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RPT-Reuters Summit-Hotel loyalty points struggle intensifies
February 22, 2010 / 12:09 PM / 8 years ago

RPT-Reuters Summit-Hotel loyalty points struggle intensifies

(Repeats Sunday item to additional subscribers) (For other news from the Reuters Travel and Leisure Summit, click here)

* Hilton faces criticism over cuts in loyalty program

* Rivals seek to take advantage with new offers

* InterContinental, Carlson, Best Western set promotions

* Executive lounges falling out of favor?

By Deena Beasley

LOS ANGELES, Feb 21 (Reuters) - Hilton Worldwide’s recent decision to raise the number of loyalty points required for a free stay at its hotels has some rivals smelling blood.

Competitors like InterContinental Hotels Group Plc (IHG.L), Best Western and Carlson Hotels have announced promotions aimed squarely at potentially-disgruntled Hilton stalwarts.

“I’ve already shifted -- I‘m taking 25 nights from Hilton and giving them to Sheraton,” said Troy Myers, a Nashville-area consultant who is on the road some 200 nights a year. “I will still spend well over a 100 nights at Hilton -- but not 150.”

Cutbacks in corporate travel spending during the recession have made the struggle to attract well-heeled customers more cutthroat than ever -- and the use of loyalty programs as an enticement is a major part of that struggle. At the same time hotel companies seeking to cut costs are wary of offering too many free rooms.

Hilton, acquired in 2007 by Blackstone Group LP (BX.N) and now struggling under a huge debt load, in mid-January rejigged its loyalty plan -- effectively devaluing members’ point balances by about 20 percent.

Many of the company’s top-tier customers have lit up message boards with complaints about the move, showing they are not quite as devoted to the brand as the road-warrior played by George Clooney in the recent hit movie “Up in the Air.”

InterContinental, operator of brands like Holiday Inn and Crowne Plaza, plans to give out more than 400 million loyalty points to its members who lost Hilton points, while Carlson early this month dropped by as much as a third the number of points needed for a stay at one of its top-tier properties, like the Radisson Aruba Resort & Casino.

Best Western said on Thursday it would match the elite status of any other hotel loyalty program free of charge. Operators like Marriott International Inc MAR.N and Starwood Hotels & Resorts Worldwide Inc HOT.N will do the same thing, but typically require a certain number of stays to keep the status.

“What we heard loud and clear was that there was quite a lot of customers that seem to be upset about this,” said InterContinental chief marketing officer Tom Seddon. “People think about loyalty points as cash in the bank.”

Executives from hotel companies, including InterContinental, Marriott, and Starwood, are due to speak at the Travel and Leisure Summit, being held at the Reuters office in New York this week.

LOUNGE REPLACED BY COFFEE AND PASTRY AT STARBUCKS

It is not unprecedented for hotel operators to change their loyalty reward structures, but Hilton’s move at a time of great economic uncertainty and weak hotel rates has some observers scratching their head.

“I understand the business challenges Hilton faces -- the points are a financial liability for the company on their balance sheet,” said Henry Harteveldt, a travel industry analyst at Forrester Research. “Hilton for a while ... had a more generous program. Apparently they didn’t see a commensurate improvement in market share or room rates paid by honors program members.”

The loyalty plan for the operator of chains ranging from Hampton Inn to Waldorf-Astoria is called Hilton HHonors.

“We had an increase in free night redemptions. We did see a need to recalibrate,” said Jeff Diskin, senior vice president of global customer marketing at Hilton.

He said the Hilton program is now in line with loyalty plans at key competitors like Marriott and Starwood and the company plans to widen the scope of its program beyond just points.

But one perk for frequent guests that may be getting shorter shrift at some brands these days is the executive lounge -- an area of the hotel that caters to its most loyal customers with free drinks, breakfast and hors d‘oeuvres.

High-profile Hiltons, like those near San Francisco’s Union Square and Anaheim, California’s Disneyland, have closed their lounges. Top-tier Hilton HHonors members now receive coupons for coffee and pastry at Starbucks.

Hilton’s flagship San Diego Bayfront property, which opened a year ago, has no executive lounge.

“Executive lounges were a cost center, not a profit center -- especially in union markets,” Bjorn Hanson, a hospitality professor at New York University said, in reference to hotels that have higher wages because of labor union agreements. “Owners didn’t mind running them when things were doing well, but now they are cutting back.”

Harteveldt also said hotels in general have been paring back their executive lounges.

“The reason is some of their most frequent guests are the least profitable -- they know how to shop and get discounts. The hotel ends up not making money,” he said.

He and others said hotels are going to have to take a look at loyalty programs and say "if you pay us more, you will get more." (For summit blog: blogs.reuters.com/summits/) (Reporting by Deena Beasley, editing by Tim Dobbyn)

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