Starwood posted on Milepoint that they are increasing the price of cash and points awards starting March 5, and also introducing cash and points awards for upgraded rooms including suites.
In order to figure out how big a price increase this is, I needed to put the award charts side-by-side and use a common currency (money) to compare simultaneous changes in both cash and points prices. I decided to use a points price of 2 cents for the exercise, but the results aren’t particularly sensitive to that assumption.
The changes represent about a 21% – 25% increase in price depending on category, with no change in category 7.
I still see cash and points as a better deal than standard award nights. But the margin shrinks with these changes.
You can still make bookings under the old lower pricing until March 5 if you wish. These awards are generally cancellable (check and adhere to cancellation requirements so you cancel in time if you don’t plan to keep a reservation). That means you can make speculative bookings, subject to the balance of points in your account, just in case you want to lock in the current lower points requirements.
Still, and while Starwood is taking criticism for this, I at least potentially like it or at least like it enough to offset much of the dislike.
The Price Increases on Cash & Points Awards are Reasonable — If They Mean Increased Availability
Deals We Like calls this the worst news in the miles and points world. I disagree.
I do not like when awards get more expensive. These awards have never gotten more expensive before, in the history of the program. (Which is to say: neither the cash nor points price of a cash and points award for a given category has risen — of course individual hotels have gone up and down in category meaning that cash and points award stays at those particular properties have gotten more or less expensive each yeaer.)
But that’s not just an argument that it’s reasonable to see award chart inflation. I don’t think it really is. There’s been plenty of award chart inflation over time with the introduction of new higher award categories. And my huge beef with the Starwood program is that since suites cost double points, “all suite” hotels cost double points. A category 7 hotel that charges enough for its rooms to be a category 7 because those rooms are suites will then cost double the category 7 points because the rooms are suites. The member is double-penalized.
But this change is likely reasonable because of the economics of how cash and points awards actually work.
Starwood Preferred Guest was the first major hotel program to offer award nights whenever a standard room is available — in other words, no capacity controls. Since then the major hotel chains have more or less matched this, generally over the past 4 years.
The way they accomplished this was to offer the hotels a modest reimbursement for member stays most of the time. A category 3 hotel might get $38 for an award night. A category 4 might get $58, for instance. But what about when a hotel is sold out? Offering award nights costs that hotel real revenue. It might have sold the room for $250 and has to take $38? That’s a problem.
Starwood set up the program to reimburse hotels at their average daily room rate on those nights when a hotel’s occupancy exceeds 95%. When a hotel sells out, award nights are expensive for Starwood Preferred Guest (as we learned from Le Parker Meridien’s alleged fraud).
Cash and points awards are discounts — a member pays fewer points plus some cash which roughly covers Starwood’s reimbursement to the hotel. Starwood Preferred Guest is happy to offer those to its members (since it won’t cost them more) and to its hotels (incremental revenue for rooms that would otherwise go unsold. But they don’t want to offer discounts and then have to pay penalty rates to the hotels that wind up sold out. So cash and points awards are capacity controlled.
Specifically, hotels decide when to offer cash and points. They generally do so when they do not expect to sell out. Because Starwood will not pay the average daily room rate to the hotel for these award nights when it sells out.
Starwood has apparently found that they need to pay more to their hotels to entice reasonable cash and points availability. So they’re explaining the change as the result of “Work[ing] very closely with our hotels.. [to] improve the availability of Cash & Points..”
So a higher price for cash and points awards isn’t great for those hotels and nights when you otherwise could have booked a cash and points award for less. But it certainly is a good thing at hotels and on dates when a cash and points award would never have been offered before but is now offered on more nights.
In other words, we should be able to expect more cash and points availability. So more nights where a discount is available. But the discount isn’t as big. I can live with that tradeoff, although some members will lose out relative to what they had before, some of the time.
Upgraded Rooms on Cash & Points Awards Will Be a Huge Benefit
Starwood offers (at each hotel’s discretion) upgraded rooms and suites for additional points on top of what a regular award stay costs. I rate Starwood’s offering here second best only to Hyatt (since Starwood offers suites for double points, while Hyatt Gold Passport charges a 50% premium).
They also let members upgrade five days out on certain paid stays using points.
But they haven’t allowed the option to book anything other than a base-level room on cash and points awards, except for brief periods as a special promotion. I’ve always wondered why they didn’t roll out this option more broadly, and now they have.
So this is a new and discounted way to get into upgraded rooms, something no other program offers.
And it’s valuable to both general members and top tier elites alike.
- A general member booking cash and points was destined to be in a base room (unless they negotiated directly with the hotel to redeem additional points at checkin as an instant award — almost always a poor value — or with additional cash).
- And a Platinum member even couldn’t guarantee a suite at booking on cash and points award. In fact, Starwood don’t let its Platinums confirm upgrades at booking at all except on free night awards (just like any other member). They offer ‘suite night awards’ to their Platinums who qualify by staying 50 or more nights, and those suite night awards confirm up to 5 days in advance. Effectively that lets their elites specify when they care the most about getting the upgrade, and have a much better chance of being upgrade on those stays. That benefit applies on cash and points stays as well. But now cash and points will have a confirmed at booking price, too.
Here we can spend double the points (just like with standard awards) for a suite. The cash portion is a bit more than double for suites, I think that’s a little excessive and would have preferred to see the cash component merely doubled. (Remember, it’s double the new, higher cash component.)
And perhaps I like the changes more than I should or more than the median reader will because I like suites and when I redeem my points it tends to be for aspirational vacation stays where I don’t want to stay in a standard room. So I value the upside here more than most. But I do think this new addition is pretty cool.
As always, compare the price of simply paying for a room to the price of cash and points (or the price of a suite to a cash and points suite award). I recently booked a category 7 hotel for less money on a paid rate than the cash component of a cash and points award at the same hotel. Some hotels are just that seasonal, and category 7 awards tend to offer less value than the real cash and points sweet spots of categories 3-5.