By Scott McCartney
Here's something different: A simple-to-use loyalty program with
huge rewards.
The top performer in a new comparison of hotel loyalty program
payback is Wyndham Hotel Group, which revamped its Wyndham Rewards
loyalty program 18 months ago to make it a lot more beneficial to
travelers. Consulting firm IdeaWorks, which specializes in loyalty
programs, compared earning and burning points at six different
hotel chains and found average payback at Wyndham is nearly 14%.
For every $100 you spend at Wyndham, Ramada, Days Inn, Wingate and
other hotels, you can get back $13.60 worth of stays on points.
The lowest payback: Starwood Preferred Guest, where stays at
Sheraton, Westin, Four Points and other brands earned back only
5.6% of value in rewards. Yet as Starwood heads into its merger
with Marriott, SPG is prized by some travelers for its luxury
properties, generous credit-card benefits and elite-level
bonuses.
Wyndham, with more than 7,800 mostly budget and midscale hotels
and a collection of four-star and five-star properties including
some beach resorts, changed its program in 2015 to price every
award room the same: 15,000 points. There are no capacity controls
or blackout dates and you earn 10 points for every dollar spent, so
points accumulate quickly. You can earn a free night at the New
Yorker hotel in Midtown Manhattan after only a three-night stay on
a $500 rate.
"You combine a very low award price and rooms at luxury
properties that are always available and it's stunningly amazing,"
says Jay Sorensen, president of Shorewood, Wis.-based
IdeaWorks.
Wyndham says redemptions are up 90% since before the change and
seven million people have joined the program since the 2015
relaunch, a 17% increase to 47.5 million members.
Many Wyndham members used to cash in points for gift cards and
gas cards. But now they're booking the company's most expensive
properties in Orlando, Fla., New York, Chicago, Dubai and
elsewhere, says Noah Brodsky, senior vice president for loyalty and
engagement at Wyndham Hotel Group.
"We've made a commitment that we are going to provide an
incredibly generous loyalty program. We believe, and the numbers
are proving, that by having the best loyalty offering out there we
will win people's business," Mr. Brodsky says.
The company says it made the change after research showed
consumers felt loyalty programs had gotten way too complicated and
had been devalued by lack of airline seats. They were also turned
off by higher requirements to redeem their points or miles.
In addition, the loyalty market has grown saturated: Buy a pair
of shoes or a sandwich and you'll get asked to join the store's
loyalty program. Research shows that on average, U.S. consumers are
members of more than two dozen loyalty programs but are active in
only seven. "We stopped and said we've got to be one of those
seven," Mr. Brodsky says.
The generosity is expensive: Wyndham says it is investing $100
million in the loyalty program, most of which is going to hotel
owners to buy rooms for free stays. Since most hotels are
franchised under a brand name but owned separately, hotel owners
pay the chain a small percentage of room revenue to cover points
given out, and then hotels that provide free rooms when points are
redeemed get paid by the chain. In Wyndham's case, the chain is
subsidizing the cost of the free rooms for hotel owners.
Mr. Brodsky says the net effect of the program has been positive
for the chain because of increased room stays, and the generous
returns aren't just a temporary promotion but a permanent shift in
strategy.
The IdeaWorks survey, which didn't include Wyndham last year,
found the value of hotel points has declined among the four chains
studied both years -- Starwood, IHG, Hilton and Marriott. The main
reason was that average room rates were lower this year than the
year before, but the number of points required for a room hadn't
changed much.
Hotels are still generally more generous than airlines. In a
separate May study, IdeaWorks calculated the value you get back
from major U.S. airlines ranging from 3.1% to 7.9% per dollar spent
on for coach seats. (Premium cabin redemptions and elite status can
raise that substantially.)
By comparison, hotel programs return 5.6% to 13.6% of spending
-- a strong bonus for consumers. Airlines "have a strong financial
incentive to be stingy on rewards," says Mr. Sorensen of
IdeaWorks.
Another difference: availability. "So often with airlines,
especially at the 25,000-mile domestic award level, there aren't
any seats available. Hotel programs almost always have
availability," Mr. Sorensen says. In the queries looking for rooms,
the survey found free rooms with points were available in every
query made at Choice, Hilton and Wyndham. Marriott had no award
rooms available on 2.7% of queries made, IHG 4% and Starwood
6.2%.
Marriott closed its merger with Starwood in September and
announced the first step in merging the two giant loyalty programs.
Members of Starwood Preferred Guest and Marriott Rewards can link
their accounts together. The highest status level a member has in
one will be honored in the other while the two continue to operate
as separate programs until 2018. You can transfer points between
the programs: One Starpoint point equals three Rewards points.
David Flueck, head of SPG, says that the program offers many
luxury opportunities to redeem and strong points-earning relative
to redemption prices for SPG co-branded credit card holders and for
elite-level members. Marriott's program scores better in the
IdeaWorks research because it offers rich rewards for average
members without status, executives from both programs say.
"It depends on how you earn points and how you use points," Mr.
Flueck says. Marriott wants to combine the best of both programs in
the new program resulting from the merger, says Thom Kozik,
Marriott's vice president of loyalty.
IdeaWorks made 225 queries per loyalty program, requesting rooms
in cash and in points on 15 dates from August to February in major
cities around the world where the chains have hotels in their top
three brands. Only 180 queries were made at Choice Hotels because
that chain doesn't make rooms available for awards more than 100
days before arrival, so February dates weren't open yet when
queries were made in August.
Room prices were compared with the price in points to book the
same room the same night. IdeaWorks also factored in how many
points a nonelite member of the loyalty program would earn when
paying in cash -- for some programs two points per dollar spent on
rooms, up to Hilton's 15 points per dollar spent.
Elite status wasn't factored in, but it can increase value for
members with bonus points, room upgrades, lounge access and other
perks. Points earned by credit card spending also weren't
included.
Write to Scott McCartney at middleseat@wsj.com
(END) Dow Jones Newswires
October 06, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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