You Can Get 75% Back Booking Hotels—But If You Miss the Hidden 100% Markup, You’ll Lose It All

I wrote this week about what looked like an amazing deal from new loyalty program Rove: 51 points per dollar booking a hotel. Since those points transfer to a variety of airlines, and can be redeemed directly for travel, surely that’s like getting a 75% rebate on the room.

I suggested that this meant it’s worth checking out Rove for your hotel bookings.

• They won’t always be this lucrative.
  
• And at the same time, for these super-rewarding hotels, you give up hotel loyalty program points and status credits and benefits.
  
• But at 75% payback that seems well worth it.

At the same time I worried that this couldn’t possibly be sustainable, because there’s no way that hotels are giving them 75% off on rooms. My read was to take the points and transfer them out, rather than building up balances in a Rove account.

The CEO and co-founder of Rove e-mailed me about that piece, tellingme in fact that he’d “[c]hecked that hotel and we actually did have a 70% margin on it, so don’t expect the ultra high multipliers to disappear anytime soon.”

Ok. Now he got me curious, because what he’s saying seemed impossible to me.

1. Usually these wholesale hotel sites do get rooms at a 20% – 25% discount, and can’t undercut the chain’s own pricing. So they can rebate some of that savings to you in the form of points.

2. A property might even get that discount up to 40% as part of a promotional effort to offload distressed inventory.

3. But that seemed highly unlikely the week between Christmas and New Year’s in New York – Times Square – when I was seeing this. That’s a peak time, which is why the high rates we were seeing at Moxy Times Square didn’t shock me.

A 20% – 25% discount I believe, 75% I don’t, and 25% doesn’t fund 51 transferrable points per dollar. So I started looking closer. The Moxy NYC Times Square was actually pricing the room night for an undiscounted $362.

I owe you an apology. I should have done this due diligence when I first posted. Rove was charging more than twice the price as Marriott.com. Now it makes sense how they can rebate 75% – half the room rate they’re charging is a markup, on top of the assumed 20% wholesale discount they’re getting. It’s still rich rewards. They’re probably rebating almost the full economic deal to you as the customer. But this isn’t as good as it looked at first.

So I went back to Rove’s CEO, who tells me that they “never actually intentionally mark up any prices for hotels.” Instead, the higher price is something of a mistake and when that happens the system jacks up the rewards.

In the beginning, we didn’t actually have an accurate data source for hotel retail prices that we were supposed to sell at. Our suppliers were giving bad info. We just knew the retail rates they sent were on average 10% below direct, so we did a flat 10% markup (which sometimes made us cheaper and other times way more expensive).

Now, we have a really good data source (from large OTAs) on retail prices that we use, and since that day we have a 0% markup on the retail rate. The accuracy is about 90-95% at the moment, but for any rates where we are more expensive, it also means the miles earning is way more.

He argues that there are actually “a bunch of 30-50x rates that should almost exactly match the major OTA price.” And, of course, for their new hotel rates that do earn hotel loyalty program points, elite credit and benefits, those rates come “straight from the hotel” – and they’re even changing loyalty-eligible bookings “to make the hotel the merchant of record (also including the option to pay at the hotel).”

I like what Rove is doing. They’re offering a lot of value back to the customer on bookings and through their shopping portal. But I’m going to be a lot more careful comparing prices I see there with direct bookings going forward.