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.
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 😉.
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.
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.
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 😂.
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.