Monday, March 17, 2008
Thank You Hyatt - I'm Going To Bruce Springsteen
I want my, I want my, I want my HDTV.
42" LG HDTV in Hyatt Place room, Fremont
HDTV image from Hyatt Place stay set the mood for what was to come that night.
On my freeway drive home from Hyatt Place Fremont on Friday night I won two tickets from KFOG radio to Bruce Springsteen playing April 5, 2008 in San Jose. If it weren't for Hyatt's "Stays Count Double" I wouldn't have been listening to KFOG radio. The radio station is too far from Monterey.
Quick: Who can name the first three Bruce Springsteen album titles?
No brainer for me and I was the first caller to get a shot at the answer. "Stays Count Double" promotion is paying off nicely in added benefits.
Elites and Suites. Now that is the question.
Here is my elementary school teacher economics logic.
The potential value of elite status in a hotel loyalty program provides an indeterminate net financial reward that can be based on a fixed financial investment.
Case in point is Hyatt Hotels "Stays Count Double" promotion running from January 1 - March 31, 2008. I have written about this repeatedly and Hyatt has explicitly promoted the opportunity for their frequent guests to earn Hyatt Gold Passport Diamond membership with just 13 hotel stays.
The fixed financial investment is the cost of 13 stays.
I paid a $71 AAA rate at Hyatt Place Fremont-Silicon Valley for Friday night, March 14.
Hyatt Diamond elite status for a little over $1,000 was possible from the beginning of 2008.
But, how many people have planned for fast-track hotel elite membership?
And, what is the potential value of Hyatt Diamond elite membership?
My answer as the Loyalty Traveler is, if you plan your travels purposefully, the potential value of Hyatt Gold Passport Diamond membership through February 2010 could be worth thousands of dollars. I don't think more than a few hundred people globally actually altered plans for more than a half-dozen stays to grab fast-track Hyatt Diamond. Perhaps a few thousand. Only Hyatt knows.
Estimating the Value of Hyatt Gold Passport Diamond elite membership
The numbers for frequent guests:
Say you stay 30 nights a year in hotels.
30 x $150/night = $4,500 for hotel rooms.
(Consider relative numbers and values for comparative purposes. Your hotel stay profile may be significantly more or possibly less than $150/night. You may stay 20 nights or 60 nights+. Adjust the numbers accordingly for your profile.)
Now here is an assumption you need to accept to make my argument valid when estimating value of loyalty programs. You have to take this assumption as truthful in the case for most top-elite hotel loyalty program members. In my case and for hundreds of people who post on FlyerTalk.com, the reality of a high-level elite member's hotel lifestyle is frequent room upgrades, especially when staying at upscale and luxury hotels. The assumption you must accept to understand the logic behind these analyses is an elite member will be upgraded to a better room category than booked for almost all hotel stays.
Assume Hyatt Gold Passport Diamond member regularly gets a complimentary room upgrade upon hotel check-in. The room rate reserved averages $150 for the room category booked. I am making up the number $150 and obviously some room nights may be less than $100/night and some may be over $200/night, but the average over many nights is $150/night for the calendar year.
The room rate for the upgrade room received at check-in by the Diamond elite member will likely have an equivalent room rate value in the range of $180-350/night. The average room rate will likely be something like $250/night value for the room the Hyatt Diamond member actually stays in for the hotel stay. Again this is common for top elite members in hotel loyalty programs to receive room upgrades, often several categories above the room category booked. Sometimes the nicest room in the hotel.
I notice a lack of complimentary room upgrades when using prepaid channels like Priceline or when staying at another hotel chain where I do not hold elite status.
A frequent guest of hotels with 30 nights or more per year will likely see an average of $100+ in added value on hotel stays and hotel points towards future stays.
30 nights @ $250/night value is $7,500 in actual room rate market value at a cost to the elite frequent guest of 30 nights @ $150/night or $4,500 in room rates actually paid.
The high elite member frequent guest in a large hotel corporate loyalty program in this example earns $3,000 in hotel added-value benefits for $4,500 in hotel spending. This is $7,500 of hotel value when adding up the paid rate for rooms, the value of an upgrade, value of points earned, and other hotel stay amenities provided complimentary due to status, and all for $4,500 in hotel spending.
So why would someone do a Fast-track to Hyatt Diamond and spend $1,000 for 13 stays?
The value to the frequent guest over next two years is a simple math equation of spending $4,500 for hotels that you probably would anyway as a business or leisure frequent hotel guest. A $1,000 fixed-investment in hotel loyalty now with Hyatt Gold Passport can likely have a net positive financial return of $6,000 over the course of two years in terms of the value of your room upgrades and additional benefits. ($15,000 hotel value received - $9,000 in hotel expenses).
A traveler can invest as little as $1,000 in Hyatt or more likely an investment of $1,500 to $2,000 in most locations where prices could be higher in order to pay for 13 stays and earn Gold Passport Diamond status. Now, think of the potential value over two years, possibly $6,000 added value to you hotel stays. A simple investment of about $50 per month of Hyatt Diamond elite membership could bring a return of $250/month in your upgraded hotel lifestyle.
Believe me it works. I have been enjoying the benefits of elite status for the past 7 years.
A hotel stay loyalty program strategy is good financial sense for business or leisure travelers and if you plan to travel frequently the loyalty program can provide thousands of dollars in added value to your hotel stays. This is typical of the kind of added value a frequent guest with top elite status can expect for meeting the standard of loyalty in one of the major hotel loyalty programs.
The fear is Dilution of benefits for Hyatt Diamond elite members
The real concern for frequent guests who earn high elite status is the competition from newly annointed frequent guests who fast-track to top elite status. The issue comes to a head when multiple diamond members are checking in the same hotel the same day. No competition ensures a good upgrade while some competition may mean a lesser value upgrade.
Valid complaint from members who earn status through tougher standards? Perhaps.
My experience has been that upgrades are frequent. Despite fast-track promotions for several years with Starwood Preferred Guest, and the undeniable success of the Starwood American Express card, I still regulary get wonderful upgrades at Starwood hotels. I don't think there are enough frequent guest members to take all the upper category rooms in many upscale hotels on a typical night.
I promised my wife I wouldn't use the term "Mattress Runs"
On the FlyerTalk bulletin board the terminology developed over the years to refer to flights taken primarily for the purpose of miles as "mileage runs". The concept of getting on a plane and flying cross-country and returning back to your home airport all in one day is somewhat outlandish, but can be financially lucrative investment to a good travel planner. The corresponding terminology developed for a travel pattern of several one-night hotel stays to quickly earn frequent guest points and it was called doing a "mattress run".
My wife became aware of this terminology last year when I created a webpage on the concept behind "Mattress Runs". She pointed out the obvious connotation and imagery of "mattress runs" to the normal hotel traveler who is not a loyalty programs geek.
I now refer to several, generally consecutive, one-night stays at different hotel members of the same loyalty program for the purpose of earning credit towards elite status or a loyalty program promotion as the "frequent stays strategy".
My background in loyalty programs is a person who jumped on dozens of flights for high frequent flier bonus miles opportunities between 1999 and 2004 to earn millions of frequent flier miles. I thought nothing of spending a night in Amsterdam, flying to Belfast for a night, back to Amsterdam for a night, and jetting off to Budapest for the weekend -- all flights made for the systematic purpose of fulfilling airline loyalty promotions for bonus frequent flier miles at near the lowest possible cost. The Belfast, Amsterdam, Budapest trip over 6 days had the benefit of 500,000 miles that have been used for a First Class ticket to New Zealand ($8,000 value), and three Business class tickets to Europe ($8,000 value). I still have 200,000 miles in accounts from that 2002 trip. The ticket cost of the 2002 trip to earn 500,000 miles was less than $1,500 and during the 20 flights taken for the promotion, my wife and I received two UA domestic tickets and something like $600 in vouchers from United.
The airline example above is to illustrate how an investment in loyalty programs can have a great financial return. At the time of the Canadian portion of our mileage run, the immigration official at YVR started an argument with me as to why I would come to Canada for one night just to earn frequent flier miles. Maybe he would understand now if he saw that my investment of $500 for two airline tickets to fly from Monterey to Victoria, BC for a night and about $200 for a day in Canada was recouped before the weekend was over when I received two free domestic airline tickets and $600 in airline vouchers for a two-hour flight bump in Portland, Oregon. And, I subsequently redeemed a portion of the airline miles for about a $16,000 value with the three international business class tickets to Europe and one first class ticket to New Zealand.
[Happy St. Patrick's Day. I spent two summers in Ireland for about 8 weeks total in the 90s and St. Patrick's Day wasn't the drinking holiday there that has developed over the past decade. I just recalled I was in Victoria on a Sunday morning for that 2002 as Ireland was playing a World Cup match and pulled off a tying goal in the final minute for overtime. There wasn't an Irish pub open at 7am. I knew I wasn't in Ireland.]
"Work interferes with seeing the world"
Back to my point with the value of Hyatt elite status. Work has usually been a constraint to plan around when designing "mileage runs" for frequent flier bonuses. The same constraint exists for hotel loyalty elite status when your job doesn't require you to be in a hotel frequently enough to earn high elite status.
Last June, on my way back from Uruguay, I ran into these former colleagues coming from Denver. They had been staying at a Denver Hilton brand hotel we stayed at a few years back. We tended to spend time in Hilton brands because the manager collected Hilton points religiously. I remembered we had a great time when I took the team to the lounge at the Doubletree after our work day. The two on the plane still hadn't attained high elite status to gain access to the hotel HHonors lounge.
My Hilton Diamond status always placed me in a better category room than my team members and with more privileges. My work team spent weeks in hotels over the course of the year, but wouldn't supplement their HHonors stay activity outside of work when paying their own way. I supplemented my Hilton work stays with paid stays during bonus promotions and award stays which counted for elite status. My leisure paid stays could be concentrated with Starwood and I maintained dual elite status with SPG on my dime and Hilton mostly through work.
The problem with earning HHonors Diamond elite status for my colleagues was their work meetings generally required multi-night stays. Even though they stayed in hotels 1 or 2 times per month, they generally had 2-night or 3-night stays, and also Hilton was not the contracted hotel for some meetings and hotel stays.
The result was a frequent guest profile of 5 nights a month in hotels, about 25 stays or 60 nights per year, but with only about 15 stays and 40 nights in Hilton hotels. Diamond elite membership with Hilton HHonors takes 28 stays or 60 nights. Being an educator and the Loyalty Traveler, I attempted to explain the value of elite status and how they could put in just a little extra effort and bump their membership from Gold to Diamond. Four years later and they still aren't getting lounge privileges.
I posted the following on FlyerTalk this morning which got me to thinking again about the value of elite membership in a hotel loyalty program in the context of a job that gets you most of the way there, but not quite far enough to get the benefits you should be getting for your level of loyalty in terms of nights and cash spent.
My FlyerTalk post in response to Hyatt offer for elite fast-track and the impact these type of promotions have on the overall program when new members move into elite membership.
"Declining occupancy rates projected for next couple years as new hotels enter the market make the marketing of elite loyalty an opportunity to grab part of that dedicated marketshare. A couple hundred people grab top elite status for bargain basement prices and several thousand customers convert to Hyatt with instant elite status offers of 2008.
The analysts are telling the hotel companies to raise rates for 2008 in the face of declining occupancy which defies commonsense logic, but the capitalist logic is lower prices will take a long-time to recover and hotels will be more profitable by settling for fewer guests paying higher prices. The competition for inducing frequent guests with elite membership is these loyalty members go a long way in grabbing a portion of the frequent guest market segment that will continue to pay higher room rate prices.
We are paying for our hotel loyalty perks with higher nightly rates overall, along with the large number of infrequent guests staying at these hotels. And the rate of hotel room rate increases is at a much higher rate than overall US inflation over the past few years.
The market segment that will see good growth as the prices continue to rise will be the frequent guests using prepaid and auction channels for hotel rooms which will be selling upscale and luxury at real bargains, but for hotels in major loyalty programs there will be no benefit of complimentary upgrade or points for these bargain rates.
This fight among the hotel chains for a loyal guest in the pool of frequent guests will possibly prompt repeated attempts for luring new loyalty through elite status fast-track offers."
Elite status is an investment opportunity with the potential to greatly improve your hotel lifestyle. The fast-track offers are a good way to expose new frequent guests to the benefits of a major hotel chain loyalty program. Some new elites will grab all the benefits they can for a year and fade away after not staying frequently enough to retain elite status. Other members will see the value of concentrating their stays with Hyatt (or Starwood, Hilton or whoever) and pump more money into the hotels to maintain that status. It is a win-win strategy for the frequent guest and the hotel who gains a loyal guest.
The dilution of benefits is what we will watch for and if the investment in loyalty becomes less valuable in the future and benefits are diluted, the elite frequent guests will be among the first to know. And I'll be blogging about the state of the Loyalty Traveler.