SMK77

In the interest of keeping Diamond the terrific status it is, they should move to a revenue based status. As you would get all your benefits without Diamond, I am kind of surprised that you are so hung up on the card...

antonius66

Revenue based status is a terrible idea. Adding revenue as an ALTERNATE qualification tier is a GREAT idea, as I have said many times. Making a $ requirement just drives people away to the cheapest alternative. UA was cited as an example earlier regarding loyalty...well, UA has succeeded in driving me away from them after this year. No longer will I fly UA at all costs, because I have to spend an average of 10 cents per mile to keep my status. That is not loyalty, that is idiocy. I would have to basically spend $500 per round trip ticket from LAX-NYC and do that 5 times to be silver or 10 to be gold. If you are spending 500 to fly to NYC from LAX regularly, you are a sucker. Now, I know there are the arguments of that being a standard fare for business, short notice, etc. Fine. I guess if all you want in your "loyalty" scheme are OPM travelers who usually don't even get a say on where/when/what airlines they go on, great. Sounds like a great way to squeeze the most money out of a captive audience. I have news for you though...when those people's OPM dries up...they will NOT keep flying you at 10 cents a mile. Normal people don't spend $500 to fly across the US. The same goes for hotels, which leads me to the Hyatt specific point.

Now, the same holds true for Hyatt. If you think I am not valuable because I don't stay 50 nights a year in the PH SYD, you are deluded. There is a reason there are about 40 PHs and hundreds of other "low brow" properties. Margin is the key, not just spend. Hotel nights are a perishable good...once a room goes empty one night, it is a lost good that can never be sold. Selling an otherwise empty room is profitable, period. I love all the high dollar attitudes around here, most of which are earned on OPM. Having other people be Diamond isn't going to diminish your benefits, so relax. This idea that if more people are Diamond, then no one will ever get a suite upgrade, etc, is ridiculous. They are hardly giving away the status and if you think the number of people who are doing 25 one night cheap mattress runs just for the stay credits is substantial, you are an idiot. Also, for those FEW people who do, they are obviously not staying enough on normal stays to impact anyone else. Revenue REQUIREMENTS are TERRIBLE. I have spent $10k at Hyatt in some years and not made Diamond. Now, THAT is absurd to me. Giving someone Diamond who spends $10k a year (for example) is a good idea in my opinion, because anyone who spends an average of $200 a night times 50 nights, has MORE than earned their keep. REQUIRING someone to spend $10k a night to get Diamond is moronic.

SMK77

antonius66: CASM, cost per available seat mile for United in the first quarter of 2013 was at 14.9 cents. United breaks even when they make on average 14.9 cents and you are not willing to even make 10cpm? I don't think United is missing you much.

antonius66

Well, if UA is always selling seats at 15cpm, then I would never be able to buy tickets for things like LAS-ORD for $150, or IAD for $200. Once the seat is left empty, it is $ lost forever. Same with hotels. We cannot all, or more importantly, WOULD NOT, pay $700 to fly cross country or pay $3000 a night at a suite at the PH Zurich. Guess the rest of us should just pack it in and stay home since we are worthless to businesses everywhere. The plebes like us are just stealing valuable hotel rooms and airline seats from the REAL customers who are apparently fighting for such limited space to throw their money at companies like UA and Hyatt.

OsakaWino

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OsakaWino

If you do not include calculations for profit margins for unsold seats/rooms, both well above 90%, then your calculations are meaningless.

In the real world, "dirtbag elites" can be very valuable to an airline or hotel chain; sorry that you might think we are soiling your space; maybe a less egalitarian chain would suit you better.

SMK77

Hyatt and United can make all of their guests Elites if that makes you happy. Defeats the purpose of maximizing profits and returns but that seems to be beyond comprehension for some.

Unsold rooms/seats are sold over price not over perks. And people who demand both should think hard again why that can't work. It's wrong the same way you derive your 90% margin logic. If that logic was right, why doesn't do Hyatt only do last minute sales? The whole business has then a 90% margin? Doesn't need much thinking that's not working.

TrojanHorse

I can legitimately use my corporate code for leisure travel

Next answer

I think FT shows that most of us (lets use > 50% of business travelers) are not limited to the hotel that they must stay at for business travel. I do not see that as an accurate statement at all. While you may say where's my data, I will retort with where is your data that the biz traveler has no choice where to stay?



Here we go again with margin

Avg spend is meaning less
It's the margin you need to look at

in your example, the Gross margin is 5%
In a $50 room its reasonable that the property could make $5 and have a 10% margin and would be in a better situation.

Since I have no idea how this is calculated I have a question or two

Is that 14.9cpm what it cost to sell every seat that flew for the quarter or was it what it cost to fly every pax who paid or flew for the qtr?

UA breaks even you say 14.9 cpm but does this include freight and other services such as fees where they clearly make money.

If 100% of the seats are sold, does it still cost 14.9 cpm to break even?

So if they only sold tickets at the break even price or higher, do you think they could break even on every flight?

JetAway

UA is a huge airline. Hyatt, compared to other chains, has a relatively small footprint and many 80s-era properties. Adding a revenue requirement to its top elite tier would only make it less competitive. Marriott or Hilton, on the other hand, could probably get away with it.

SMK77

It's all about margin. At the end of the day, it's the overall margin. Doesn't help that my margin for one room is 10% while for the other million rooms sold it's 1%.


You are correct:

This is the total cost for United to offer all the seats that were up in the air in the first quarter. United would need to fill 100% of the seats and make 14.9 cpm to break even.

Keep in mind that this is the average for every flight mile offered in totality. This cost is just an indicator and goes across all aircrafts, all flight lengths an and all classes of service.

Hence, it's not a good measure to calculate prices per flight but is only giving an overall picture. Zooming into the actual flight it is clear that the cost in First Class will be higher than in Economy, the cost for a mile offered on a long haul flight will be less than a short-haul flight etc.

In the big picture, United is saying to its Premier customers: We give you status if you make us at least 10cpm which is again, the average of all the flights the Premier customer has taken. On average, United still has to make 14.9cpm to break even. If all Premier customer just hit the 10cpm, United need the other customers to pay more to average out at 14.9 for break even.

TrojanHorse

So aren't we saying the same thing? It's Margin (whether its Gross or profit, I don't know) that runs the show. So I'm saying, the price you pay should not be the qualifier for elite status when you can have a bigger margin on a much lower price. You can also have the same or greater profit on a much lower price.


The one thing not counted here is fees, Fees are what 95% profit? What is the actual cost of a fee? Minutes of CSR time maybe? Baggage may have a more tangible number per pound of bags = $X of cost.

So in that 14.0 cents per mile to break even, is that to assume there is no fee or other ancillary income?

SMK77

Almost: Your profit consists out of two components: margin x turnover.

My margin for 25,000 USD turnover is 10%, hence Hyatt is making 2,500 USD.

The margin for our 3,000 USD turnover elite would have to be more than 85% to beat that. Mission impossible.

And I would still think that the overall margin for a customer buying 400 USD rooms at Park Hyatts is better than at a Hyatt Place where customers spend 100 USD.

Profit or margin doesn't matter: 14 Cents is total cost and now every cent of income is equal: whether it comes from tickets, surcharges or ancillary income: All revenue that United makes has to be greater than 14 Cents x offered seat miles to break even.

As United offers First, Business and Economy Class, the 'real' cost for an Economy seems to be at 10 cents and that's what they are asking for in terms of Elite qualification. The only tricky part with that is: if you fly other carriers and earn PQM, you don't add any money to your balance: Fly 50.000 miles on UA for 10 cents and 50.000 miles on SQ with no value, you are not making 1K.

FD1971

Comparing the operation of an airline utilising their own aircraft with a hotel chain licensing, franchising, but also managing hotels, manpower, loyalty programs etc. does not make any sense at all.

Being paid a fee to manage a Park Hyatt on behalf of a real estate company in comparison to getting a franchise fee plus fee offering a reservation systen like Hyatt Place is like comparing apples and oranges.

peteropny

We've received several RBPs on this thread. It's veered off considerably from the original subject and most are now personal commentary and attacks. As such, I'm locking this thread.

Peteropny - co-mod - Hyatt