Hotel Points Programs Offer More Than a Free Room
Loyal hotel chain customers sitting on a stack of points are in a good position as major hotel companies such as Starwood, Global Hyatt Corp., Hilton Hotels Corp., and InterContinental Hotels Group now offer customers enrolled in their loyalty programs the option to spend their points on "unique experiences" rather than just getting free nights or room upgrades.
Why are hotels offering these types of programs? One reason is that they want to create more loyalty and good publicity for their programs. Another reason may be that these once-in-a-lifetime offers often use up a lot of points. As customers rack up more points. hotels lose more money on points programs. As the WSJ article explains it, hotel companies often don't own many of their own properties, an independent party owns the building and manages the property under the hotel brand. The independent party must be paid for all of those free nights . A special fund is set up to pay the costs of potential redemptions of points and a hotel brand must make sure that the fund has enough money if all points get cashed in. Of course the VIP experiences also cost the hotels money.
The Starwood program is unique in that they have an online auction system that lets members to bid for experiences in online auctions. It's a pretty clever gimmick since it combines the "something for nothing" feeling of redeeming points along with the competitive thrill of online bidding. These types of experience trips also may help lure the traveler who earns his points on business travel into spending his points and his vacation time with the same hotel chain.