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

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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 2nd 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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Comments (81)

  • Ralph says:

    The 10,000 point sign up bonus and 5,000 referral bonus is what makes this card strategically valuable for me. £75 annual charge for the card but a pro rata refund means that each family member that I refer and that lives in my household (AmEx do not check the electoral roll) results in 10,000 spg points for them and 5,000 for me. Factor in a free transfer of points from my family members spg account to mine as we are in the same household and I am spg gold through AmEx platinum too. So refer a card, spend on the referred card and cancel the referred card = 15,000 spg points for £10. I have generated 90,000 spg points in the past 6 months and am now waiting 6 months do do it all again. The Westin New Jersey was 12,000 points and I got an upgrade their. Booked 2 rooms for 2 nights at the Sheraton Universal in Ca and the Westin in Phoenix. Finally, don’t forget about spg points and cash whet you can book for example a $400 room in done properties for 5,000 points and $75

    • Jason says:

      Ralph,

      I’m still trying to get my head around how you are referring family members at your house, that don’t live with you – are they at university?

      • Ralph says:

        No, they all work. They all also meet the £30,000 application requirement 😉

        As I said, American Express do not check the Electoral Roll and my family members never get to see the card, I put the £1,000 spend on them and then cancel them after achieving the bonus.

        • Ralph says:

          …with their consent of course.

          • Jason says:

            Looks like I’ll be applying for the wife and me every 6 months, I don’t think our 7&9 year old’s will get approved by amex 🙂

    • Kipto says:

      Further to the above, one advantage
      of SPG points is that when booking four nights at the same hotel you get a fifth night free and you can use points to get access to the club lounge which gives you breakfast and hot snacks between 4-7pm if there is a club lounge at the hotel.

      • Rob says:

        Just for clarity, you can’t do this at the hotel – you need to ring SPG and use points to upgrade your room to a Club room, if the hotel is willing to make one available.

  • Oh! Matron! says:

    Maybe the hotel / point benefits aren’t so great, but let’s not forget the rather good travel insurance that comes with it. Not sure it merits the £120 annual fee, but it’s still good.

  • Jordan D says:

    Regarding the Hilton Visa or SPG Amex – did anyone ever get to the bottom of the churn time on this? I’ve not had the latter for quite a while now ….

    • Rob says:

      SPG is 6 months, isn’t it? It will be on the Amex website.

      3 months seems good enough to get a Barclays card again after cancelling although personally I would not push my luck that soon.

      • idrive says:

        for Barclaycard thsat is 6 months. i wanted to apply for another product within the family ( i have an old Platinum) and my banker told me i could not. I had to cxl and wait 6 months…so my problem now is that i probably can not apply for a hotel card if still keeping that Platinum…bah!

  • The_Real_A says:

    I dont really understand where the money is for the hotels/credit card suppliers. If we assume people taking these cards are affluent/informed its unlikely they would carry a balance and pay interest. At a an average 2% transaction fee on a £10000 spend thats only £200 margin to be shared across the hotel and credit card company… ?

    • Scottnothing says:

      The money for the hotel companies is in attracting affluent people to properties operated by that hotel in the hope they spend up big on their cards while on site, and in the hope of building brand loyalty.

      I have booked 6 Hilton stays for personal travel between Easter and July since taking out the Hilton HHonors Credit Card last month – lured by the free night certificate (which I am using for a Sunday night stay at Conrad Tokyo in April), the various Hilton promotions that are running at present and a Hilton Gold fast track offer I picked up. I will be more inclined to spend money at the bar/restaurant/spa/breakfast buffet at those properties knowing that I have bagged 33 per cent off on each EMEA stay, plus will earn bonus Avios (on the Conrad and Waldorf stays) and HHonors points (due to the double your points promotion) in addition to the increased points earning rate for settling my bill on the card.

      • Scottnothing says:

        Should have also mentioned that Hilton takes a commission on every account opened. This is stated on the Barclaycard website!

  • Mike says:

    The value can be a lot worse, depending on what other cards are held.

    E.g. A holder of the Amex Plat would already have SPG gold and could earn 0.5 SPG per £ spent as-is.

    Assuming a £25k spend, they get the ‘free night’ which at best covers the card fee. That just leaves the points, which would be 12,500 more than they would have got just spending on the Plat card. So the ‘added value’ works out at £156.25

  • Wade says:

    Raffles, the SPG conversion bonus (5000 for every 20,000) – does this mean it makes more sense to transfer MR > SPG > [airline]? I’m specifically looking at an SQ redemption here and this could nearly push me over the line.

  • Andy says:

    Another SPG specific point is the contrast with the US SPG Card (a location where SPG itself has far more brand appeal).

    The US SPG Amex gives the following benefits for circa 50% of the annual fee of the UK Card.

    5 nights SPG Credit annually just for having the card
    2 stay credits annually just from having the card
    1 SPG point per dollar spent (not pound)
    Double credit for spend with SPG

    The U.S. card is quite a decent proposition it is a shame that the UK card is so weak in comparison when the Hilton and IHG cards seem far more on a par with their US equivalents. The earn to burn ratios from SPG stays also hurt the value for the SPG card.

    I am pushing more of my own spend to my business platinum amex charge card for the advantage of neutrality of outcome even though the earning rate is shocking poor. I shall be sad to see the end of the Enhanced earning rates on the BD MasterCard.

  • SteveC says:

    Is the Hilton free night any night? You say a free night but the sign up page says, “for any weekend night”. Is it restricted to only weekends?