Hotels.com has recently launched a credit card in the United States. I should say upfront that I don’t have any news about a similar card being launched in the UK in the short term.
However, I thought it was worth covering because it uses an interesting rewards model.
Hotels.com Rewards is a very good loyalty which, for many people, works better than traditional hotel loyalty schemes.
Put simply, for every 10 nights you stay, you receive a free night worth the average ex-VAT price of those 10 nights.
This idea has a lot going for it. Hotels.com features 50x more hotels than even the largest global chain. You can earn rewards without ever having to compromise on location, price or hotel quality to stay at a particular brand.
Redeeming is also easier. Your free night credit can be topped up to pay for a more expensive room, allowing you to book suites or executive rooms if you with.
The only downside is that Hotels.com bookings do not earn points or elite night credit with the chain where you stay. Your elite benefits are also blocked, so a Marriott Platinum Elite won’t get free breakfast or upgrades on Hotels.com bookings at Marriott properties.
It’s a trade off, but one that many are happy to make. You can learn more about Hotels.com Rewards here.
How does the Hotels.com Rewards credit card reward you?
Since Hotels.com Rewards is not points based, the credit card cannot give you points for every $1 you spend.
Instead, it has gone down a different route.
You receive 1 ‘stamp’ in Hotels.com Rewards for every $500 you spend on their credit card.
Each ‘stamp’ is the equivalent of a $110 hotel room.
Since you each ‘stamp’ is worth 10% of the value of the room, you are effectively earning $11 in Hotels.com Rewards credit for every $500 you spend on their credit card. This is a return of 2.2%.
What other card benefits do you get?
The card comes with other goodies on top:
a free night voucher worth $125 when you spend $1,000 within three months
Hotels.com Rewards Silver membership for your first 12 months of card membership (provides extra benefits at some hotels)
Would a similar card work in the UK?
There is, of course, no way that you would ever see a credit card which was so generous in the UK.
Interchange fees are capped at 0.3% here. In the US, retailers can expect to pay around 2% for accepting a Visa or Mastercard, with more for American Express, and that is before terminal fees etc.
That said ….. a card which offered you a free night ‘stamp’ worth £50 for every £1,000 you spent would work.
Hotels.com could probably break even on this basis, assuming they fully shared in the P&L of the card with the issuer. This is the model that Virgin Atlantic is using with Virgin Money.
Hotels.com would get extra upside from upselling redemption rooms (I doubt many people would be redeeming their 10 x £50 stamps for a £50 room) and driving additional cash bookings as cardholders tried to push up the average value of their free night.
Let’s see if anything emerges in 2021.