Why are fewer hotels participating in Starwood’s Cash & Points?

Starwood posted its Cash & Points award hotel participation for 2006 yesterday. Well, sort of, since hotels in Asia aren’t listed yet.

This has been a long time in coming, I understand from Flyertalk that they were trying to get this up much earlier but a glitch in the process delayed it until January 30. They even moved back the date to look for it on the website a couple of times.

I don’t really know what the glitch was, but posting a full year of participation by the end of January is actually an improvement on past practice.

Starwood used to list these awards only one quarter at a time, and the listing would usually be posted no earlier than a few days into that quarter. Last year they moved to show a full year at a time, but that didn’t happen until March. So showing all of 2006 participating hotels on January 30th is their best performance yet, a real improvement to the cash and points program.

However it does seem that fewer hotels are participating this year. I haven’t actually counted the number of hotels in any quarter, so it’s just an impression, but certainly fewer hotels that interest me are participating. (And with more hotels bumping up to category 5 you don’t even have a chance that they’ll participate, since cash and points tops off with category 4 properties.)

There does seem to be a problem in getting hotels to participate. It’s possible that there was just a glitch in soliciting the hotels, which would also explain the delay in getting things posted. And it’s also possible that more hotels could be added later to the list.

But it’s worth remembering that unlike traditional awards — which hotels have to offer if they’re a participating property in the Starwood Preferred Guest program — cash and points is entirely voluntary.

Perhaps many hotels are reluctant to participate either because

  1. they view Starwood’s internal reimbursement rate — what Starwood Preferred Guest pays a hotel on top of the cash portion of the reservation, or

  2. hotels can’t plan several quarters out, perhaps their revenue modeling is only accurate and useful 90 days forward or so

A hotel has to see cash and points as valuable (incremental revenue) in order to be induced to participate. No doubt there would be more participation if Starwood Preferred Guest offered more money to hotels on these reservations. Could it be that with higher occupancy rates hotels are less likely to see value in a cash and points award?

A hotel would only want to make cash and points nights available on rooms that would otherwise go unsold. This is similar to the decision to list a hotel on Priceline. At a higher reimbursement rate they might be more willing, but if they’re going to see money similar to Priceline they might only want to make the same level of inventory available. (A rough generalization.)

They can adjust Priceline inventory real-time, and even not make it available until the last minute. But with a full year of cash and points, a hotel would presumably have to make some rooms available now for Oct – Dec if they were going to participate during the fourth quarter of the year. So if a hotel forecasts sales wrong they might crowd out higher paying guests with lower-revenue cash and points nights.

I wonder if an unintended consequence of moving to a full year of cash and points offerings is that hotels are more reluctant to participate since they don’t do a good job forecasting revenue more than 3 months out?

This could be alleviated of course by a higher payout to the hotels from Starwood Preferred Guest, but they’d presumably only be willing and able to do that if they raised the points requirement on the award. (Or they could raise the cash co-pay and pay the same amount for their kickin.) But that would defeat the value proposition of cash and points.

On the whole I’m happy with the ability to see farther out on these awards. It would be nice to have greater participation, though.

A tough nut for the cash and points gurus at Starwood to work out I 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 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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