Hotels Want You to Redeem Your Points Because They Make Big Money on Award Guests

At Marriott and Hyatt the payment a hotel gets for your award night is not linked to the number of points you pay.

Most hotels actually want your award business. If you’re taking up a room that would otherwise go empty, it’s pure marginal revenue. And if you’re taking up a room on a night they’re full they get a large payment – generally equal to their average rate for the year, though not as high as the highest rate they might charge on that night.

You should feel good about being an honored guest when redeeming points. You may not have been loyal to the particular hotel, but your stay is a reward for revenue to the chain and the hotel is well-compensated for it.

In fact with Hyatt’s category changes going into effect March 18 the Park Hyatt Hadahaa Maldives which is going up from a category 6 to category 7 hotel (25,000 points per night to 30,000) sent out a blast email hurry book now to save 5000 points.

We wish to share that effective 18 March 2019, 11:01 p.m. CT, Park Hyatt Maldives Hadahaa will be a category 7 property within Hyatt. This means point redemption will increase from 25,000 to 30,000 per standard Park Villa per night for bookings made.

Bookings made before 18 March 2019, 11:01 p.m. CT, your reservations will still follow the current award chart. Reservations made on or after 18 March 2019, 11:01 p.m. CT, will follow the new award chart.

Save 5,000 points and take this opportunity to secure your Maldives holiday
with us and book now


Pathway to Overwater Villas the Park Hyatt Maldives

The Park Hyatt Maldives does a lot of redemption business. People often want to spend their points at the most special properties in the chain, not at limited-service hotels in the Midwest. To be sure those have their place, and get redemptions, but the Park Hyatt in the Maldives relies on those redemptions to fill rooms clearly.

Some hotels will even argue their award category down in hopes of filling rooms with incremental guests, or because they don’t want to have the same points price of notionally ‘better’ properties within the chain in the same area. They want their fair share of award guests.

Not all hotels take this approach of course. The Andaz Maui seems to do its best to avoid award guests and elite benefits. The Andaz Maui gets a disproportionate number of redemptions, at least they did until they started playing games with ‘standard’ room award inventory.


View at the Andaz Maui

By the way for a standard room at Hilton the rate the hotel gets isn’t linked to points price either but reimbursement rates aren’t as favorable to hotels.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I got this impression when I stayed at the Conrad Maldives over NYE a few years back. The resort was packed. After talking to several guest I found out almost all had used points. I was surprised because I assumed that during a major holiday, and the peak season, they would be very stingy with point redemption. Then I realize if it was true that they get a high percentage of their going rate for redemptions when the hotel was at/near capacity they would definitely want more points redemptions. Over NYE the rooms were going for ~$2,000 at night. I’m not sure if they would really get their asking rate or some behind the scenes rate but it was interesting to consider. I’ll admit I do feel less entitled, or maybe more forgiving, when I redeem points than when I’m paying.

  2. How many people out there are stupid AND rich enough at the same time to waste that kind of cash on a hotel?

  3. If I’m staying for free (on points), I’m a heck of a lot more willing to spend at the hotel as my budget isn’t being spent on paying for the rooms. I’m sure they’ve done it, but I wonder if there is a correlation on spending whilst on a free night.

  4. Very interesting about that blast from the Park Hyatt. Smart management. More hotels ought to do that. When hotels are at low occupancy, they love to get the business.

    However trying to generalize that is kind of questionable unless you know the % of reward stays that fall under the ADR reimbursement. I’m sure most reward stays fall under the small flat rate reimbursement, not the ADR. It cannot be high or the loyalty programs would lose their collective shirt.

    One thing I know is that Hyatt does pay hotels more in base compensation if they are a higher category hotel, much more. Unless things have changed Hilton does not. It is a flat rate. One for all Hamptons, one for all HGIs, etc. The hotel’s brand, not HHonors category, controls the base reward compensation.

    Another reason why hotels like to get rewards stays is because hotels still make money because of ancillary spending. A large % of free night guests actually stay additional nights at paid rates.

  5. I’m confused by your analysis. It doesn’t explain the Andaz Maui’s behavior. And that was the Gold Passport VP’s favorite property for redeeming points at too, which makes it even weirder.

  6. Yes and no. It all depends how full a hotel is on a given night. As I understand, with most Marriott brands, that bogey used to be 96% occupancy, but who knows what it is now with the Marriott/SPG merger disaster.

    So if a hotel was 96%+ occupied, all award nights were paid by Marriott at the “rack rate”, or highest rate at the hotel for that night. However, if occupancy was below 96%, the hotel only gets paid the “Friends and Family” or employee rate, which is around $35, depending on the brand. That barely, if at all, covers the marginal cleaning, loyalty perks, and overhead expenses associated with the guest.

    Hotels (which almost always are not actually owned by Marriott, Hilton, or whoever the brand is) love award nights if they expect to be totally full, but hate them if they are not. That’s also why the hotel brands blackout certain dates, so they can avoid paying rack rate reimbursements.

    Best advice I can give travelers: book as early as possible to snag the date you want at the lowest possible points. If your date isn’t available, or is blacked out, call the local hotel manager (at the property) directly and sometimes they are able to game the system to allow you to use an award on a particular night. They’re getting paid the top rate, so don’t mind helping you with that.

  7. To the questions above about the Andaz Maui, Hyatt is one of the only hotel brands that owns almost all of its hotels directly. (The Hyatts, not the Hyatt Places).

    So Hyatt doesn’t really want you to ever redeem award points on an expensive Hyatt property where they expect they could otherwise sell the room. That’s the difference.

  8. @Too Much Flying

    But isn’t it a win win for the hotels?

    Scenario 1: The hotel isn’t too busy and lets just say they are at 40% occupancy with cash-paid guests. If they get another 20% from award-guests then what’s the problem?

    Scenario 2: The hotel is jam-packed and close to full, in this scenario the hotel is getting reimbursed at rack rate so what do they care if the guest is paying them directly or the guest is using points and Hyatt corp is reimbursing them the cash

    If Hyatt owns the Andaz Maui directly then wouldn’t it just be one unit of Hyatt shifting funds to another unit of Hyatt?

    I guess the hotel may not be enthusiastic about scenario 1 if they believe the incremental costs of the guests is more than the rate they are getting reimbursed at…but other than that why do they care?

  9. @HoKo:

    Scenario #1, those marginal guests being reimbursed at $35/night actually are not profitable. If you are 20% occupied, you can tell housekeeping to make due with only 2 staff on a day, check-in desk with 1 person, restaurant with 1 person, etc.

    But double the occupancy to 40% and now you are probably doubling your staffing and you are cleaning more rooms, replacing toiletries, doing laundry, etc. and that won’t be paid for with the Friends and Family Rate. it just won’t. People are very expensive.

    Scenario #2: If a hotel is 100% full, you are correct. But frequently, they are 96%, 97%, even 99%, plus you have to account for no-shows. In that case, you love to have lots of award stays, to make sure you hit the holy grail of 100% occupancy, exactly.

    Scenario #3 re Hyatt: Points do not have the same value as cash, regardless of whatever value Hyatt books them on their balance sheet. You ALWAYS prefer a cash paying customer over a points paying one, otherwise your rewards program is completely messed up.

  10. This is a fascinating topic. My comment/question concerns how a pandemic might affect the rewards equation – is it now at a point where hotels will take cash or points with open arms? Lately for example, IHG has been offering more aggressive point sale promotions with higher purchase limits. In practice, I have been receiving unusually good treatment, including instant 2 category suite upgrades via top tier elite status on rock bottom reward pricing. High elite status often would entail more expense for a hotel, what with all the perks and things. The general manager would apply immediate upgrades with early-checkin and invite me to call/email whenever I need to do that again. I’ve been experiencing this at multiple reputable hotels, across multiple chains.

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