What Does Elite Status Actually Cost Hotels? Not Much In My Opinion!
We have a tendency in the miles and points space to look at things from a value perspective. What will this perk, credit card, elite status etc. net in value for us. What is Hilton Gold status worth and what is Hilton Diamond status worth etc. That is understandable because we are trying to make decisions based on what is best for us. But one thing we never do is take a look at what does it really cost the issuer of said status? The funny thing is that is where the real value probably lies.
Why am I bringing this up? I bring it up because Marriott recently nerfed their meetings program perk where you get 10 nights for setting up a meeting. This made gaining status easier and many people did it for an out of pocket cost of $100-$150. People have blamed bloggers for alerting Marriott to this additional cost. I guess I question if this decision had anything to do with actual cost and wanted to look at it more in depth.
Why I Don’t Think Elite Status Costs Hotels Much
I like to think of status like vacation time at work. People love it, value it and want more of it but vacation time doesn’t really cost your employer much of anything. That little fact is why it is easier to negotiate more vacation when you are hired versus extra salary (a tip there for you).
This is speaking in generalizations of course but there isn’t a line item on the balance sheet for vacations, it is already included in your salary. Have you ever noticed that you work twice as hard the week you get back from vacation? That is because your work often just sits there until you get back. And whatever work was done for you while you were gone was done by people paid their normal salary, not extra. So what did that cost the company? Next to nothing, just like status!
Okay so now let’s take a look at the two major perks of hotel status, breakfast and upgrades, and see what they cost hotels.
Breakfast
Continental breakfasts with powdered eggs and some pastries may cost them a few dollars per person, as in like $2. Hotels may charge $20 a person for continental breakfast so that is what you say it is worth. But selling that breakfast to one sucker staying at the hotel probably covers 2 elite people’s breakfast too. So is it worth the $20 you would have paid, the $7 that you could have got it for offsite or the $2-$3 it actually cost them to provide it? Also, if breakfast costs so much why do all of the lower tier hotels offer it for free? Let’s not forget this is Marriott we are talking about and not Hyatt that sometimes gives you over $100 at a restaurant to spend too 😉.
Upgrades
But what about upgrades? I got this upgrade for FREE and it is going for $500 more a night! Actually it was going for $0 more per night. The hotel wasn’t going to sell it so it didn’t really cost them anything. It is more likely that the upgrade made them money because they are more likely to sell the standard room you vacated than the suite you now occupy. I guess you could say the cleaning person may take a few more dollars in salary to clean it since it is a larger room but we are splitting hairs here.
What Do Hotels Value Elite Nights & Status At?
So we see elite status probably doesn’t cost them much to provide so that means that elite nights probably aren’t all that valuable either right? Let’s look at this from a few different perspectives.
Status
A good way to tell what status is worth is to see what competitors offer it for. Hilton is a prime example since I believe their Gold status lines up with Marriott’s Platinum status. And I think Hilton Diamond and Marriott Titanium are similar as well.
Guess what, Hilton essentially sells both of these via credit card annual fees. Hilton Gold is sold for $95 a year with the Hilton Surpass card. Hilton Diamond is sold for $450 a year with the Aspire card. To be honest Hilton Diamond is essentially sold for free because the Aspire card more than offsets the annual fee.
If a status similar to Marriott Platinum is sold for $95 how are you trying to tell me they got rid of the Marriott meetings perks to save money? So they walked away from $100-$150 in pure profit to save essentially $95? I say pure profit since there was no cleaning or set up involved in these meetings. That sounds like a genius plan!
Wait I am being too generous, those 10 nights don’t get you Platinum status it gets you 20% of the way there. So really they walked away from $100+ in revenue to save $19.
Elite Nights
You may be saying to yourself, you are looking at this all wrong Mark! This is about elite nights and not status. They are trying to make people spend more nights with heads in beds which will lead to more money! That could be true but let’s take a look at what hotels value elite nights at.
Marriott gives all credit card members 15 elite night credits for carrying a card. Even the no annual fee Bonvoy Bold gets 15 nights. So if they give out 15 nights for no cost then what would they value 10 nights at?
Even if we looked at the $95 Bonvoy Boundless card that would mean they sell elite nights at a cost of $6.33 each. That is if we completely ignored that the card comes with an anniversary night that more than offsets the annual fee. So they walked away from $100+ in revenue to save AT MOST $63.33 in elite night cost. That doesn’t make any sense.
Why Did Marriott Make The Change?
Why did Marriott make this change then? I honestly don’t know why Marriott made this change but if they made it to “save money” I don’t see it. Did they change it because the system often has an issue of posting the credits properly? Did they hope to encourage people to book hotel rooms for their meetings and get the credit that way? Maybe Bonvoy’s corporate culture is one that they look to remove anything that their members find of value one step at a time. I put my money on this last one 😂.
Final Thoughts
After writing this I am starting to think that maybe we need to change the way we value and chase elite status? How much value do we actually get from it? Is the value what we really think it is or is it all a mirage built by profit centers? I guess that is a different discussion for a different day.
I don’t think we can say that Marriott closed this loophole because of cost. At least I can’t see where the cost is but help me out in the comments section if you have inside information. Regardless of that I do think we can answer the question what does elite status actually cost hotels? Not a whole lot when you really think about it.
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I had about 50-60 hotel nights this year (all leisure), and none of them were purchased through the hotel websites for points. Most recent stay: 2 nights SpringHill Suites, St. Louis. Marriott wanted $301 all-in for the member rate, and I could have received points. I opted for a Priceline rate at $170 all-in, plus a potential Ibotta rebate (which I don’t ever assume will happen). In my experience, hotel website rates are frequently 50-100% higher than alternate non-matchable sources.
Don’t forget, you are paying handsomely for your status and points.
Great point Tino!
I just finished hosting a 2 day training room rental at a Courtyard by Marriott with food for roughly $2500. I needed 4 extra nights to get to Platinum, and the 10 night bonus from the meeting got me over the hump. Had Marriott not offered that promo, I would have booked elsewhere to save a couple of bucks. Needless to say, I won’t consider Marriott first next year when I look to book my next training event.
I do find it a weird place to cut because I think there were more than a few people like you out there that chose the location in part because of it. And I don’t think it was enough people to be much of a savings by removing it so yeah I don’t get the decision.
Whether or not you feel Marriott or their status is worth much, Marriott is trying to protect their brand.
Easily acquiring 20% of Plat status cheapens its allure. Is owning a Lexus worth the premium over a Toyota (even though their parent company is the same)?
Good point. I guess they have to weigh is it worth the loss in loyalty perceived or otherwise to make the change.
It is interesting to see them take one route and see Hilton go the exact opposite. I would put Hyatt in the middle making it difficult but obtainable to get status via credit card spend.
Globalist status with Hyatt takes $140,000 of cc spend ($125k to requalify) + the 5 nights that are auto given with the Hyatt cc. Marriott Plat takes $75k of cc spend. The 2 aren’t even close on spend alone – Marriott wins by far.
Hyatt otherwise requires 60 nights vs 50 Marriott nights. Again Marriott is much less difficult.
There are different ways of hitting each status, of course, but Hyatt is by far the most difficult (esp by not having the volume of props Marriott does to even make the spend!). Then Marriott. Then Hilton as you have already pointed out with either the Aspire or $40k spend on the Ascend (or whatever they are calling it these days) or 30 stays.
Interesting take Pam but flawed –
1. Globalist is top tier status with far more benefits than Marriott Platinum which is only mid or mid upper tier.
2. Spend for Globalist with cc wouldn’t be $140k because you combine it with your hotel stays. Manufacturing status if one doesn’t ever stay at Hyatt doesn’t make any sense, so presumably, one has some actual stays with elite nights to combine with the spend. Vs with Amex Marriott Brilliant, even if you’re at 49 elite nights, you’ll still need to spend $75k for the Platinum elite status.
“There are different ways of hitting each status, of course, but Hyatt is by far the most difficult (esp by not having the volume of props Marriott does to even make the spend!)“
Which status is “better” is a topic for a different post!
Hyatt Globalist is also a ton more valuable than Marriott Platinum status which is essentially Hilton Gold status so I can see why it is more difficult. And I also agree with Alex that it lets you take the combo approach of stays and spend where Marriott does not. I think that makes Hyatt better than you give it credit for.
@ Mark – I was addressing your previous reply: “I would put Hyatt in the middle making it difficult but obtainable to get status via credit card spend” from a strict spend standpoint v spend + nights.
You self-admittedly spend a lot of your hotel stays at Hyatt Place, I spend at St Regis. Once you receive a few free $100 breakfasts & beachfront suite upgrades yourself (& a greater chance of even getting by having exponentially more properties with upgradable rooms & lounges), you will see where the Globalist v Plat benefits truly begin to reveal themselves.
I am otherwise good with Prive + Guest of Honor privileges for making Hyatt work fine for me on breakfast & upgrades without $140k spend or 60 nights or some tedious combo of the two.
I’m guessing that if you get 10 nights for setting up a meeting, that’s 10 nights of lost revenue. If we assume $150 per night, that’s $1500 of lost revenue. That seems like the real cost to me.
That is assuming that these nights will be filled with actual stays by the people using it. I am not so sure that does happen. I think people used this to bridge the gap and may just stick with the lower level or move on entirely. But maybe that is their ultimate goal.
Now if people just mattress run 10 more nights to make up the difference or shift more stays to Marriott from other brands then you would be correct Frank and Marriott comes out on top.
I think they can’t stand the idea of people getting status without a head in bed, and I foresee the 15 nights from your card being the next benefit cut. Bold prediction: Marriott reduces the 15 to 10 credits for their credit cards in 2020.
I could see them reducing that too. They may only want the true business road warrior to have top tier status.
My assumption is that Marriott has looked around after combining all those SPG and Marriott accounts, with co-branded cards offering status with 2 banks, and said “good grief everybody has status, therefore nobody has status”.
I’m not saying it’s not self-serving, but I’ve assumed Marriott would take *some* measures to pull back on the number of top-tier statuses out there. I was 5+ years away from Lifetime Status with SPG and even farther with Marriott when they merged and wound up at Lifetime Platinum. If status is so watered-down that it no longer means anything the loyalty aspect of the program goes away.
That’s just my opinion, I’m no “insider” and I’ve kind of walked away from Marriott…because their status is significantly diluted compared to Hyatt…so I can’t say I have great knowledge or perspective but that was just my assumption.
I think that could be a possibility for sure. A lot of people have lifetime status with the brands combined so they may be trying to reduce their overall load wherever they can.
I think it’s because Marriott has become like Cersei Lannister in GoT (Game of Thrones)… hateful and spiteful.
Haha that is what I was leaning towards too. It is less uncommon than you think for companies to become adversarial to their clients. It rarely ends well for the company but it does happen.
But Marriott is just so GOOD at being adversarial with their clients, and they’re going for great on this.
🙂
I also wonder how much those 15 elite nights cost credit card issuers as well. It can’t be much since even the no fee card offers it. I got annoyed when by boundless card didn’t post my nights this year. I called chase and they said I wasn’t eligible since I got the SUB which didn’t make sense. I replied those elite nights are a separate perk. I finally got the nights posted but not sure why it was so difficult.
That is weird that they wouldn’t post right away. It is crazy how often reps don’t know what they are talking about and just wing it on the fly.
I would imagine it costs the card issuers nothing or very little to offer the elite nights. I think it most likely comes from the program.
Not just the short-run perspective you’re taking in this blog entry is relevant.
In the short run, it’s true that it costs a hotel next to nothing to upgrade an elite to a higher room category which would otherwise remain empty. It’s also true that the variable cost of a hotel breakfast given to an elite free of charge is low (it’s essentially the food and beverage the elite consumes which the hotel buys cheaply).
BUT: There’s also a long run perspective. For example, when you decide upon the size of the restaurant, you have to factor in an expection that, say, 20+% elites at your property eligible for free breakfast. This probably means you need a bigger restaurant. It probably means you need more staff. People who would have skipped breakfast will now show up because it’s free for them.
There’s also a different cost concept that’s highly relevant. Among those 20+% eligible for free breakfast through elite status, some would have paid the regular breakfast rate if the breakfast wasn’t taken of by their elite status. That’s money left on the table right there! (It’s called opportunity cost.)
Similar arguments can be made wrt room upgrades. Say, 80% of your customers book standard (perhaps the travel policy requires it). 20% book higher room cats. BUT, when you construct the hotel, maybe you just put in 70% standard room and 30% higher cat rooms so you have some buffer to upgrade elites.
Sure, a hotel has some sort of natural buffer due to occupancy rates being typically under 100%. But that buffer may not be enough. I know many hotels which see like 20-30% elite members. So basically, if you intend to treat elites well, you need a premium-heavier config right when you build the property. That costs money.
And again, there’s potentially the issue of opportunity cost again. What if you forgoe revenue because an elite books a lower room category because he expects an upgrade?
It’s not that simple to determine hotels’/chains’ costs.
Great comment John.
On the restaurant side I would say maybe the restaurant doesn’t get enough business to properly staff it without elites in there. And even though they aren’t paying they are most likely giving your employees tips they would not have otherwise received. Also if it is a buffet style then I don’t think it adjusts costs all that much honestly. Now assuming that some of the people getting the free food would have paid otherwise is a good point and one I should have considered. We don’t know for sure if the hotel covers the breakfast cost or if the program does either. Could that have been negotiated into the stay rates etc? I would have to believe it was considered and is baked in somewhere if not reimbursed. So I guess we could swing it back the other way and say more people eat in the restaurant which in turn makes it more viable because of status. Without knowing the answer to that question though we can’t say for sure.
On the build out/suite point I don’t think they change anything for elites. Since the suites are only given upon arrival (and often not offered when they should be) I think they only give the upgrades when they know it won’t be sold or if they think they can sell the standard room/overbooked them.
It is difficult to calculate hotel chains costs for sure. I would love to sit down with someone on the inside of everything some time…if you are out there please email me so I can buy you dinner and discuss it!
Some valid considerations, but speaking personally as a value oriented traveler, a lot of the reason I’ll look first at a company I have status with is that that status presumably has value. If there’s no guaranteed late checkout, no breakfast included, no lounge access, and no suite upgrades, why not just stay with IHG?