A new Chinese 6% VAT tax on hotel stays went into effect today. Hilton’s website now reflects the VAT, as it should. However their award searches are showing not just the number of points for the award but also this new VAT based on the payment Hilton HHonors makes to the hotel.
This is an error, of course, since Hilton HHonors awards include tax. But it tells us a lot of the economics of the program.
Reader Peter P. went through and documented these internal reimbursement rates and shared his findings.
- When a hotel isn’t full, it’s reimbursement rate is fixed regardless of prevailing room rate.
- The reimbursement rate appears to be the same for hotels in the same brand regardless of HHonors redemption category. So when Hilton charges you more it isn’t because they’re paying the hotel more.
- For premium room awards, HHonors appears to reimburse the hotel half the cancellable rate for the room. (So while you’re getting about 4/10ths of a point based on room rate usually, hotels are only getting paid about half that.)
- Hotels receive their full nightly reimbursement on 5th night free awards (the fifth night if free for elite members, but the program still pays the hotel for all 5 nights).
Here are the reimbursement rates Peter found for HHonors hotels in China:
- Waldorf Astoria: CNY 306.80 to 312.10 (around USD 48)
- Conrad: CNY 248.90 to 249.70 (around USD 38.50)
- Hilton: CNY 182.70 to 186.70 (around USD 29)
- DoubleTree: CNY 122.70 to 124.40 (around USD 19)
- Hilton Garden Inn: CNY 92 to 92.10 (around USD 14)
Here’s an example where it’s the brand and not the reward category or price that determines the hotel’s reimbursement.
The category 1 DoubleTree Wuhu gets CNY122.70++ ($18.95) for your 5000 point award night.
The category 6 DoubleTree Sanya gets CNY124.43++ ($19.22) for your 40,000 point award night.
Let’s take a look at another example where it’s the brand not the category or room price that determines the hotel’s reimbusement.
The category 2 Hilton Urumqi is getting CNY182.76 ($28.23) per night plus service and tax.
The category 7 Hilton Sanya is getting CNY186.65 ($28.83) per night plus service and tax.
Even though you’re paying 40,000 more points per night (50,000 vs. 10,000) for the Hilton Sanya compared to the Hilton Urumqi, on non-sold out nights those two hotels are getting paid the same amount for your stay.
Meanwhile if you booked a paid premium room at the Hilton Sanya, it might cost you CNY1380 ($213.70).
If you booked a premium room award for that room, Hilton Sanya would get CNY690 — half the paid rate for the same room.
These numbers, of course, what Hilton is showing on its website with the change to Chinese VAT. They’re telling. In general, Hilton HHonors is paying much less for a standard award night than Starwood or Hyatt.
Back in the day when IC was Priority Club, the Intercontinental Grand Stanford Hong Kong received $490 HKD for an award night on points — this Ambassador did not get a B-Fast with it, of course.
Every once in a while I’ve had an HHonors award stay post a folio to my HHonors account online with the reimbursement amount displayed. It has generally ranged $25-40 when that has happened.
Shouldn’t be surprised about the low Hilton payout vis-à-vis SPG/Hyatt, right? Fewer *guaranteed* elite benefits, much higher mix of budget hotels, etc.
Unlike what some idiot might suggest, Hilton’s relatively low reimbursement rates to hotels for award stays is simple economic 101: supply/demand/price. For a constant demand, when supply is limited, price has to be high for a company make a profit. With 8x more Hilton hotels than Hyatt hotels or 4x more than SPG hotels around the world, the “supply” of Hilton properties is never limited compared to the much smaller chains, so that they can afford to offer reasonably-low reimbursement rates and everyone still makes money.
Proof? The fact that the reimbursement rate for a category 2 hotel like Hilton Urumqi and category 7 like Hilton Sanya Yalong Bay Resort & Spa is the same means that the costs of awards are distributed across all hotels in a portfolio, enabling costs to be limited by spreading them around.
BTW, I spent 4 nights at Hilton Sanya Yalong Bay in a SUITE upgrade and it is an absolutely exquisite resort property in China’s southernmost province of Hainan in South China Sea, where I intend to vacation again when time permits. In fact, Sanya has been dubbed China’s answer to Hawai’i, which is almost exactly the same latitude. This also shows how stupid is the notion that elite perks or hotel luxury level has anything to do with Hilton’s reimbursement rates to hotels for awards stay…
Having backed my claim that I never pull any punches when it comes to defending HHonors, the most mature and stable and best run loyalty program out there, I must say…
….G’day!
This is where DCS shows his lack of real-world acumen – case closed.
There is no “shortage” of SPG or Hyatt properties compared to Hilton, that’s just stupid.
Weighted-average reimbursement price for Hilton is so low as a high % of the portfolio is budget/basic – not the same for SPG/Hyatt. Higher quality properties (and more/better benefits to folks staying on points) = higher reimbursement rates.
Stick to the lab, son.
Hey, idiot, you’re getting demonstrably unhinged. Just provide an economic model, a data point, an internal hotel document, a survey, anything to factually substantiate you increasingly mindless claims or I suggest you stay out of here for a while to get some fresh. You do not seem mentally well or coherent to me. This level of single-minded obsession with another poster cannot possibly be healthy.
GOODBYE!
Let’s not get inhinged in the comments, please don’t get personal.
Here’s an easy mic drop:
http://www.statista.com/statistics/297768/average-daily-rate-in-hilton-worldwide-hotels/
http://www.businesstravelnews.com/Hotel-News/Starwood-Hotels-and-Resorts-reported-an-increased-occupancy-rate-of-68-1-percent-during-the-fourth-quarter
ADR for Starwood ~25% higher than Hilton. Add in better elite benefits (things like “guarantees” actually do cost money, even if that’s tough for some people to understand), and it’s not surprising the Starwood/Hyatt reimbursement rates are higher.
Back to your lab now.
@Gary — It’s been highly personal for this poster. He’s followed me around, not just here but also at OMAAT, convinced that I refuse or am unable to defend HHonors [because it is indefensible? I dunno], which you know it simply silly. I went a few weeks ignoring him but the more I did, the more, well, he got unhinged.
I will permanently ignore him henceforth, so I hope you’ll gently remind him when he throws around puerile insults to just chill.
Thanks.
I have nothing against HH – it seems like a perfectly fine (but mediocre) program. Kind of like Marriott, IHG, etc. Bigger footprints = lesser benefits, that’s not rocket science.
DCS, you’ve managed to create an absolutely terrible reputation for yourself across the different blogs with your never-ending insults and dogmatic, not-grounded-in-reality discussion (i.e., the concept of a “guarantee”). I laughed about it from afar until you went on the SPG warpath, and then I (and many others) called you out for it, rightfully so.
Shape up and you’ll probably feel less heat coming your way.
@UA-NYC — Please go away. My reputation in these blogs is mine to mess up and not yours to worry about. If I had to guess, I’d say that many, if not most, have found value in my presenting a different view than that which bloggers offer.
If I had to take a second guess, I would say that you are an SPG plant, sent to detract that guy who keeps saying all those terrible things about the best hotel loyalty program in history. If that’s the case, then SPG could have sent a better (read: smarter) advocate or surrogate.
It is one thing to defend one’s program and stand one’s ground. It is another to launch puerile name-calling and insults, which I will unfortunately return in kind every time they are aimed at me, because they soil of everyone.
GOODBYE!
As if sane person wants to go to Sanya, ….I mean Sauna, China.
They should give you triple points on award stays just for going there.
Take refuge in the Pizza Hut or at Starbucks.
It does make it easier to understand why some Hilton properties play games with award availability.
@losingtrader — Your comment has been registered, but just out of curiosity, have you ever been anywhere near Sanya?
Inquiring minds wanna know!
Everyone calm the hell down. Hilton and Marriott are great for General availability in a given market, but something beyond the norm is something you’ll pay for (better hotel, nicer room). SPG/Hyatt is better for the average stay and bene’s in a market. It is what it is. (I’m HH Diamond and SPG Plat, Marriott Gold, Hyatt Plat, IHG nothing).
Fully agreed – behemoths like MR and HH are good rewards programs, with more limited defined benefits. Mid-size options like SPG and HGP are great loyalty programs with better benefits. Not too difficult for most to figure out.
@David Gonzalez — Just making a claim does not make it true. Yours are claims travel bloggers kept making, except that when challenged to prove them, the response was invariably something like “it is because it is” or “it is because I say so.” The past tense is on purpose because in the face of evidence, like SPG going belly up, most have considerably toned their claim, and so will you…
For your edification, most if, not all, reputable surveys of customer satisfaction rank Hilton and Marriott tops, Hyatt somewhere in the middle and SPG last or next to dead last.
In fact, one should altogether stop talking about SPG. It went belly up precisely because, like its mother company, it was structurally flawed. If Marriott is weak and SPG is strong and Marriott is about to swallow SPG, that would be reverse Darwinism or survival of the weakest, would it not? Well, there is no such thing. SPG is out because it was based on a flawed model.
…and do not even get me started about Hyatt GP, which has floundered so much it is seldom the topic of blog posts in the travel blogosphere where it used to dominate. As a loyalty program, HGP has revealed itself as, at best, a work in progress, or, at worst, a joke.
Just making them is the easy part…proving them is a purple horse…
G’day.
It’s clear silly things like “economics” and “business” are less the forte for some than others
And some have no forte at all…just a YUGE void between the ears…
What did we discuss yesterday about getting personal?
Gary, you have a mega-troll frequenting your blogs who says demonstrably false things such as “Starwood being fundamentally flawed”, when in fact it was a highly profitable company with a premium customer base, and thus a natural target for larger, budget-heavy chains. A la Trump, such phrases may be catchy, but lack basis in fact.
As I operate more in the “real business world”, and actually understand how M&A activity works, I’ll continue to point out such illogical claims.
The guy is a SPG plant. I am sure of it now. The obsession is nothing short of that of rabid dog let loose on a prey. But in my opinion, SPG needs to recall this attack dog and send smarter one. A new one would quickly realize that SPG is dead and look for other bones to feed on…
@DCS You realize you’re making personal attacks as well, right?
@Gary — Yes, I do realize that but that it is the language that the troll speaks, which is unfortunate since it is tough to throw mud without muddying oneself. This makes a strong case for implementing the “ignore” option as found on many discussion boards and should not be too hard to implement.
Cut it out.
You wish is mine as well and I hope it is his too…
G’day!
BTW, I am off to Singapore and then Hong Kong in a couple of days and will be glad to leave the stage for anyone who wishes to have the soapbox and knock themselves out to jump on it …
I’ve done 600 Starwood nights the last 6 years. William the Starwood Lurker can attest to me being a “real” person. As can my SPG Ambassador. As can anyone on FT where I’m an Evangelist. Suggesting I’m a plant is a joke – nice try at a misdirect.
I also do plenty of MR stays due to Gold via UA (some clients require it), but I’m not out there advocating for MR as it’s a mediocre program (about the same as HH as far as I can tell). Lack of *guarantees* makes it a non-starter, though the future MR I suspect will still be better from a loyalty benefit POV compared to HH.
Looking forward to some peace & quiet (and productive discussion) around here the next few days! Keep the good content coming Gary.
@Gary — You simply have got to be even-handed here and ask this SPG plant or whoever he is to also “cut it out”.
SPG IS DEAD!!!!
The psychopathology is clear: it is obsessive compulsive disorder and it has gotten out of hand!
Dude – you seriously need to get a grip
Once again a futile attempt to pull me into the hotel business. Listen, if I wanted to be in the hotel/motel business, I’d build my own motel 6 or buy a reasonable imitation RV to have a traveling room.
Why companies in America want their customers to know their underlying costs is beyond me.
I don’t write on here well you know, in order to type these words I had to purchase a blah blah device connected through a blah blah device on a network worth 10 BILLLION blah blah drachmas and to pay you I’ve had to indirectly employ millions of tech workers not paying taxes ….. ( just listen to the droning sound of Charlie Browns teacher fade off into the sunset)
Who cares? You want to let me sleep somewhere .. fine. You don’t but you want my plastic. Ok do I at least get some grub.
Yes and you can keep the snide comments and papers flung under my door to yourself.
@DCS: Yes, I’ve been to Sanya. Maybe I was just unlucky: It was the hottest,most humid place I’ve ever been, the Sheraton was not holding the Miss World competition during that time, and they wanted $120 for 30 minutes on a jet ski.
Three strikes.