Rumor: Starwood Category 7 Redemptions Coming

I haven’t been able to get this confirmed officially, but I’ve heard from multiple sources that the devaluation is coming after all, and in the form of a new category 7.

I apologize that I cannot attribute this, and I hope that the places I heard this are wrong. But my gut says they aren’t.

I imagine we’ll know more as the year comes to a close or the new year begins, but that’s just an assumption as to timing.

It’s unclear what this would mean initially. Perhaps the really expensive properties like Bora Bora Nui and W Maldives — that already charge more than category 6 prices for redemption — would go into this category. Perhaps it’s just a way to make headroom for rising hotel rates and pressure for greater internal reimbursment on award stays from Starwood to the hotels. But I suspect that hotels seeing greater than 90% occupancy, especially in resort destinations, may ‘jump the queue’ a bit to higher categories than their average daily room rate would otherwise suggest.

Starwood annually reassigns hotel properties to redemption categories based on their previous year’s average daily room rates. The category determines the number of points requiremed for a free night, and the room rate determines the price Starwood Preferred Guest pays the hotel for the room.

In my experience (based on hotel bills showing the internal reimbursement rate on my folio on award stays, or the hotel flagging the award rate plan as earning Starpoints and thus seeing points post to my account based on the internal reimbursement), Starwood pays a hotel three-quarters of a cent to one penny per point redeemed. But I also know that when a hotel’s occupancy rate exceeds 90%, Starwood pays the hotel its average daily room rate. Redemptions at hotels that wind up close to full get extremely expensive for Starwood. I imagine that high-season redemptions at the Westin St. John and Westin Maui, and much of the year in New York are putting real pressure on SPG’s bottom line.

So higher redemption costs are coming. My understanding of the form that’ll take is a new higher category introduced into the program (making it also easier to shuffle some properties upward in existing categories). But we should know soon, I’d imagine.

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, 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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