IHG Hotels Earns Just 10% Of What Marriott, Hilton Make On Credit Cards

The CEO of IHG Hotels and Resorts admits that they make only 1/10th as much off of their Chase credit cards as Hilton and Marriott make on their co-brands.

  • Total fees form their card portfolio total $100 million a year

  • All of this used to get passed through to hotels. Now one third is kept at the corporate level. A recent loss by Hyatt in tax court explains how hotel program economics work and they’re very different from airlines. For the most part the chains don’t own the hotels, and the programs are very different than airline frequent flyer offerings.

  • The amount kept by the chain is almost all profit. And IHG wants Chase to pay more in a deal re-up. The current card agreement expires in 2025. Banks pay a lot more than you think for airline miles with 1.5 cents a low end and 2 cents far more common.

  • It’s natural to think that because IHG sells points super cheap to consumers, and IHG points are worth just about half a cent, that Chase must be paying less. But that isn’t how it works, because they aren’t just buying the redemption value of points they are buying access to customers.

To give you an indicator, two of our leading competitors [read: Marriott and Hilton] are probably earning more than 10 times on their P&L from the fees than the $33 million or so that we’re taking.


Intercontinental Tahiti

This would suggest that Marriott and Hilton are netting $300 – $400 million per year from their card deals, after money that goes to owners through their programs.

More cardmembers doing more spend should drive better card economics for IHG.

“It gives us an opportunity to renegotiate or rebid that agreement against the backdrop of a stronger brand portfolio, a higher spending customer base, a broader customer base, and a stronger loyalty plan,” Maalouf said.

“The two new credit cards we launched late last year have been performing very well this year, with 80% growth in uptake from customers and double-digit spending increases from the customer per card,” Maalouf said.


Intercontinental Boston

While it’s probably right that IHG can do better than they do today their portfolios won’t be worth what Hilton’s and Marriott’s are, let alone with American’s and Delta’s are.

The quality of the product matters. Who the customers are matters. While IHG has luxury hotel properties in their portfolio, they skew more midmarket. And their credit card just doesn’t earn very well for spending and that matters to customer adoption and use.

Even though IHG is large in its hotel footprint, it’s Hyatt that punches about its weight in card because the card delivers value and Hyatt’s loyalty program delivers value.

At the same time you can think of the revamp of IHG’s One Rewards program, in some ways bringing it closer to Hyatt (they now have the second best suite upgrade program behind Hyatt’s, and the second best breakfast benefit behind Hyatt’s), as a credit card play as much as a guest loyalty play.

The IHG program is now quite good. They have hotels everywhere, but not necessarily hotels you want to stay in everywhere. The cards, though, needs to be better integrated into the loyalty program as a driver of status and incremental benefits in order to be successful – and worth more.

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. @ Gary — iHG’s biggest credit card problem is the earn rate at IHG hotels (and otherwise). If they would bump the IHG earn rate up to 15x (about 7.5%), then it would be a no-brainer to use, but 10x is weak compared to what Hyatt offers at 4x (about 6-7%) plus elite nights, and is equivalent to using the CSR at 3x (about 5%). I always use my Hyatt card at Hyatt and never use my IHG card at IHG. That behavior should warrant IHG’s attention.

  2. They also don’t have the best breakfast benefit behind Hyatt. I think Marriott has the best benefit benefit because its accessible to mid-level elites (Platinums)

  3. Great overview of IHG
    The best breakfst benefit indeed goes to Hyatt
    However their quality and variety compared to years past in the US is shameful.at a number of their properties
    I order in from food delivery companies now as Hyatt quality has plummeted
    I’ve cut my business in half with Hyatt as a result
    No matter what property or brand offers breakfast complimentary quality is property specific at the end of the day
    IHGs kiss of death is allowing InterContinentals to charge resort and destination fees on
    on award nights.For that reason I’ve written them off except in some rare situations

  4. IHG has always been my main program and that’s not likely to change soon. I’m usually more of a mid market traveler, and I spend a lot of nights in places Hyatt has never even heard of, so my options are often an off-brand Marriott, a Hampton, a HIX or a Choice/Wyndham. HI/HIX is usually a better value, IMO, than the others.

    The IHG cards are worth carrying because of the FNC’s…but as somebody who isn’t gonna spend $40k in a year on a card, there’s no incentive to actually spend on their card other than when I stay at an IHG hotel. I can get a clearly better return on everything else with other cards, easily. When card points were elite qualifying, it could be worth it to try to get to Spire on a combination of hotel spend and card spend. But now that it has to be all one or all the other, it’s a sock drawer card except for IHG stays and/or if there’s a good Chase offer.

  5. Remember not so many years ago when IHG had a really fun loyalty program? Amazing saver rates of 5,000 points per night, sometimes at top level hotels, games where combining stays with credit card spend would get you nice bonuses, and a fair award chart? Oh, and a credit card that came with a free night in any hotel.
    They killed off the good stuff and didn’t replace it with something people want. Even a Hilton card will get you six points per dollar on groceries.

  6. IHG hotels in the USA are not at the level of IHG overseas, especially Asia/Pacific region. I have stayed at some very nice Intercontinentals in Asia.

    But when comes to roadside motels in the USA, IHG offers the nicest properties at better prices than Marriott or Hilton. IHG is very tough on corporate standards so HIE can be much nicer than Hampton Inns and Courtyard Inns. IHG’s new Avids are much nicer than Hilton’s Tru or Marriotts Moxy brand, at better prices as well.

    But as others have mentioned, IHG has cut so many benefits from the program. Why should anyone apply for an IHG CC if they can get better benefits from their Chase Sapphire CC?

  7. @ Gary — iHG’s biggest credit card problem is the earn rate at IHG hotels (and otherwise). If they would bump the IHG earn rate up to 15x (about 7.5%), then it would be a no-brainer to use, but 10x is weak compared to what Hyatt offers at 4x (about 6-7%) plus elite nights, and is equivalent to using the CSR at 3x (about 5%). I always use my Hyatt card at Hyatt and never use my IHG card at IHG. That behavior should warrant IHG’s attention.

    — Gene

    The math is fuzzy, leading to mindless claims and decisions on how to best utilize loyalty credit cards.

    FYI: A WoH Globalist and a IHG Diamond get exactly the same “return on each dollar” they spend at their respective properties.

    Here’s the mathematical proof.

    The base earn rate of a WoH Globalist with a Chase WoH visa card is: 6.5x + 4x = 10.5x, for a return on the dollar of 10.5x * 1.5 cpp = 15.8%.

    The base earn rate of IHG Diamond with a Chase IHG MC is: 20x + 10x = 30x, for a return on the dollar of 30x * 0.5 cpp = 15.0%.

    Those return on the dollar are identical. The slight difference is a round off error in the estimates of the value of each points currency. From my modeling, I analytically calculate values of hotel points currencies that are accurate to more digits, yielding 1.52cpp for a WoH point and 0.53cpp for a IHG point. Using those analytical or objective valuations, the returns on the dollar become:

    WoH Globalist: 10.5x * 1.52 cpp = 15.96% = 16%
    IHG Diamond: 30x * 0.53 cpp = 15.90% = 16%

    WoH points, IHG points and all other hotel points currencies are “worth” exactly the same when adjusted for differences in base earn rates that include bonus points from their co-branded CCs with comparable annual fees.

    Q.E.D

  8. @ DCS — Yes, but paying with the brand credit card is optional, not automatic. Using your valuations,the credit card portion for IHG is 5%, while it is 6% for WoH. Those are not equivalent results. Using my valuations, the difference expands to 5% vs 6.67%.

    When staying at IHG, I would rather earn 3x UR than 5X IHG since they are both worth 5%, but UR are more flexible. If IHG would offer 15x rather than 10x, I would take the IHG points instead.

  9. @Gene — I have no idea what you meant by “but paying with the brand credit card is optional, not automatic.” Anyone with an ounce of gray matter between the ears would use a co-branded credit card to pay for stays at properties associated with a loyalty program they are serious about patronizing.

    Therefore, it is utterly silly to compare the return of the $ spent based solely on CC earnings. Importantly, your thesis was that “iHG’s biggest credit card problem is the earn rate at IHG hotels” of 10x, which I showed to be total nonsense because an IHG Diamond paying for stays at IHG properties with their co-branded Chase IHG MC gets exactly the same return as a WoH Globalist paying for stays at Hyatt properties with their co-branded Chase WoH visa: exactly 16%, as would
    — a Hilton Diamond paying with the AMEX HH Surpass (12x) : 32x * 0.5cpp = 16%
    — a Bonvoy Plat and above paying with the Chase Boundless visa (6x): 23.5 * 0.68cpp = 16%
    — a Radisson Platinum paying with the Radisson Rewards visa (10x) : 45x * 0.36cpp = 16%

    using my more precise values of hotel points currencies.

    When staying at IHG, I would rather earn 3x UR than 5X IHG since they are both worth 5%, but UR are more flexible. If IHG would offer 15x rather than 10x, I would take the IHG points instead.

    Then, either you are not playing the game with a “full deck” or you are not serious about patronizing IHG. IHG offering 15x would yield a return on the $ of (20x + 15x) * 0.53cpp = 18.55%, exceeding anything that elites in any other program earn, and there is no reason for IHG to be so much more generous than their competition. Only a Hilton Diamond paying with the incomparable AMEX HH Aspire card (14x) would could come close: (20x + 14x) * 0.5cpp = 17%.

    Using your valuations,the credit card portion for IHG is 5%, while it is 6% for WoH. Those are not equivalent results. Using my valuations, the difference expands to 5% vs 6.67%.

    Nonsense. Those differences are still round-off errors and are, therefore, meaningless.

    G’day

  10. @ DCS — I basically agreed with you, yet you seem to be having some sort of mental break in response. So, one can’t be serious about a program without using their inferior credit card? I’ve purchased millions of IHG points at 0.5 cpp via Daily Getaways over the years. Since I cannot do the same with UR points, I “buy” those with credit card charges. I couldn’t possibly be more serious about IHG’s program, as I stay 100 nights per year with them and have done so for 20 years.

    Finally, last time I checked, 20% is not a rounding error.

  11. So, one can’t be serious about a program without using their inferior credit card?

    The answer is, emphatically, “no”, because for the purpose earning the points currency of a program that one is serious about patronizing there is no better card than that program’s co-branded card. Therefore, the notion of an “inferior” card when it comes hotel loyalty credit cards makes little sense. I would not dream a paying for a stay at Hilton properties with a card other than the Aspire (14x), as no other non-Hilton card would earn me Hilton points. By the same token, I would not use the Aspire to purchase airline tickets due to the huge “opportunity cost” associated with such a purchase. That is why one has a card that maximizes points on specific purchases…

    I’ve purchased millions of IHG points at 0.5 cpp via Daily Getaways over the years. Since I cannot do the same with UR points, I “buy” those with credit card charges.

    You are confused. Are you saying that it should be possible to purchase UR points with an IHG CC, or IHG points with a Chase card that earns UR points?

    Finally, last time I checked, 20% is not a rounding error.

    Can be when you have no idea what the actual “values” of points are…

  12. @ DCS — The problem is that there IS a better card to use for IHG stays than the IHG Premier or IHG Premier Business card card and that card is the Chase Sapphire Reserve. That is why IHG needs a bump in their card earn rate for IHG stays. Perhaps15x would be unnecessarily generous, but 12x would do the trick. Furthermore, why do you act as if you do not understand precisely what I mean when I say that I am “buying” UR points by choosing to use my CSR to charge my IHG stays? Finally, since when is your opinion of points values the only correct one? The answer is certainly not exact for any rewards currency other than cash and there is unquestionably a range of reasonable values.

  13. @Gene – Remember the last time DCS engaged with anyone without throwing out petulant insults? Me neither. When you know you’re wrong it’s easier to toss out cheap insults than admit fault. Genuinely brave attempt at engagement on your part though. Props.

  14. @JohnB: So, I’m an IHG member, and my one complaint with them is that their hotels in the US are iffy in quality. I really wish they had some kind of Marriott-level consistency in quality.

    So, I decide to finally start planning for my first trip to Asia. When I pulled up the properties in Bangkok I was absolutely floored. High-end, elegant, sophisticated IGH properties EVERYWHERE. Even the Holiday Inn Expresses looked decent.

    Looks like I found the IGH Mariott level of consistency and quality: In Asia. lol.

    “IHG hotels in the USA are not at the level of IHG overseas, especially Asia/Pacific region. I have stayed at some very nice Intercontinentals in Asia.”

  15. @ DCS — The problem is that there IS a better card to use for IHG stays than the IHG Premier or IHG Premier Business card card and that card is the Chase Sapphire Reserve.

    @Gene — That you consider the CSR to be a “better card” to use for IHG stays fully supports my point that you are either clueless about how the game is played or you are not serious about patronizing IHG..or both. It also means I wasted my time engaging you, especially when you keep parroting this line I already debunked:

    That is why IHG needs a bump in their card earn rate for IHG stays.

    No, IHG does not need to bump their card earn rate for IHG stays because
    “…an IHG Diamond paying for stays at IHG properties with their co-branded Chase IHG MC gets exactly the same return on the spend as a WoH Globalist paying for stays at Hyatt properties with their co-branded Chase WoH visa: exactly 16%, as would
    — a Hilton Diamond paying with the AMEX HH Surpass (12x) : 32x * 0.5cpp = 16%
    — a Bonvoy Plat and above paying with the Chase Boundless visa (6x): 23.5 * 0.68cpp = 16%
    — a Radisson Platinum paying with the Radisson Rewards visa (10x) : 45x * 0.36cpp = 16%

    using my more precise values of hotel points currencies.”

    That you do not get that makes you clueless, so we’re done, especially with the even more clueless Christian chiming in mindlessly as usual…

    Parting shot:

    Finally, since when is your opinion of points values the only correct one?

    Since I got self-anointed “travel gurus” to stop crowning the Hyatt point as more valuable than any other hotel points currency — a concept that still eludes you and underlies all the mindless claims that you made above.

    Goodbye.

  16. Actually IHG points are worth between .7 and .76 each.

    I get 30 per night with the card and my status.

    Beats all the other programs hands down

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