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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 ….

(Want to earn more miles and points from credit cards?  Click here to visit our ‘Credit Cards Update’ page or use the link in the menu bar at the top of the page.)

Comments (81)

  • RT says:

    Speaking about the IHG cards… the triple points run until 31/3/15 right? How long does it take for the points to post after your first purchase?

  • Jude says:

    Another question is the Hilton free night just for a double occupancy or can it be a family room. As a family I have steered clear of the hotel cards as I didn’t think I would be able to use the free hotel night for all four of us.

    • Rob says:

      It has to be a standard redemption room. I had a look at London and you’re stuffed, not surprisingly, since rooms are smaller.

      However, looking at the regions where hotel rooms tend to be larger, you can be OK. A quick look at Yorkshire shows Hilton York, Hampton Sheffield and Hilton Sheffield offering standard redemption rooms that sleep for 4 for example.

      Worth noting that Hilton has a corporate policy of charging just 50% of the normal price for a connecting rooms for kids, Hyatt has something similar as does Accor IIRC.

  • Rochelle says:

    Just curious…which card offers 2 miles per £ spent?

  • Costa says:

    The US offer from Chase on IHG Hotel looks much better. The annual fee is 1/3rd, and they give more bonus points.

    • Costa says:

      P.S. The offer from Chase is
      – 70,000 bonus points for $1000 spend
      – annual free night (no spend requirement)
      – annual fee of $49

    • Kai says:

      Every US credit card looks much better. The market there is not comparable to the UK.

      • Costa says:

        Yes, it is often the case but not always.
        I get a better MR bonus when signing up for UK Platinum than the US Platinum, for example.
        The old “bmi AmEx” cards also earn at better rate than the UK Chase Biritish Airways Visa (2 Avios per £1 vs 1.25 Avios per $1).

  • Justin says:

    I would like the ritz carlton credit card to be available here

  • Passing By says:

    Interesting proposals, but many of them aren’t too feasible from an SPG perspective. It is good to have a comparison to the UK cards market, but also look to the US SPG card for a bit of inspiration.

    Personally my recommendations would be more along the lines of:

    – Increase the earning rate (which is something SPG have wanted, but AMEX haven’t been able to agree on) to something more like 1.5 points to the £1
    – Category 1-6 for a weekend night is far more possible. Category 7 is something usually excluded on the most aggressive SPG promos.
    – No need for a second night at half price. That is an IHG tool and SPG doesn’t operate in that space normally. Increasing the category for the weekend night (or make it any time) should do the trick.
    – Add in some nights / stays towards status. (As per the US card)

    As somebody who has been involved not just in the SPG Advisory Committee, but also on the small follow-up focus groups for UK customers, the above has been discussed. The SPG feedback was that they wanted something more in line with the US card, but they were suggesting that AMEX were reluctant to increase the offer much and felt that the UK market didn’t have as much competition. Your post shows why that is very much misguided if correct.

    Hopefully the contact AMEX will be prompted to review this as a result of your post, some of the comments here and feedback already provided by the SPG advisory committee.

    • Rob says:

      You can’t increase the earnings rate because the SPG Amex would become more generous than proprietary airline cards. That is the killer I think.

      Category 1-6 would be fine, I agree. Still plenty of good stuff in 1-6.

      SPG DOES have the SPG50 certificates which a room at 50% off rack rate, although most people forget these exist as you can’t book them online. You normally redeem 1000 points for them.

      If you have April 17th blocked out in your diary for any reason I might see you ….

  • Ant says:

    With the Hilton free night, can you cancel the card after you book the free night but before your stay? Or do you need to use your card at check in?

  • mark2 says:

    While we are talking about Hilton, I have booked a junior suite using Avios and am going to book the following two nights using my and my wife’s free night from the credit card.
    Obviously we hope to retain the suite. Is it best to just pitch up clutching the three bookings or let them know in advance as they might give the suite to someone else for the second and third nights? The email for the hotel does not seem to be available.
    I am doing the same with Holiday Inn straight afterwards.

    • Rob says:

      Good question. Partly depends on how many of the suites you think the hotel has. It does no harm to ask in advance.

    • Waribai says:

      I’ve done this before albeit one free night not two. I booked the suite and then booked the free night separately. I then emailed the hotel and asked them to link the bookings. I didn’t explicitly ask for the suite for both nights but they kept us in there anyway. I was hoping this would be the case but didn’t expect it.
      I think as Raffles says if there are a number of suites still free you should be fine. But if you are heading to a busy location and someone is ready to pay for that suite even an hour before you check in, the chances of them keeping it for you are almost nil.
      I think you should hope for the suite throughout your stay but by no means expect it!

    • mark2 says:

      Thanks for the advice. I will try and get in touch after I have booked the free rooms.