Eugene

Those of us who are active participants in the Hilton forum on FT already know the upcoming changes in the HH program (including increased redemption levels for some awards).

For those who haven't heard it yet, here are some relevant threads:

http://www.flyertalk.com/forum/Forum57/HTML/006136.html
http://www.flyertalk.com/forum/Forum57/HTML/006104.html
http://www.flyertalk.com/forum/Forum57/HTML/006126.html
http://www.flyertalk.com/forum/Forum57/HTML/006086.html
http://www.flyertalk.com/forum/Forum57/HTML/006105.html

But what is even more universally important to all of us, is how these changes would affect other programs (e.g., SPG, Marriott, Hyatt, etc.) and their marketing strategies.

Jeffrey Diskin, Head of Hilton HHonors, has been quoted once as saying that "Loyalty programs... <<snip>... are only as cost-effective as our competitors let them be." (for more, see Hilton HHonors Worldwide: Loyalty Wars).

What are your thoughts? Any prognosis on what competition would do now?

LemonThrower

I have to assume that the other programs are going to receive an increase in customers. The question becomes whether they retain their current award levels or boost theirs as well?

SPG already pays its properties nearly full value, so they have less "need" to devalue their program.

KathyWdrf

What do you mean by "full value?"

My impression is that SPG pays their hotels a wholesale rate (similar to a cheap Priceline rate). This is FAR less than rack rate -- and less than even the most deeply discounted rates at spg.com.


Kathy

Xyzzy

FYI -- I was recently at a full service Marriott brand hotel in Canada on a reward stay (W14 I think). By mistake they posted the billback (to MR) amount to my account. They billed back about C$40/night. That's even lower than I'd expect for a Priceline stay -- particularly considering the hotel was sold out the nights I was there.

ozstamps

Not entirely sure why this thread is here, but suffice to say if Hilton can get away with increasing a popular award like ALON from 100,000 to 170,000 other Hotel chains will crank up award rates.

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Guava

This is an excellent topic of discussion. Thanks for bringing this into the Buzz forum. I have been following the news at the Hilton forum as much as I could but I think there is no better place to discuss about this than here because the implications of these changes are not only HHonors related but they could also have implications on other frequent guest and ever frequent traveller (airlines) programs.

Put it this way, I think this day [HHonors' huge hike in redemption cost] is inevitable. Others in the Hilton forum have argued that it's non-sense for HHonors to blame these increases on the impossibility of sustaining the current reward levels due to CNTU, INTU or you name it... The truth is while these Hilton promos were going on, competitors like Starwood and Marriott had their versions of special promtions such as Free Weekends by AMEX or stay 3 get 1 weekend free. While the 50,000 HH points promo is generous, the Free Weekends can be considered just as generous if not more. The problem is instead of having the 'debt' been banked and cumulated, Starwood or Marriott's promo had an expiry date, forcing the members to redeem them within the specified period. In a way, that's very smart because the debts aren't carried over and further increase the debt load of the company. Hilton's 50K promo is a different story. Judging from the reaction of FTers, it seems few actually spend the 50K immediately once it was earned. Rather, they are usually banked until a significant sum such as 100K where they can usually go for a 6 nights GLON or Aloha Spirit awards for 6 nights in Hawaii. To make the matter worse, these 50K promos have had several repetitions over the last 3 years, enough for a significant sum to be cumulated from relatively few stays. So the effective earning power of HHonors points really is not $1 for 10 pts. It's many times that ratio.

So just how 'flawed' is this frequent guest program? From the perspective of Hilton, I would have called the current program [and the up-coming] a failure, totally and completely. In my last 3 years with Hilton, Hilton has probably spent more money on me than I spent on them, no kiddings here. My reward stays outnumbered paid stays may be 3 to 1 and I still have plenty of points reserved unused from various sources. The program has failed in creating loyalty, rather, it has created lots of opporunity seekers (myself included). Thanks for advanced communication technologies and Internet and Flyertalk, the loyalty programs are behaving almost like efficient markets. Any 'arbitrage opportunities' will be seized and taken advantage of immediately yet the time to regain the balance is quite slow - to the detriment of the loyalty programs.

There are so many things I could have talked about but I guess that's all for now. It's not just the program itself, it's also the operations such as the antiquate system of paper certificates - costy, error-prone and inefficient, hotel standards clearly below competitors, poor hotel compliance overall in the chain, customer service inconsistent and many other things. The real losers here are not just Hilton but also Hilton's true loyal customers who really don't deserve to have their loyalties punished by these huge hikes for which Hilton can only blame its marketing and management departments and nobody else.

hhonorman

Originally posted by Guava:

It's not just the program itself, it's also the operations such as the antiquate system of paper certificates - costy, error-prone and inefficient, hotel standards clearly below competitors, poor hotel compliance overall in the chain, customer service inconsistent and many other things. The real losers here are not just Hilton but also Hilton's true loyal customers who really don't deserve to have their loyalties punished by these huge hikes for which Hilton can only blame its marketing and management departments and nobody else.
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Amen to that.

[This message has been edited by hhonorman (edited 12-13-2002).]

mwp2paris

One stay at the Troy, Northfield, MI Hilton will confirm everything above. I chose to stay here rather than a Marriott, Holiday Inn Select, Embassy Suites (next time I'm so there!), or other places because I'm "loyal" to Hilton. I figured with a "full service" Hilton, I'll get certain returns on my investment. Plus, every time I stay at a Hilton property, I'm building the bank for a future stay. Hilton is giving this to me...I'm earning this not screwing Hhonors simply because I want to.

Checking in at the Hilton on Sunday nite, 9:00ish.....no Suite upgrade (I'm Diamond), 1 free drink coupon and 2 breakfast coupons (I'm there 2 nites). While the Front Desk agent is checking me in and giving me these "perks" I'm overhearing a conversation at the next agent position, "our restaurant isn't really that good, you might want to go out". GREAT...

It gets better....

Go up to my outdated, stained carpeted, moldy, hairy (not mine) bathroomed room with a flat mattress and tiny TV. Put my stuff down, go back down to use my free drink coupon. Sorry, bar closes at 2:00 p.m. on Sundays...room service closes at 2:00 p.m. on Sundays...restaurant closes at 2:00 p.m. on Sundays...the other restaurant that leases space from us has closed early on a Sunday...and not much in this Suburb is open at this hour on a Sunday.

"Your in the suburbs, not downtown, and we just don't stay open late out here" is the comment from one of the front desk agents.

HELLO, even more reason to provide something for your paying customers other than a bag of pretzels and a diet coke from the vending machine.

UNBELIEVEABLE.

I chose Hilton because I thought the name carried a certain quality to the product. Not so. This facility is no better than a Hampton Inn, and actually worse, because at least at a Hampton Inn, you know what you are getting...unless they do it better than other Hamptons in which the are better than other Hiltons.

Don't flame me, I know...after 50+ stays a year at Hilton product facilities for the past upteen years, I should know better....what can I say, I still buy Powerball tickets honestly thinking this time is MY TIME!

I'm slowly switching to Hyatt...they comped me to Diamond Level, I've already collected a few bottles of wine from the Check-in amenity, and had one of the most attractive junior suites I've ever had at the Elliot Grand Hyatt in Seattle the last 2 nites...

Now if there was just a Hyatt Suites in Frederick, MD...

"Please kind sir, may I live here for a week or two?"

We'll see how it goes in 2003.

hhonorman

Hilton seems to be taking its best and most loyal customers, the Diamond VIPs, for granted. Don't they realize we have a choice where to spend our hard earned money? Lately it seems Hilton just doesn't get it. This has been difficult for me to accept because for so long I have been one of Hilton's biggest supporters. They used to be the ONLY chain I would even consider. Now, they make it hard to stay with them. Hilton needs to find the proper balance between giving out perks willy-nilly to every Tom, Dick, and Harry, and providing meaningful benefits for its most loyal customers. They seem like they are operating without perspective to what is important.

Eugene

That's a very good point!

And folks -- the purpose of this thread is to discuss the implications of recent HH program changes on the competition and the industry as a whole. Let's leave the discussion on Hilton itself in the Hilton forum, ok?

Eugene

Is this the beginning?

http://www.flyertalk.com/forum/Forum74/HTML/005764.html

dallasflyer

I have been HH diamond for two years. Already requalified for next year. Tried out SPG. A Sheraton in Denver and the Sheraton Grande Sukumvit in Bangkok. Upgrades both times this is the best. If only they had more locations. I thought that I would requalify for HH diamond first next year and then requalify for SPG Plat, I was comped last month. Now with all the changes at HH, I may start with SPG and then see about HH.

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dallasflyer

cactuspete

Depends upon whether Hilton loses any customers over this devaluation. If not, then other programs may follow suit.

But I think a well-placed Starwood promo in early 2003 would attract a lot of attention.

pinniped

Marriott went through their round of devaluations about a year ago. They probably aren't due for another one for a while...

Marriott and Hilton are the two that are probably most closely related as competitors. At least, they compete at all brand levels in almost all markets, whereas Hilton only competes with Starwood and Hyatt in certain markets at certain brand levels. I don't think Hilton has done anything here with their ALON/GLON redemption levels that would significantly alter the Marriott Rewards program. Marriott still requires more hotel spending/earning to be done for a week in Hawaii than Hilton does, even at the 175K (new ALON) level.

LemonThrower

With respect to Starwood, one advantage has been no capacity controls--if there is a room avaialble for dollars you can have it for points. I understood SPG's deal with its property owners was that SPG had to pay more for this arrangement. I assumed it was close to full value--perhaps this is incorrect. At any rate, it must be more than H property owners get.

Ultimately, M and SPG have two choices--keep their redemption levels at the current rate or devalue their points as well. I think in the interim both will keep to the status quo and try to develop H's former customers. Certainly they launched any promotions without the expectation of devaluation, so the fact that a competitor devalues is a golden opportunity to attract new customers who previously were unavailable.

Of course, you should take my ramblings with a grain of salt since I'm sitting on almost 200K Hilton Pesos.