Is IHG Rewards Club “moving to variable points pricing”? It might be.
InterContinental Hotels Group, owner of Holiday Inn, HI Express, Hotel Indigo, Crowne Plaza etc, published its 2018 results on Tuesday.
The summary is here, but I have summarised the summary into news I think is relevant:
A new brand, not named so far, will launch in 2019. It will be an ‘upper midscale all-suites’ brand. How this differentiates from Staybridge, which is already ‘upper midscale’ in the UK to my mind, and Candlewood remains to be seen.
The company now has 837,000 rooms globally
The number of UK rooms grew 8% in 2018, helped by the Principal Hotels acquisition
Room rates are falling in the Middle East (REVPAR down 6% in 2018) due to oversupply
The avid brand has now signed over 170 contracts although only one hotel – in Oklahoma – is actually open. These will be new build ‘cheap and cheerful’ hotels which will charge noticeably less than an equivalent Holiday Inn Express.
voco, the new conversion brand, has three hotels open with 13 signed. We are reviewing the Cardiff hotel over the weekend.
Bookings by IHG Rewards Club members rose from 39% to 43% (over 50% in the Americas)
IHG Rewards Club members are 7x more likely to book direct than non-members
Importantly for hotels, revenue from IHG Rewards Club members is 25% higher than from non-members (this is, I imagine, due to the 20%+ commission charged by Expedia, booking.com etc and the propensity for loyal guests to book superior room categories)
Here is the key thing that caught my eye:
IHG Rewards Club is “testing new features for 2019 roll-out, designed to increase member engagement with variable point pricing”
It is not clear what this means. If we’re lucky, it MAY be a move to a Hilton model whereby redemption rates fall on dates where cash costs are low. It may also be linked to the current New York promotion whereby certain hotels are currently on special offer for points until 30th April.
Of course, there is also a massive downside scenario whereby IHG Rewards Club moves to 100% variable pricing. Points prices become uncapped and you get a fixed amount, say 0.5c, per point. If the InterContinental Times Square pictured below is selling for $600, you would need 120,000 points.
I doubt IHG would do this – it is hardly likely to “increase member engagement” – but we need to keep an eye on it. The Hilton Honors model has, I think, worked well with hotels having a points cap but members still able to get redemption value on nights where cash rates are low.
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