This whole situation mimics a very typical FMCG scenario - when you run a promo too often, customers get used to it and the promo price becomes the benchmark. Competitors follow, creating a price war that runs margins into the ground. Then at some point, one of the players says "enough" and cuts on promos drastically. Sooner or later, despite growing market share, others follow in order to (re)create healthier margins for themselves.
Now, I'm not saying that the two industries are entirely comparable, but when I look at my own example, with the year-round promos, I amass enough points to make every 4th or 5th night a free one, easily losing Starwood 20-25% of revenue they would otherwise have had from me, and I'm only a lowly Gold - I can only imagine what the percentage is for heavy corporate travellers. Are such percentages workable for the hotel industry? I won't pretend to know the answer, but I can see why a healthier global economy that we're currently enjoying would disincentivise promos. After all, the original idea behind hotel loyalty programmes was to offer systemwide preferential treatment (such as priority check-in and late checkout) - not free nights.
Anyway, since promo-sensitive customers are so eager to jump ship as soon as the carrot is gone, the problem can be fixed by simply restarting good promos if revenue drops too much
