How bad would a Hyatt devaluation need to be?
/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.
