IHG introduces variable pricing, says it will expand

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Last week, IHG Rewards Club debuted variable award pricing at properties in Asia. Loyalty Lobby has now confirmed with IHG that they intend to expand this to more properties, tying award pricing more closely to cash pricing. That’s bad news — variable pricing likely means it will be increasingly more difficult to get better than average value out of IHG points and free night certificates.

I’ll bet that everyone’s beloved Kimpton Seafire won’t be available for any fewer points than today but may become even more expensive for award stays when dynamic pricing spreads.

IHG confirms move toward revenue-based model

While IHG had last year confirmed the rumor that they intended to offer dynamic pricing, German blog You Have Been Upgraded broke the news the other day that this dynamic pricing was now live at a number of properties in Asia, where awards now vary in price based on which night(s) you search. A number of blogs reported on that over the past few days (See One Mile at a Time for a number of examples showing new dynamic pricing).

This morning, Loyalty Lobby reported a response from IHG confirming that they started offering dynamic pricing at some properties last week and confirming their intention to make this more like cash rates:

“With this program update, the amount of points required for members to redeem a Reward Night will now flex up and down, just like cash rates for room bookings.”

See the post at Loyalty Lobby for the full email, which also confirms that variable pricing will continue to roll out to properties around the world during 2020.

I take that response to say that IHG intends for their program to more closely resemble a revenue-based award structure with a more fixed value for points, which isn’t surprising given the fact that IHG got rid of their award charts a few years ago. That all follows Hilton’s model where award pricing can vary wildly.

While this means that properties may sometimes cost fewer points, the bad news is that it means that there will be fewer opportunities to get excellent value from points since IHG can just jack up the number of points required as room rates increase. With awards now costing as many as 100K points per night at some properties, there is plenty of range for IHG to adjust properties upward.

I suspect we’ll continue to see IHG points worth about half a cent each, but many fewer opportunities to get significantly more value than that in the long run.

What will this mean for free night certificates?

A big kicker here in my opinion is the effect this will have on free night certificates. Since the free night certificates that come with the IHG Rewards Club Premier card (and the older, no-longer-available IHG Rewards Club Select card) are now capped at a value of up to 40,000 points per night, there are likely properties where those certificates work today that will turn into YMMV situations in the future depending on cash rates. Theoretically, this means that during slower seasons you may be able to use those free night certificates at nicer properties (when cash rates are low, perhaps they will cost fewer points for an award stay), but I wouldn’t set my hopes on that. It will likely become harder to use those free night certificates.

In a recent Frequent Miler on the Air, Greg and I discussed the IHG credit cards and I said that the IHG Rewards Club Premier isn’t an automatic keeper for its free night certificate in my book. Members can often buy 40K points for $200. Since points can be used for multiple nights at a lower tier property or combined with other points for a higher tier property or easily kept from expiring so they can be used for years into the future, points are clearly more valuable than a free night certificate that can only be used for exactly one night for exactly one year. To me, it’s hard to value the free night certificate over $150 and I don’t think I’d pay anywhere near that to buy such a certificate unless I knew exactly when and where I’d use it, so the $89 annual fee tests the upper boundaries of what I’d be willing to pay speculatively for an IHG 40K cert. I said that the older card with the $49 fee is still a no-brainer for me, but the $89 one really depends on whether or not you use the other benefits of the card.

Unless we see a higher value assigned to IHG points as they become more dynamic (unlikely), I’d say that the IHG free night certificates are probably losing some value with this news.

Bottom line

IHG going more revenue based isn’t new news, but it’s still disappointing to see a move toward opaque pricing ushered in at a time when nobody is traveling (and when loyalty programs are likely going to need to do everything they can to attract guests back when it becomes safe to travel again). We’ll keep our eyes out for bright spots as this spreads, but overall I expect the net effect will be a negative for most members.

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