Why hotel credit cards became more important – except the Starwood Amex

My friend Andy was in a British Airways lounge in the US last week when he got talking to a fellow passenger who turned out to be a senior UK Amex employee.  The conversation turned to the Starwood Preferred Guest American Express card and its pros and cons.

As I know she will be reading this, here is my view.

Hotel credit cards in the UK are currently on a roll. 

There are four reasons for this:

• the card providers have done a good job of packaging points with hotel status benefits
• recent rises in hotel room rates as the world economy improves make hotel points more valuable
• the Avios devaluation has made Avios-earning credit cards less attractive
• the aggressive airline sales recently have seen BA, KLM and Qatar selling business class seats for little more than the taxes required for an Avios redemption.  Passengers with flexible diaries are realising that paying 100% cash (and being willing to start their flight elsewhere in Europe) and being opportunistic is a better deal than using miles.

The main UK Visa / Mastercard-based hotel cards each offer a decent reason for getting them:

IHG Rewards Club Premium Visa costs £99 and, even ignoring the generous sign-up bonus, offers long-term value.  You get top-tier IHG Rewards Club Platinum status and a free night every year in any of their properties for spending £10,000.  The latter is worth £250 at a good InterContinental.  The two points earned per £1 are worth 1p which is good.  If you sign up before March 31 you receive 60,000 IHG points which I value at £300.

Hilton HHonors Platinum Visa is free and has a great sign-up deal of a free night anywhere (including the Conrad Maldives, usually £1000 in peak season!).  The earning rate is only average (2 points per £1, worth 0.6p) but spending £10,000 gets you Hilton HHonors Gold status.  That gets you an upgrade and free breakfast on every Hilton stay, with the exception of Waldorf-Astoria.

Even the Marriott Rewards Mastercard has its good points.  It is free, you get Marriott Rewards Silver status and 10,000 points (worth £50-ish) and you get another 2,000 free points every year.  The earn rate is poor, though, at 1 point per £1, worth 0.5p.

Compared to these three cards, the Starwood Preferred Guest American Express card doesn’t have much to offer long term (I am ignoring the one-off sign-up bonus in this discussion):

There is a £75 annual fee

You earn 1 point per £1 – worth around 0.75p to 1.25p depending on whether you use them for airline miles or Starwood hotel stays

There are no bonus points for spending at Starwood hotels

You receive SPG Preferred Guest Plus status for signing up (this is an unadvertised benefit)

You receive Starwood Gold status for spending £15,000 – this has just been devalued now that SPG gives free internet to all guests

You receive a free weekend night in a Category 1-4 hotel for spending £25,000 per year.  Starwood has SEVEN reward categories in total.

It is the latter benefit that blows my mind.  I genuinely cannot get inside the head of the person who signed that off.  Unless you can charge business expenses to a personal credit card, I estimate that you would need to be earning £150,000 per year in order to make £25,000 of discretionary spending on an American Express card.  This substantially limits the market for the card.

No other UK credit card requires such a high spend target to trigger a reward.

There are few decent SPG properties in Europe in Categories 1-4.  The ONLY UK hotels in Category 1-4 are the Sheraton Skyline, Sheraton Heathrow and aloft at the Excel conference centre and in Liverpool.  These are not, to put it mildly, top weekend break destinations.

The sort of person who earns £150,000 in order to be able to put £25,000 of personal spend through an Amex does NOT spend their leisure time in Category 1-4 SPG hotels!

Even then, it is only one free night.  At a weekend.  It is unlikely the cash cost of such a room would be more than £75 – a poor return on £25,000!

What does the SPG Amex pay you back?

Let’s assume you can get 1.25p of value from a Starwood point, which is generous.

£5,000 annual spend earns 5,000 points (£62.50 back) – £75 fee = net loss of £12.50

£10,000 annual spend earns 10,000 points (£125) – £75 fee = £50 of benefits (0.5% back)

£15,000 annual spend earns 15,000 points (£187.50) – £75 fee = £117.50 of benefits (0.78% back) plus any value you derive from SPG Gold status

£25,000 annual spend earns 25,000 points (£312.50) – £75 fee = £237.50 of benefits (0.95% back) plus at most £75 of value from your free Cat 1-4 weekend night – in reality most people would let this go unused

You can get substantially better returns from other fee-paying cards (eg two airline miles per £1 on some Amex cards) or equivalent returns from a card with no fee.

What can be done?

As I said at the top of this article, hotels cards are undergoing a renaissance at the moment in the UK.  How can SPG stop itself missing the boat?

This is my proposal:

Reduce the spend threshold for the free night from £25,000 to £10,000 or £15,000

Make the voucher valid for any category of hotel

The ‘weekend only’ limitation can remain

Offer a 2^nd night, when booked with the free night voucher, at a 50% discount to Best Available Rate

Remember that, even if you brought in all the changes above, you are still only matching the free night benefit of the IHG Rewards Club Premium Visa – and the free night voucher on that card does NOT have a ‘weekends only’ restriction.  It is also easier to rack up spending on the IHG card as it is a more widely accepted Visa.

Starwood has one advantage that IHG does not, however.  There are a long list of genuinely impressive European properties – the Gritti Palace in Venice, the Imperial in Vienna etc.  These are very fine hotels indeed.

Speaking personally, I would put £10,000 or £15,000 per year through my SPG Amex if I could get a cheap (1 night free, 1 night at half-price) weekend away each year at a luxury European SPG property.  This could easily become an annual ritual for some couples and drive substantial loyalty to the card.

Reducing the spend limit from £25,000 would also make the Starwood Amex a realistic ‘second card’ for holders of the British Airways Premium Plus Amex.  A significant number of BA American Express holders stop using the card once they have triggered their 2-4-1 voucher at £10,000 of spend.  With the SPG free night set at a realistic level they may be willing to move their next £10,000 – £15,000 of annual spend to the Starwood Amex.

Is Starwood willing to do this? I have been told, via a member of SPG’s private online community forum, that Starwood is planning a radical change – the card will have a new design!  That may not be enough in the current market.

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Want to earn more points from credit cards? – April 2024 update

If you are looking to apply for a new credit card, here are our top recommendations based on the current sign-up bonuses.

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the best of the other deals currently available.

Earning miles and points from small business cards

If you are a sole trader or run a small company, you may also want to check out these offers:

SPECIAL OFFER: Until 12th May 2024, the Capital on Tap Business Rewards Visa card is offering a bonus of 30,000 points, convertible into 30,000 Avios. You must have a Limited Company to apply. Click here to learn more and click here to apply.

For a non-American Express option, we also recommend the Barclaycard Select Cashback card for sole traders and small businesses. It is FREE and you receive 1% cashback on your spending.