IHG will let more partners award its points – because it can now keep the money

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• JDB says:

  13 May13 May 07:12

  This published announcement is very interesting, but there is also big pressure on IHG to do more/spend more to increase the share of bookings that come via group sources rather than OTAs which dominate, even when IHG is running promotions. Individual hotels are officially quite constrained about selective discounting/running their own promotions but are pushing back hard on this because IHG isn’t doing enough to help sales.

  • Rob says:

    13 May13 May 07:34

    They should advertise with us then! Their lack of activity vs Hilton, Marriott and Hyatt is presumably noticeable.

• Chrisasaurus says:

  13 May13 May 07:20

  Should we expect others to follow suit or should we expect this to be robustly challenged given the very real reason for the current rules to exist?

  • Rob says:

    13 May13 May 07:38

    I suspect the argument goes like this: hotels pay the equivalent of (say) 0.3c per point so why should IHG be handing over 0.5c when it sells a point?

    If IHG was trying to pay less for the points it issues externally than the hotels pay for points then it would have been a harder sell.

    What I think is helping the fee reduction is the new redemption system. A major cost for loyalty schemes is when a room is redeemed at a hotel which is 95% full, at which point the hotel is paid in full and not the usual $25-$50. By moving to a revenue based system, there will be fewer people redeeming at ‘almost full’ hotels (because the high cash rates leads to a high points rate) and so they book elsewhere, cutting what IHG has to pay.

    • BBbetter says:

      13 May13 May 10:18

      But wouldnt this revenue based system put off potential points buyers?

      • Rob says:

        13 May13 May 10:30

        IHG doesn’t allow part payment with points, so there will always be people buying as a top up. But, yes, there is no-one out there doing what I do with Hyatt and Hilton, which is to buy huge volumes of points to instantly redeem for a major gain.

        • TGLoyalty says:

          13 May13 May 15:22

          IHG is dynamic based upon pricing but pretty sure it’s not just purely revenue based ie points per £ as you can get different value from different properties.

          And while it doesn’t allow part pay with points it will offer to sell you points at a better rate than its usual non offer price.

        • HampshireHog says:

          13 May13 May 18:38

          Err I did Rob on a 5 for 4 at Hilton Tokyo at 100% bonus, top value

        • Rob says:

          13 May13 May 19:53

          I meant out there in the big wide world, not the HfP world!

    • Chrisasaurus says:

      13 May13 May 10:41

      That’s fair – and level playing field on pride paid to the system makes sense.

      Challenge for the low to mid range hotels now though is that they’re seeing the brunt of the redemptions – the more closely it moves to revenue-based redemptions the more it becomes about taking any opportunity to redeem above a threshold point value and eventually, like Nectar, it becomes a matter of only ever keeping a balance until the first redemption opportunity since there’s no potential upside on the table to wait for.

• BA Flyer IHG Stayer says:

  13 May13 May 08:22

  Sometimes a hotel reveales how much it gets paid for a reward booking. Same hotel the stay has posted with values of £ 9.94 and £ 20.00 for two separate stays. It’s nice that I get both status and non status qualifying points,

  I assume the diamond breakfasts and use of lounge passes are also paid to hotels from the system fund?

  • ken says:

    13 May13 May 09:50

    Less than £10 seems incredible.

    Can the variable costs of a room (cleaning, changing & cleaning linen & towels, utilities, consumables) be much less than that ?

    What about free breakfast ? How is that accounted for.

    I know the argument sometimes goes that a guest may spend in the bar / restaurant – but I suspect 9 out of 10 don’t.

    Marginal revenue at this level is more trouble than its worth.

    • Chrisasaurus says:

      13 May13 May 10:37

      Suspect that people on a ‘free’ stay may actually be significantly less likely to spend in the hotel vs the business-funded stays that earned them the points…

      But the point I think is that in a business where revenue and costs are entirely divorced from each other (see also: Airlines) making something is preferably to making nothing just so long as you don’t allow opportunities to make ‘something’ cannibalise opportunities to make ‘lots’ – ergo restrictions on bookable points rooms so you’re selling them for cash where possible and filling in the slack with points redemptions

    • blenz101 says:

      13 May13 May 13:32

      The majority of the room cleaning costs will be labour which the hotel is paying anyway at an hourly rate if the room is cleaned or not. Bulk laundry where not undertaken in-house is usually by weight so negligible additional cost. HVAC is centralised so no real extra cost their either.

      In many markets (i.e. think beyond the UK) the hotels will make ancillary revenue through parking fees, F&B spend, paid upgrades at the desk, early / late check in fees, bag storage, commission on concierge bookings, onsite shop, airport pickups etc.

      Given the very low cost of having your already employed cleaning staff service you can see that it having a guest in a room provides far greater revenue potential than leaving the room empty.

      • ken says:

        13 May13 May 14:45

        I’ve heard these arguments for un-profitable marginal revenue for my whole working life.

        Labour costs are in many cases based zero hour contracts (or similar).
        If there are less rooms filled, you can guarantee there will be less hours paid.

        Laundry – yes you may describe it as negligible but its a real identifiable cost, doesn’t matter if charge by weight or per pillowcase / sheet.

        There is a real addition cost in electricity, hot water, air-con even if each of these elements measured in pence.
        Even toilet paper / shower gel has a real cost.

        Then there are the costs that never get attributed when looking at marginal revenue – stained sheets or towels need replacing (unless its Brtannia), micro scuffs and non chargable damage in the room, eventually the room needs re-decorating.

        The examples of incremental revenue you give (paid upgrades at the desk, early / late check in fees, bag storage, commission on concierge bookings, onsite shop, airport pickups etc) – 99 point something percent of reward booking aren’t paying for these things.

        Bag storage ? I’ve never paid for that even leaving cases for the best part of a week.

        • TGLoyalty says:

          13 May13 May 15:26

          I think the real sell is F&B spend and the chance to showcase for repeat business.

          I’m actually one of those who will happily use the money I otherwise would have spent on the room in the restaurant or bar if it’s of a good enough standard.

        • ken says:

          13 May13 May 15:59

          I absolutely get the F&B one, but how many really good restaurants are in IHG hotels ?

          And bars ? A drink before or after you go out maybe, but they are never going to be a destination.

          Hardly the American bar at the Savoy

        • TGLoyalty says:

          13 May13 May 20:54

          I always wonder that and then I walk past a town centre premier inn’s bar every other day and see many guests having a pint where I see far fewer in the more posh boutique style one a few mins walk away, which I visit for the odd drink.

          I feel Indigo hotels outside London have deffo got it right with F&B too.

  • BBbetter says:

    13 May13 May 10:33

    That explains why many indy hotels dont join the chains.

    • Rob says:

      13 May13 May 10:40

      IHG hotels are contracted to make 5% of rooms available for rewards every night, for which they are paid virtually nothing. However, it is sold to them on the premise that these rooms would otherwise be empty (remember that if occupancy goes above 95% the hotel is paid in full), the $25 they get pays for room cleaning and any F&B spend is upside.

      • Alex B says:

        13 May13 May 13:52

        In the world of variable pricing, do you know how the price of the room is calculated in this scenario? Just the average of all the rooms sold that night?

        • Chrisasaurus says:

          14 May14 May 09:09

          Correct

• BA Flyer IHG Stayer says:

  13 May13 May 10:23

  I’m just reporting what was showing when the points stay posted into my account.

  Others may have similar posts if they check. You can tell because you gain points on that cash element.

  • Ken says:

    13 May13 May 11:07

    I believe you just gobsmacked at quite how low the payment can be.

    • BA Flyer IHG Stayer says:

      14 May14 May 10:38

      No I’ve been aware of how much (or little) IHG pays hotels from previous comments from Rob.

  • John says:

    13 May13 May 11:48

    Earning points is an error.

    All my points stays, for at least the past 10 years show how much the hotel received from IHG (website only) but only rarely is there an error where I actually earn points.

    HI and HIX can be £15 to £25 but CP, Indigo, IC tend to be around the £50-£100 mark even when the hotel is not >95% full. Highest I’ve seen in my account was £450 for an IC.

    If I erroneously earn points, it isn’t on the full amount that was paid by IHG, for example I did earn points on a points stay at HI – according to my receipt IHG paid them £25 ish but somehow I earned points on a spend of £5 (definitely did not spend anything)

• Simonbr says:

  13 May13 May 11:24

  Does this news increase the liklihood of a new UK IHG points – earning credit card?

  • Rob says:

    13 May13 May 11:29

    Not really – it doesn’t change the fact that the interchange fee is so low that there is no money for the bank to buy points.

    • TGLoyalty says:

      13 May13 May 15:29

      In a world where you compare to what you had x amount of years ago.

      At some point you have to start again and look at new ways of doing it like JV approach Virgin took. $0.5 per point isn’t too bad either tbf.

      The other risk is you lose market share to Amex or chase turns up and captures market share.

      What are the chances of Amex becoming a transfer partner with IHG after this?

• Alex B says:

  13 May13 May 13:33

  Are there additional payments due to IHG if a booking goes through the IHG website as opposed to say Expedia?

  • Rob says:

    13 May13 May 14:11

    Obviously Expedia takes its 22%. The brand fee would still be due to IHG. I suspect the loyalty fee is waived, not sure about the fees lumped under ‘other’ for the system fund or whether IHG charges its own booking fee if you book direct.

    • John says:

      13 May13 May 14:21

      From I understand some chain do charge a booking fee but it’s much lower then OTA’s. I don’t think IHG charges one themselves.

  • John says:

    13 May13 May 14:14

    They pay the base fees no matter the booking channel. Booking via OTA then makes the hotel pay a rather hefty commission vs what would be payed if booked directly.

• FNT Delta Diamond says:

  13 May13 May 15:20

  Outside Asia-Pacific and Europe, IHG has neither an attractive hotel portfolio nor an attractive loyalty program. The vast majority of IHG hotels in the United States and Canada are dumpy Holiday Inn and slightly less dumpy Holiday Inn Express properties. I just don’t see how anyone makes IHG their number one program of choice.

  • Tom says:

    13 May13 May 18:39

    Over five billion people live in Asia Pacific and Europe, but you don’t see how “anyone” makes IHG their number one choice because the US hotels are poor? OK then…

  • G says:

    15 May15 May 14:21

    Correct this to “The vast majority of hotels” in the US/Canada are dumpy.

    There’s a world (better one) beyond North America.

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