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

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.

About Greg The Frequent Miler

Greg is the owner, founder, and primary author of the Frequent Miler. He earns millions of points and miles each year, mostly without flying, and dedicates this blog to teaching others how to do the same.

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Dee
Guest
Dee

I didn’t upgrade my IHG card. Will my certificate going forward be capped at 40,000? I seem to remember something about being grandfathered in for the certificate to be good for any property.

Thanks, Greg.

Wu Yi
Guest
Wu Yi

yes after May 2019 ALL certificates will be capped

Nick Reyes
Editor

^This. Certs issued after May 1, 2019 will be capped.

James
Guest
James

I just used my last unlimited cert for a stay at the Kimpton in Amsterdam this fall. Combined with SO’s free night and points, we’ll be staying three full nights. It will be interesting to see how easy it is to use the 40K certs with variable pricing.

John
Guest
John

Why not pay 60K points for a hotel that costs $200 of you can buy those 60K points for 0.5 cents each? At that price you would only be paying $150. Value is irrelevant compared to cash outlay.

Wade
Guest
Wade

Wouldn’t that be $300 for 60,000 points at .5 cents per point?

John
Guest
John

Oops yes. Posted too early on the morning!

CaveDweller
Guest
CaveDweller

Don’t forget that $200 cash cost $300 with paying the IRS ..

Kai
Guest
Kai

It may be better assuming that they peg the value of a point to 0.5 cents. But since that’s how much they are selling the points, I would assume the points would be worth less than that. So it could be 0.33 cents or even less. Be care what you wish for.

Aleks
Guest
Aleks

That switch would kill most of the value of the IHG points, especially aspirational stays. IHG would become second Hilton program, with inflated redemption rates, very quickly. And with Marriott dumping it’s loyalty base, it is becoming more like with airline miles – no more loyalty but search for a cheaper stay/flight. I hope IHG reconsider and keeps the current system in place.

Brands
Guest
Brands

Another possible silver lining-since IHG redemption values are already relatively high-maybe they cap the maximum number of points you will pay for a night similar to what the current redemption values are, and introduce variable pricing for when prices are lower. I know Hilton does this somewhat, and I also remember everyone was panicking when they introduced variable award pricing a few years ago, but I think it has been largely advantageous for us the consumers.

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[…] wonder Frequent Miler lamented this morning that there’s only 1 reward night available in all of 2019.  That’s […]

Points Adventure
Guest
Points Adventure

My favorite use of IHG pts used to be the 5k Points Break. Consistently got 2-3 CPP and took me to some interesting places.

Chuck
Guest
Chuck

Don’t really care about IHG but what I’m worried about is other programs following suit

wise2u
Guest
wise2u

point break awards ruined…check
annual certs ruined,,,,check
categories devalued to the point where cash is a better option than points….check
get rid of categories and introduce variable pricing….after all Hilton and Bonvoy got away with it.
It makes for peak pricing at all times if a property wants it and instead of blackout dates they can just inflate the award price to 3-4 times peak points (Hilton does), given time Bonvoy will too.
normal award pricing will be reduced to times of the year that nobody wants to stay and cash prices are at their lowest, or blocked until last minute when they realize that due to peak pricing award stays are down and they are at half occupancy or they will block standard awards until the week before hoping for additional cash bookings.
Variable award pricing leaves the door open for many kinds of abuse by the hotel and does nothing good for the customer…so as these greedy chains shoot their loyalty programs in the head, we move to the ones that still value a loyal point collecting customer….eventually we will all be looking for vrbo and airbnb properties while the overvalued hotel chains sit with empty rooms because they were too greedy to play nice with their loyal customers.

Probably
Guest
Probably

I thought IHG rewards barely reached the ceiling let alone the sky.

Alex
Guest
Alex

It’s gotta be too early in the morning and I must be mis-reading something, Greg. You have to be kidding trying to justify this. What is the great value of being able to use points when prices are low? You know the rules – cash when low, points when high.
There’s always value to be found in a program with categories. Expensive places like Bora Bora is just one example. I had great stays at rural hotels in France for half the cost. Last summer I had an amazing stay at Crowne Plaza Brugge for way less than what the cash rate was.
The only thing that a revenue-base program gives you is availability but who needs availability at outrageous prices?

Jessica
Guest
Jessica

I agree with others. I play the game for aspirational stays. If I am going to stay at a holiday inn for $125/night, I’m paying cash. I want to use my miles and points for those times I wouldn’t be able to afford to go otherwise, like bora bora.

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[…] is much better than when booking with points. If you read this morning’s post (See: Is the IHG sky falling? My take on variable point pricing.), Greg noted that the InterContinental Bora Bora Resort & Thalasso Spa only had one or two […]