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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Gene
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Gene

This is a massive devaluation of IHG points, which are likely now worth 0.30-0.35 cpp. No surprise here.

Debitnm
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Debitnm

Will Kimpton properties be caught in this mess too?

Larry
Guest
Larry

From the outside looking in — just going by affiliate enthusiasm and coverage — it felt like Chase was really pushing the premier card hard. The spend was pretty modest so I doubt there was much breakage and at 140k a pop, IHG’s outstanding points exposure likely saw a material increase over the last six months. I wonder if this will be a bit of a trend — massive sell offs of points followed immediately by devaluations. It has always been like this but they traditionally have been more subtle about not making it appear to be a ponzi scheme. How often can they go to this well? At some point there just won’t be any juice left to squeeze out of these oranges.

Gene
Guest
Gene

You wonder if it WILL BE a trend? It already is.

losingtrader
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losingtrader

Is it true they are charging 5000 points per night for staying home?

Greg The Frequent Miler
Admin

LOL. The charge for staying home is variable too. For you, they’ll charge 40,000 points. Luckily you can use your free night cert for one night at home.

losingtrader
Guest
losingtrader

Seriously, yesterday I ordered a subscription to every magazine on Mags for Miles.
“How to Run A Hotel Group For Dummies” should be interesting.

CaveDweller
Guest
CaveDweller

You should be ashamed of yourself these people have many degrees. It’s not their fault they spent all of their money and want a bailout. Let’s hope they get brought out for pennies on the dollar.Hopefully by a nice hedgefund.
#stayincave

Matthew G
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Matthew G

For the person that doesn’t have a Hotel card or Global entry, this still seems like a solid SUB for 140K at $89

Is it worth keeping? Who knows.

Is it worth 5/24 slot is the real question…

Brian
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Brian

I have the old IHG card with the $49 annual fee. After years of being over 5/25, I’m finally under and was thinking about getting the new IHG card later this year, as having 2 free night certs is more than twice as valuable as having 1 free night cert. Unfortunately, this change makes that strategy dubious. Not only am I less likely to find good value for the $89 annual fee, but I’d now potentially run into the problem where the hotel I want to stay at for 2 nights is under 40K for one of the nights but not the other.

losingtrader
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losingtrader

Without assets on deposit at Chase, good luck getting any card with 30 million unemployed.

Brian
Guest
Brian

My mom was approved for a CIP a week ago for a prerevenue business. I was approved for same in early April. Neither of us has money with Chase.