buries Small Luxury Hotels at the end of search results, but it’s worth digging

If you search for Hyatt stays in New York City, you’ll see an ocean of properties stretching from the Grand Hyatt on East 42nd Street to the Hyatt Place in Princeton, New Jersey, before you’ll see the HGU NEW YORK, at 34 East 32nd Street.

That’s because all Small Luxury Hotels results are buried at the very end of the search results, long after most people stop looking. Slightly better is the map view, which shows all the properties in a given city, but which makes it more difficult to compare their relative value.

In destinations without Hyatt properties, Small Luxury Hotels are a potential game-changer

Since Manhattan offers a range of Hyatt properties, Small Luxury Hotels aren’t likely to play a huge role in a travel hacking strategy there. But in other areas, they’re potentially decisive. Consider a stay in the center of London next month. There are only two Hyatt properties, the Hyatt Regency London - The Churchill and the Andaz London Liverpool Street, both at 25,000 World of Hyatt points.

But there are 6 Small Luxury Hotels properties, ranging between 20,000 and 25,000 points, in or near the center of London. On a smattering of sample dates, I saw redemption rates at those properties between 1.58 and 2.84 cents per World of Hyatt point. Not breathtaking, but properly calibrated to the value of the program as a whole.

Compare that to Hilton’s central London properties on the same dates. From a high of 0.61 cents per point at the DoubleTree by Hilton Hotel London - Kensington (50,000 points for a 231 GBP stay) to a low of 0.45 cents per point at the London Hilton on Park Lane (80,000 points for a 273 GBP stay), what you see across the board from Hilton is replacement-level redemptions. There’s nothing wrong with those redemptions — I would make them myself in a pinch, and a 5th-night-free redemption would improve the value further — but the Small Luxury Hotel redemptions offer the kind of outsized value we’ve come to expect from Hyatt points.

Conclusion

The addition of Small Luxury Hotels as a redemption option in World of Hyatt hasn’t increased the value of individual Hyatt points (still worth between 1.5 and 3 cents each), nor has it increased the value of individual Hilton points (still worth about 0.5 cents each).

What it has done is increase the value of a portfolio of both Hyatt and Hilton points, allowing Hyatt points to be redeemed more readily in cities like London and New York where Hilton points are typically redeemed at their replacement value, while allowing Hilton points to be saved up for redemption at the very few properties and redemptions where they get outsized value.

Four use cases for Hilton credit card spend

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Lately I’ve been mulling a series of posts by Nick Reyes over at Frequent Miler about the relative value of earning Hilton Honors points directly through credit card spend, versus purchasing them for 0.5 cents each during Hilton’s periodic point sales. As someone who considers Hilton indispensable to my travel hacking practice, I took the opportunity to reflect on what I might be doing wrong (or right).

The Deal

As Reyes explains, the opportunity comes from the fact that while Hilton normally sells their points for 1 cent each, they very frequently offer sales where you can purchase up to 80,000 points per calendar year for $800, and receive 80,000 bonus points, bringing the cost per point down to 0.5 cents.

Moreover, you should be able to receive the same deal clicking through the TopCashBack portal and earning 2.5% cash back, or up to $20 on an $800 purchase. And of course the purchase itself will earn cash back, worth another $16 on a 2% cash back credit card. That means you can purchase up to 160,000 Hilton Honors points per year for $764, or 0.4775 cents each.

If that’s the cash cost of 160,000 Hilton Honors points, you should be at least reluctant, if not unwilling, to pay more than that in opportunity cost. For example, Hilton Honors credit cards earn 3 points per dollar on unbonused spend. If you can otherwise earn 2% cash back on unbonused spend, putting the same spend on a HIlton credit card would mean paying 0.67 cents per points — 40% more than they cost on the open market.

Even manufacturing spend in the Hilton Ascend bonus categories may mean overpaying: earning 6 Hilton Honors points per dollar spent at grocery stores means giving up 3 cents in travel on the US Bank Flexperks Travel Rewards card, while at gas stations it means giving up 2 Ultimate Rewards points per dollar on the Chase Ink Plus and Ink Cash.

All that is straightforward enough. What I wondered was, under what circumstances does it still make sense to put spend on a Hilton co-branded credit card?

Reimbursed business travel

It’s easy to forget today, but travel loyalty programs were not actually designed with cheapskates like me in mind. Instead, they were meant to encourage business travelers with control over their reservations to prefer one travel provider over another by offering to kick back a portion of the company’s travel budget to the traveler for later, personal use. And to an extent, that’s still what they do.

If you’re a reimbursed business traveler, it can make sense to charge your Hilton reservations to an Ascend or Aspire credit card. The former earns 12 points, and the latter 14 points, per dollar spent at Hilton properties, including taxes, resort fees, and room charges, the equivalent of 5.73% and 6.69% cash back, respectively (since 12 points can be bought for 5.73 cents during 100% bonus promotions on purchased points). That compares favorably to the 3 ThankYou points per dollar spent at hotels with the Citi ThankYou Prestige and 2 Ultimate Rewards points per dollar spent with the Chase Ink Plus.

Indeed, you would need to value the marginal ThankYou point at 1.91 or 2.23 cents each, and the marginal Ultimate Rewards point at 2.865 or 3.34 cents each to be willing to give up 12 or 14 Hilton Honors points per dollar spent. Those are not incredibly unrealistic values, but they’re well above the rate at which I would acquire those points speculatively.

And of course, American Express Offers linked to your Hilton credit cards may offer substantial additional savings, like the $70 off $350 offer I took advantage of in Hawaii last month.

Ascend free weekend night award spend threshold

If you don’t manufacture spend, and you don’t have reimbursed travel you can direct to Hilton, then you probably shouldn’t carry an Aspire card (with its $450 annual fee) and you absolutely should not carry an Ascend card unless you’re willing to meet the $15,000 cardmember year spend threshold to trigger a free weekend night award.

That free weekend night award has two costs: the card’s $95 annual fee, and the opportunity cost of putting $15,000 on the Ascend card instead of your next best alternative. Here I’ll assume that opportunity cost is 2% for unbonused spend, and 3% for bonused spend (gas stations and grocery stores). You should re-run these calculations if your opportunity cost differs, of course.

That brings the total cost of the free weekend night award to $395 or $545, from which we can back out the 45,000 points (worth $214.88) or 90,000 (worth $429.75) points earned on the spend, for a net cost of $180.12 or $115.25.

Using the same base cost of 0.4775 cents per Hilton point, we know $180.12 can buy you 37,721 points, and $115.25 can buy you 24,136 points. In other words, any Hilton free weekend night redemption above those values leaves you at least marginally better off than if you had put the $15,000 in spend on a 2% or 3% cash back card instead and simply purchased the corresponding number of points.

But ideally, you won’t be making breakeven redemptions. At a 95,000-point property, a free weekend night is worth $453.63 in purchased points, for a profit of $273.51 or $338.38. If the new Waldorf Astoria Maldives Ithaafushi really charges 120,000 points per night for a standard award — and those awards can be booked with free weekend night awards — then the potential profit is even larger.

Increased float

Even replacement-level affiliate bloggers have enough of a conscience to warn the folks they sell credit cards to that you should pay off your balance in full every month, since the high interest rates credit cards charge (sometimes after a low-interest or zero-interest introductory period) will almost immediately reclaim the value of any rewards you earn on spend.

A newbie taking this advice literally might use their manufactured spend to immediately pay off the card used to generate it. And indeed, during opportunities like the unlimited 5% cash back offered by Wells Fargo credit cards in the past, that’s sometimes the most lucrative strategy.

But more experienced folks understand that while credit card interest should be avoided, there are lots of advantages to holding onto cash, rather than plowing it back into the card used to generate it. A card with a 30-day billing cycle and 20-day grace period effectively offers a series of rolling 50-day interest-free loans. The more lucrative your short-term investment opportunities, the more willing you should be to maximize the value of those interest-free loans, a strategy discussed by Sam Simon and Robert Dwyer in the February 1, 2019, episode of their Milenomics Squared podcast.

That means if your credit limits are too low to meet your needs for cash to plow into your most profitable gigs, you may well find it worthwhile to put spend on a second-best or third-best card.

Ascend Hilton Honors Diamond spend threshold

In general, Hilton Honor Diamond status doesn’t afford very many concrete or guaranteed benefits. In fact, the only guaranteed benefit I’m aware of is that Gold members are only entitled to executive club access when they’re upgraded to a club floor, while Diamond members receive club access even when they are not upgraded. That’s not nothing, but it’s also not much.

Moreover, Hilton status seems to last more or less forever. So while Diamond status is a benefit of spending $40,000 per year on the Hilton Honors Ascend American Express card, you don’t have to spend $40,000 every year. If you spend that much even once, you’ll probably have Diamond status for at least 2-3 years, if not longer.

However, if you’re keeping the Ascend in order to hit the $15,000 spend threshold every cardmember year, you may find it worthwhile to also hit the $40,000 Diamond status spend threshold every few years, especially if you can do so in bonused spend categories.

Bonus use case: you just need more points

As Reyes pointed out in his post, while each individual Hilton account holder is limited to purchasing 80,000 (and receiving 160,000) points per year, Hilton has made it easy to transfer and pool points, so in principle you can simply enlist as many people as needed to buy points during each promotion and then combine them for your desired redemptions.

In reality, conscripting friends and family to help you spend thousands of dollars on virtual currency is as likely to generate dead-eyed stares as it is Hilton Honors points. Once you’ve picked the low-hanging fruit of yourself, your spouse, and your kids, you might simply not have any good options for additional points purchases. At that point, instead of wasting time trying to cajole your relatives into playing along, you might find that it’s worth slightly “over-paying” to avoid the fuss.

Top-tier Hilton properties eligible for the Aspire resort credit

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Thanks to lifecycle effects I haven’t taken as many sprawling international vacations as I did when my life was governed by the academic calendar, which has had the ancillary effect of nudging me towards somewhat more luxurious travel plans. To give a trivial illustration, 250,000 annual Ultimate Rewards points earned through office supply spend on a Chase Ink Plus are worth 16 nights at 15,000-point World of Hyatt properties but only 8 nights at 30,000-point World of Hyatt properties, so the decision of whether to stay at a 15,000-point property or a 30,000-point property is in part governed by how many nights I need to book each year.

That has made me more curious about top-tier properties in each chain, like the Grand Wailea in Maui where we stayed earlier this month. Since I earn a lot of Hilton Honors points (and they can be purchased for less than 0.5 cents each through a cash back portal during Hilton’s frequent promotions), I wanted to take a look at all the top-tier Hilton properties where the Hilton Honors Aspire American Express card’s $250 resort credit can be redeemed.

In principle, these would be the properties where you can get the most value (in points) from American Express free weekend night certificates, the elite 5th-night-free benefit on award stays, and the Aspire credit card resort statement credit. I couldn’t find an existing list anywhere online, so I decided to assemble it myself for my and your future reference.

95,000-point Hilton Honors properties eligible for $250 Aspire resort credit

Note that due to Hilton variable award pricing, these are properties where the maximum, standard room award rate is 95,000 points. The actual rate for the dates you want may vary, sometimes substantially, below the maximum rate. After each property, I’ve indicated a sample redemption value for a 5-night, 380,000-point reservation 6 months from now.

Waldorf Astoria

  • Grand Wailea, A Waldorf Astoria Resort, $3,467.42 (0.96 cents per point)

Curio Collection by Hilton

  • Hotel del Coronado, Curio Collection by Hilton, $2,342.41 (0.62 cents per point)

Conrad

  • Conrad Fort Lauderdale Beach, $1,903.73 (0.5 cents per point)

  • Conrad Maldives Rangali Island, $4,249.29 (1.12 cents per point)

  • Conrad Koh Samui, $3,404.35 (0.9 cents per point)

Hilton

  • Hilton Odawara Resort & Spa, $1,967.32 (0.52 cents per point)

  • Hilton Seychelles Northolme Resort & Spa, $3,111.88 (0.82 cents per point)

A clarifying exercise

I arrived at this list by applying two filters to the entire list of Hilton properties: eliminate properties that don’t have a maximum redemption rate of 95,000 points per night, and eliminate properties that don’t qualify for the Aspire resort credit. However, while this is a good way of determining the properties where you can take advantage of Hilton program rules to save the most points, it says nothing about where you can use Hilton Honors to save the most money. Indeed, since I looked at 5-night stays 6 months in the future (July, 2019), I didn’t even look at the highest-dollar-value redemptions at these properties, most of which I assume would fall over spring break, Thanksgiving, Christmas, or other peak-travel holidays.

Moreover, while there are only 15 total properties in the Hilton Honors system that charge a maximum of 95,000 points per night (according to Loyalty Lobby’s March, 2018, update) there are 65 properties that charge 80,000 points per night and 145 that charge a maximum of 70,000 points per night. In other words, there are ample areas to fish for high-value redemptions outside the 95,000-point pond.

Conclusion

I am a big fan of Hilton Honors, but since I use my miles and points to book the trips I want to go on, I was a bit disappointed by my findings. I had a great time at the Grand Wailea, and would happily return there, but don’t have any special interest in visiting the Maldives, Seychelles, or Koh Samui, let alone Coronado, California, or Fort Lauderdale, Florida, so the Hilton Odawara is the only property on this list I could conceivably plan on visiting in the foreseeable future.

Compare that to the list of top-tier World of Hyatt properties: New York, Paris, Milan, Zurich, Sydney, and Tokyo are all cities I’d be happy to splurge for a stay on with points (New York’s Park Hyatt was a bust, but Zurich’s was lovely).

That doesn’t mean you can’t get good value during your first year of Aspire cardmembership stacking free-weekend-night and 5th-night-free awards with the card’s $250 resort credit. But it does mean that you may want to hunt for the highest dollar-value savings outside the highest point-cost properties.

The Hilton Honors Ascend American Express Priority Pass Membership "Year"

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Unlimited access to the Priority Pass network of airport lounges, which was long an afterthought compared to airline lounges and, more recently, the superb American Express Centurion lounges, has quietly become an impressive benefit of many super-premium credit cards, like American Express Platinum cards, the Chase Sapphire Reserve, and the Citi Prestige. In part that’s because Priority Pass has aggressively added airport restaurant locations where you can typically receive about $28 towards your food and drink bill (excluding gratuities). When I first started tracking that option, I recorded just 23 participating restaurants. The number is now up to 49!

Credit cards issued in the United States have typically offered either unlimited Priority Pass memberships or, like the Chase Ink Plus, “memberships” in name only where “members” pay $32 or so for lounge access. Obviously those memberships don’t offer any value at all at non-lounge locations, since the benefit is usually capped at $28-$30, although they might theoretically still be useful on long international layovers.

The Hilton Honors Ascend American Express struck an interesting compromise, offering a Priority Pass membership that includes 10 free visits per year, a benefit I enjoyed last year (although my partner’s new Hilton Honors Aspire card will give us both unlimited free visits while traveling together).

If you have an Ascend card and don’t otherwise have unlimited Priority Pass access, you should already be asking an important question: what’s a “year?”

Three ways a year could be defined

The two most common ways credit card benefits are restricted are by cardmember year and by calendar year. For example, American Express airline fee reimbursements are offered on a calendar year basis, while American Express Delta companion tickets are offered on a cardmember year basis, with the companion ticket appearing in your SkyMiles account shortly after your annual fee is charged each cardmember year.

There’s a third option, however, when benefits are provided by a third party: third-party program year benefits. For example, American Express Platinum cards offer Hilton Honors Gold status as an incidental benefit, but your Hilton Honors Gold status doesn’t depend on either the calendar year or your cardmember anniversary. Instead, it depends on the Hilton Honors program year, and your Gold status will continue for a year or longer even if you don’t renew your Platinum card.

American Express claims Priority Pass membership is based on a third-party program year

You can find American Express’s description of the Ascend Priority Pass benefit on the online application or by logging into your account. It’s more or less identical in both cases, and crystal clear (this text comes from the description in my online account, emphasis mine throughout):

“Your Priority Pass Membership year begins on the date you enroll. Once enrolled, you will receive your Priority Pass Select card directly from Priority Pass within 10-14 business days. There is no membership fee with your Hilton Honors American Express Ascend Card. With your Hilton Honors American Express Ascend Card you will receive 10 complimentary lounge visits each Priority Pass Membership year. Once your 10 complimentary lounge visits are used, all subsequent lounge visits during the remainder of the Priority Pass Membership year are subject to a fee equal to the amount of the guest visit fee of the Priority Pass Standard program per person per visit, which will be automatically charged to your Card. To check on your remaining complimentary visit balance, please contact Priority Pass directly. Any unused complimentary lounge visits will be forfeited at the end of each Priority Pass Membership year.”

In other words, whenever you get around to enrolling in Priority Pass, the clock starts on your Priority Pass membership year, during which you can make 10 total visits, including guests. This would theoretically be gameable, for example by waiting until a few weeks before the first trip you expect to use Priority Pass on, thereby delaying the start of your Priority Pass membership year.

But it’s not true.

The Hilton Honors Ascend Priority Pass membership is a calendar year benefit

I know travel hackers all fancy themselves jailhouse lawyers, so before anyone starts commenting about how crystal clear the terms and conditions are, let me say: I know how crystal clear the terms and conditions are. But if you rely on the terms and conditions, you’re going to end up with a bunch of $32 credit card charges before you know it.

Fortunately, I only ended up with one, but it illustrates the issue perfectly:

  • My Hilton Honors Ascend annual fee was charged on January 19, 2018;

  • I registered for Priority Pass on February 7, 2018;

  • I made 11 visits between August 20, 2018, and December 26, 2018, and was charged $32 for the 11th visit;

  • I made another visit on January 2, 2019, and was not charged.

There’s simply no other way to explain this set of facts than the benefit being based on the calendar year, contrary to the explicit terms and conditions of the benefit.

My secondary piece of evidence is that I called Priority Pass today to ask how the benefit works, and spoke to a lovely woman with a perfect British accent who nevertheless understood no English. After both of us shouted at each other in perfect English long enough, she finally understood my question and told me I get 10 free visits per calendar year, I’ve used 1, and I have 9 remaining. At that point I politely thanked her and she politely hung up on me, to both of our relief.

Conclusion

For me, travel hacking is about staying focused on a simple question: how does it really work? The systems we take advantage of lie on the intersection of marketing, engineering, and law. Sometimes the marketers talk to the engineers, sometimes the engineers talk to the lawyers, and sometimes nobody talks to anybody at all. It isn’t enough to ask what the marketers intended, or what the lawyers wrote, if you don’t pay attention to what the engineers actually programmed.

Quick hit: when are you eligible for your first Hilton Honors Aspire American Express resort credit?

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I started writing this blog because I was frustrated by how imprecise and inaccurate the mainstream travel hacking bloggers I was reading at the time were. In some ways that situation has gotten a lot worse, as credit card affiliate blogs have consolidated and become ever more limited in what kinds of deals they’re able to talk about, while in other ways it’s improved, as more independent bloggers have started writing without relying on affiliate revenue.

As careful as I am to be as accurate and precise as possible, I got caught out on Wednesday by two commenters asking versions of the same question: when are you eligible for your first $250 Hilton Honors Aspire American Express resort credit? This is a question it genuinely hadn’t occurred to me to ask.

The source of the confusion

The reason my commenters were confused arises from the fact that the resort credit is described in at least 2 different ways in different places:

  • on the American Express credit card application: “With your Hilton Honors American Express Aspire Card, enjoy up to $250 in statement credits each year of Card Membership for eligible purchases at participating Hilton Resorts.”

  • on the American Express “benefits” tab for existing cardholders: “Upon renewal of your Card, enjoy $250 in Hilton Resort Credits each year when you stay at a participating resorts within the Hilton portfolio.”

This raises the question, is the resort credit an anniversary benefit (like the bonus Radisson Rewards points offered by US Bank, or the Alaska Airlines companion ticket offered by Bank of America), or an annual benefit? If it’s the former, the value of the card drops enormously, since the credit would only be available if you kept the card or were able to make an eligible resort charge shortly after your first anniversary. If it’s the latter, you have an entire year of card membership to find a chance to use the credit before canceling the card.

My answer to this very good question

I was so flummoxed by these commenters I started to believe I may have actually misunderstood the terms of the benefit, something that has happened before and will happen again (always for the benefit of my readers). Had I relied too much on the seductive prose of affiliate bloggers? Had I, the anti-affiliate-blogger, become a pawn in their game?

But I quickly oriented myself and realized my original interpretation of the benefit, that it is available during your first year of card membership, had to be correct for a simple reason: the card is less than a year old, and people have already received resort credits. The relevant FlyerTalk thread has datapoints from as early as March, 2018, less than 3 months after the card was launched, so the benefit has to be available during the first year of card membership.

Conclusion: banks and loyalty programs love to out-legal themselves

If you squint at the conflicting language just right, you can start to see what American Express and Hilton were thinking: they wanted to make it as clear as possible that unlike the card’s $250 airline fee credit, which resets on January 1 of each year, the $250 resort credit is a cardmember year benefit, and they tried to express that concept in slightly different, slightly contradictory ways. While lawyers have fun pretending to speak with precision, English simply isn’t a surgical language. Here’s my modest attempt at reformulating the resort benefit:

“Each year of card membership, beginning with your first year, and continuing each additional year upon the anniversary of your account opening, enjoy $250 in Hilton Resort Credits each year when you stay at a participating resorts within the Hilton portfolio.”

As always, you can find my personal referral link on my Support the Site! page (feel free to use either my Hilton or Delta referral link, since they should both give you access to the same cards).

My version of the co-branded paradox

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I was listening to the latest episode of the new Milenomics² podcast, which everyone should subscribe to, and sign up for bonus Patreon content from, and the hosts brought up what they call the “co-branded paradox.” By this they mean the counter-intuitive way that even if you like staying at Hyatt properties, or like flying on Delta, your best bet for a credit card to use on everyday spend is probably not a Hyatt or Delta co-branded credit card.

That’s for the simple reason that while those cards may offer other worthwhile benefits, they actually earn points at a lower rate than other available options. A Chase World of Hyatt credit card may be worth carrying for the annual free night, but for non-bonused spend you’d be better off using a Freedom Unlimited card, which earns 50% more Ultimate Rewards points. At restaurants, the World of Hyatt card earns 2 points per dollar, but so does the Chase Sapphire Preferred, which allows you to transfer your points to Hyatt or any of Chase’s other transfer partners.

Likewise, you might want to carry a Delta Platinum card for the annual companion ticket or to take advantage of free checked bags, but that card only earns 1 SkyMile per dollar spent, while a no-annual fee Amex EveryDay earns 1.2 Membership Rewards points everywhere when you use the card 20 times per month (and the $95 EveryDay Preferred earns 1.5 points everywhere when you use it 30 times per month).

This is even more true in the case of products like the Chase IHG Rewards Club credit cards, which earn just 1 point per dollar spent on unbonused purchases: the more you value IHG Rewards Club points, the less you should be willing to spend on their co-branded credit cards, for the simple reason that a simple 2% cash back credit card earns almost 3 points per dollar, given that points can be purchased year-round for 0.7 cents or less.

All this produces a simple conclusion: get co-branded credit cards if you like their benefits, but don’t use them for actual purchases, where you can earn more points, more valuable points, or both using other products.

This is fine as far as it goes, but I actually think the logic of the co-branded paradox can be taken one step further.

Put everyday purchases on the card that earns the least useful rewards

What listening to the Milenomics podcast got me thinking about was the fact that most frequent travelers are usually already optimizing their earning of their most useful loyalty currencies. If you’re a paid business traveler that likes flying on United, you’re already earning United miles every time you fly. The fact that you like flying United shouldn’t encourage you to earn more United miles because your paid travel is already taking care of that. Likewise if you’re spending 55 nights a year at Hyatt properties for work, you’re likely already earning somewhere in the neighborhood of 100,000 points per year, plus two annual free nights (at the 30-night and 55-night thresholds) and any points earned from seasonal promotions.

To me, this is the real co-branded paradox: if your paid travel and manufactured spend are already optimized around the most useful rewards currencies, then your everyday spend should be going to the least useful rewards currencies, the ones that are nice to have lying around but that you don’t count on for your major travel needs.

A few examples off the top of my head:

  • Barclaycard Choice Privileges Visa. If you’re like me, you don’t stay at Choice Hotels properties very often. But when you do want to stay at a Choice Hotel, you can get terrific value from having a handful of Choice Privileges points lying around.

  • Bank of America Amtrak Guest Rewards MasterCard. This is another card that doesn’t make any sense to put hundreds of thousands of dollars in spend on, but if you do like to occasionally ride on Amtrak, you might like to have 20 or 30 thousand points kicking around so you don’t have to pay cash for what would be an especially high-value redemption, like 2.9 cent-per-point long-haul sleeper accommodations.

  • US Bank Radisson Rewards cards. I don’t carry any of these cards anymore because, with the exception of the Radisson Blu Aqua in Chicago, I have mostly found Radisson properties to be trash heaps. However, if you do still carry any of these cards due to their anniversary point bonanzas, you might also consider using them for everyday spend, earning as they do 5 points per dollar on unbonused spend.

Conclusion

Of course in one sense I’m being a bit tongue-in-cheek: obviously you shouldn’t prioritize earning less-useful currencies over more-useful currencies. But this is another way of expressing my long-standing observation that people really are inclined to earn too much, and redeem too little, of the currencies they consider most valuable. If there’s one good thing about the end of the Starwood Preferred Guest program it will be that we won’t have to listen to people complain that Starpoints are “too valuable to redeem” ever again!

If you’re maxing out a couple of Ink Plus cards at office supply stores every year and sitting on a million Ultimate Rewards points already, then I think it can make perfect sense to put away the Freedom Unlimited card when you go out to eat and pulling out something a little more exotic. Not because Amtrak Guest Rewards points are more valuable than Ultimate Rewards points in the abstract, but because they might be more valuable to you at the frontier you are personally operating at.

How bad would a Hyatt devaluation need to be?

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I’ve been following with interest the changes Hyatt has made to certain types of award reservations. To roughly summarize the changes:

  • points can now be redeemed for “premium” suite award nights;

  • Points + Cash can now be redeemed for standard and premium suites;

  • qualifying paid stays can now be upgraded to premium suites with points;

  • the cash co-pay on Points + Cash stays is now 50% of the “standard” room rate for the room type you’re booking instead of a fixed amount based on hotel category;

  • a new 40,000-point redemption tier will be introduced to cover certain newly-acquired luxury properties.

I’m frankly not sure if it was part of this update or not, but I also noticed recently that award nights at Hyatt Ziva and Zilara all-inclusive properties can now be booked online (you used to have to call to book).

Hyatt is a competitive program for travel hackers

If you earn miles and points mostly or exclusively through manufactured spend this shouldn’t come as surprise, but to break it down simply:

  • a Category 1 Hyatt property costs 5,000 points per night, or $3,333 in spend on a Chase Freedom Unlimited or $1,000 on a Chase Ink Cash or Ink Plus at office supply stores;

  • a Category 4 Hyatt property costs 15,000 points per night, or $10,000 in spend on a Freedom Unlimited or $3,000 in spend on Ink Cash or Plus;

  • a top-tier Category 7 property costs 30,000 points per night, or $20,000 on Freedom Unlimited or $6,000 on Ink Cash or Plus.

We can break down Hilton’s award chart in the same way:

  • a bottom-tier Hilton property costs 5,000 points per night, or $833 in grocery store or gas station spend on an American Express Ascend card;

  • a mid-tier Hilton property costs 50,000 points per night, or $8,333 in bonused spend;

  • and a top-tier Hilton property costs 95,000 points, or $15,833 in bonused spend.

(Note that since grocery store spend costs about 50% more than in-person unbonused spend, the out-of-pocket costs for the same spot on the Hilton award chart end up being somewhat more expensive than Hyatt).

This is what I mean by a “competitive” program: Hyatt properties won’t always be cheaper than Hilton properties in a specific city or on particular dates, but having access to both programs gives you a better chance of paying as little as possible for the trips you want to take than relying solely on one program or the other and being stuck paying cash when it fails you.

Likewise, having credit cards that are useful for unbonused spend, office supply store spend, and grocery store spend means you’re able to take advantage of more promotions and opportunities, instead of relying on a single merchant or bonus category.

That brings me to today’s topic.

How bad would a Hyatt devaluation need to be to make the program uncompetitive?

I think it’s useful to think through questions like this ahead of time, so you don’t fall into the trap of motivated reasoning once a devaluation actually happens (something credit card affiliate bloggers are especially vulnerable to, but a risk for anyone).

You can imagine multiple forms a Hyatt devaluation might take:

  • Hyatt could change or end their transfer relationship with Chase. This is the least likely situation in the short term since Chase loudly promotes its uniform transfer ratio, but there’s no natural law that says Hyatt will remain a Chase partner forever, or that Chase will never revamp the Ultimate Rewards program.

  • Hyatt could introduce higher award categories and steadily shift properties upwards. Hyatt told Pizza in Motion that they have “no plans for any Hyatt-branded hotels or resorts to move to a new Category 8,” but all that wording requires is that the Park Hyatt sign come down and be replaced with a Small Luxury Hotels of the World or Joie de Vivre sign. No Hyatt branding? No problem.

  • Hyatt could restrict award space or introduce dynamic pricing. This is in many ways the most likely or even inevitable form a devaluation will take, since Hilton has had dynamic pricing for years and Marriott will launch it in 2019. 30,000-point properties might limit their availability to a few low-season weeks per year, while mid-tier properties might cost a few thousand points less for part of the year and tens of thousands of points more when people actually want to visit.

A change to the relationship with Chase would be the most catastrophic from a travel hacker’s point of view. Changing the transfer ratio or perhaps capping annual points transfers would make Hyatt a truly niche program, still worthwhile under specific conditions but uncompetitive with Hilton or even Radisson Rewards, which has US Bank co-branded credit cards that still earn 5 points per dollar on unbonused spend and a much larger footprint than Hyatt.

Meanwhile, category inflation isn’t the end of the world as long as the Chase relationship remains the same, although eventually you might see your favorite properties inflated out of eligibility for annual credit card free night certificates (currently good at Category 1-4 properties).

Conclusion

There should be no question in your mind that something will eventually give in the World of Hyatt program, and this post isn’t about predicting whether or not it will happen — it definitely will. There has to be enough money to go around between Chase, Hyatt, and Hyatt’s owner-operators, and a fixed credit card earning ratio and fixed award chart are simply incompatible with that. I don’t know which piece will buckle first under the pressure, but the transmission mechanism between Chase Ultimate Rewards, World of Hyatt, and award availability and price will change because it has to change.

The point of this post is to encourage you to think in advance about what kinds of changes would make you walk away from the program, or at least radically reduce your dependence on it. How bad would the transfer ratio have to become? How hard would it have to be to find award availability? How low would your typical redemption value have to fall?

If you don’t think about it in advance, then when the devaluations do start to roll in and you’re bombarded with affiliate bloggers explaining how “it’s not really that bad,” you’re not going to be ready to tell if they’re right or not.

Gaming out my Waldorf Astoria stay

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As I wrote last month, this January I’m heading to Maui for what I’m expecting to be an unusually-for-me expensive vacation, so I’ve spent some time in the past few weeks gaming out what the options are to save money on the trip without annoying my partner too much along the way.

Shorter car rental

Since we plan to drive around and explore Maui, I had initially planned to rent a car at the airport and drive to the Grand Wailea. I quickly realized this made no sense: not only would I pay for 5 days of car rental, but I’d also pay for five days of valet parking, since the Grand Wailea doesn’t have a self-park option.

By taking a cab or shuttle from and to the airport, I’ll save on both daily rental costs and daily valet parking: a roundtrip shuttle for two from the Grand Wailea’s preferred vendor costs just $99, and I may be able to shop around to bring that down even lower.

Amex Offer of $70 off $350

I was targeted for the current Amex Offer of $70 off $350 spent at “Waldorf Astoria Hotels & Resorts in the US, Amsterdam, Berlin, Edinburgh, and Paris; and, Conrad Hotels & Resorts in the US.” While such promotions sometimes exclude Hawaii, this one doesn’t seem to, so I’ll use my Hilton Ascend American Express card to check in and put the first $350 of room charges on that card.

As I wrote in my original post, the Grand Wailea currently claims to give a $15 per person daily in-room dining credit as their Diamond breakfast benefit. Readers quickly pointed out in the comments that with a $7 delivery charge and 20% fixed gratuity, that works out to about $19 in actual food if you’re trying to spend the exact amount of the credit.

Instead of trying to game the room service menu to spend exactly $19 per day, I figure we’ll just order what we want and let the excess count towards the $350 threshold for my Amex Offer.

Hilton Honors American Express Aspire Card Referral

Thanks to American Express’s “universal referral” system, I can refer my partner to an Aspire card despite not having one myself (you can find my universal referral links on the Support the Site! page). I’ve written about it before, but it’s worth spelling out again just how good this deal is:

  • I receive 20,000 Hilton Honors points for referring my partner;

  • My partner receives 150,000 Hilton Honors points after spending $4,000 within 3 months;

  • My partner gets a $250 airline fee credit in 2018 and another $250 airline fee credit in 2019;

  • We already have an eligible stay planned where we’ll be able to use the $250 Hilton Resort statement credit (a cardmember year, not calendar year, benefit);

  • And she’ll get an unlimited Priority Pass membership that allows up to 2 guests, so if I ask nicely she might take me with her into lounges when we travel.

182,000 Hilton Honors points (after earning 3 points per dollar on $4,000 in spend) are over half the points cost of our stay at the Grand Wailea, which I jokingly valued at $8,500 but realistically value at around $2,000. Valuing the airline and resort statement credits at half of face value, this works out to roughly $1,375.

I don’t like paying $450 annual fees. I’ve never paid a $450 annual fee. But this is a no-brainer for us since we already have a stay at an eligible resort booked.

Conclusion

There is one interesting question you might have after reading this: my Ascend card will get a 20% discount on exactly $350 in spend, while my partner’s Aspire card will get a 100% discount on up to $250 in spend, so which card should the first Grand Wailea room charges go on, and which card should be the backup?

In part, the answer is that we don’t have to decide until we know the final room charge. If it’s less than $350, we’ll put the entire charge on the Aspire card and get $250 back. If it’s more than $600, we’ll put $350 on the Ascend and the remainder on the Aspire, maximizing both opportunities (and the higher Hilton earning rate on the Aspire).

But for final charges between $350 and $600, what’s the right order to place the charges in? I think my preference is to put $350 on the Ascend and receive $70 back, then put the remainder on the Aspire, because the remaining cardmember year Aspire credit will remain available for later use.

But there’s a good argument, an argument I might even agree with depending on the day, that the Aspire resort credit is available at such a limited footprint of properties that maximizing that credit when we do have the opportunity is a much higher priority than triggering a piddling 20% discount, the kind of discount I can beat 365 days a year through manufactured spend.

Sound off in the comments if you feel strongly about it one way or the other.