Is the IHG sky falling? My take on variable point pricing.

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In February, IHG confirmed that they plan to test variable award pricing in 2019.  Their news release included the following little gem:

Testing new features for 2019 roll-out, designed to increase member engagement with variable point pricing.

Loyalty Lobby asked IHG for clarification and was told this:

As part of a continued effort to enrich the value proposition for our IHG Rewards Club members, we’ll be introducing variable pricing on reward night redemptions. We’re testing new features for a planned roll-out this year, and will be sharing additional details as they are available.

Most coverage of this announcement has been negative.  After all, this may mean the end of getting outsized value from your points.  When hotel programs maintain a fixed award pricing scheme, it’s often possible to get great value by using points when the hotel prices are otherwise very high.  For example, while IHG points on average tend to be worth just over half a cent each, it’s often possible to find closer to 1 cent per point value:

IHG fixed pricing vs IHG variable pricing
Here’s a generic example of a hotel with a higher than usual room rate ($484) which is available at its standard award price: 50,000 points. This results in a per point value of approximately 1 cent per point (probably a bit higher than that once taxes are factored in).

And, if you’re really lucky you may be able to get closer to 2 cents per point value:

IHG fixed pricing vs IHG variable pricing
The InterContinental Bora Bora Resort & Thalasso Spa. The standard award price is 70,000 points per night. Compared to a nightly rate of over $1300, this award delivers nearly 2 cents per point value.

When IHG moves to variable pricing, deals like those above might no longer be possible.  IHG may automatically price these awards higher in order to track with high demand or high paid prices.  If that happens, it may be nearly impossible to get much better than half a cent value for award stays.

Counterpoint

InterContinental Bora Bora Resort & Thalasso Spa

There’s little doubt that free nights at the InterContinental Bora Bora Resort & Thalasso Spa is a great way to use your points, but award availability at this resort is awful.  In researching this post, I only found one award night available for the rest of this year.  And that was for a stay just 2 nights away from the day of the search.  So, yeah, incredible awards are possible today, but they can be tough to get.

There are three reasons that variable pricing may be a good thing if my guesses come to fruition:

1. Hard to get awards become possible

If your heart is set on booking an overwater bungalow with points, it may get easier to do so.  But it will be more expensive.  It’s possible, for example, that the InterContinental Bora Bora Resort & Thalasso Spa will suddenly show lots of available awards once they’re free to price those awards much higher.

2. Points will be useful when prices are low

Many times when I’ve wanted to use IHG points for a stay, I’ve found that the room rates are very low — too low in my mind to justify spending points.  For example, if a 60K per night hotel is available for $200 per night, I won’t spend my IHG points for that stay.  If I did, I would get only 0.33 cents per point value.  With variable award pricing, we should see the award price for that some hotel drop during these low occupancy dates.

3. Free night certificates become useful again

Free night certificates available annually from IHG credit cards used to be the best deal around since they had no cap.  You could literally use them anywhere a free night was available, even the InterContinental Bora Bora Resort & Thalasso Spa (if you could magically find a free night there!).  Now, certificates issued on or after May 1 2019 will be capped at 40,000 points per night.  I’ve been particularly bummed about this because I love Kimpton hotels and almost all (all?) of them currently cost more than 40,000 points per night.  With variable pricing, it may be possible to use 40K free night certificates at these hotels by visiting them during low occupancy dates.

Take this example from Nick’s post when Kimpton first became available to book with points.  He searched for Kimpton options in Chicago and found that cash prices were quite low, but award rates started at 45,000 points per night:

As things stand today, none of the Chicago Kimpton hotels are available to book with a 40K free night certificate.  However, it’s likely that variable award pricing will mean that award prices will drop to or below that threshold when paid prices are as low as shown above.

My take

Up until now I’ve had a hard time getting good value from IHG rewards with the exception of the uncapped free night certificates.  And I’ve been dreading the day when my wife and I are next issued certificates capped at 40K.  Ooh boy, we can stay in a Holiday Inn Express (apologies to fans of that brand).  We will no longer be able to use them for fabulous Kimpton stays (like this one).  But, variable pricing gives me a glimmer of hope.  Sure, we won’t be able to use the certificates at outrageously priced resorts, but maybe, just maybe, we’ll be able to spend a nice weekend in Chicago or New York at a great Kimpton hotel… during the off season.

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