RPT-Reuters Summit-Hotel loyalty points struggle intensifies

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(For other news from the Reuters Travel and Leisure Summit,
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* Hilton faces criticism over cuts in loyalty program

* Rivals seek to take advantage with new offers

* InterContinental, Carlson, Best Western set promotions

* Executive lounges falling out of favor?

By Deena Beasley

LOS ANGELES, Feb 21 (BestGrowthStock) – Hilton Worldwide’s recent
decision to raise the number of loyalty points required for a
free stay at its hotels has some rivals smelling blood.

Competitors like InterContinental Hotels Group Plc (IHG.L: ),
Best Western and Carlson Hotels have announced promotions aimed
squarely at potentially-disgruntled Hilton stalwarts.

“I’ve already shifted — I’m taking 25 nights from Hilton
and giving them to Sheraton,” said Troy Myers, a Nashville-area
consultant who is on the road some 200 nights a year. “I will
still spend well over a 100 nights at Hilton — but not 150.”

Cutbacks in corporate travel spending during the recession
have made the struggle to attract well-heeled customers more
cutthroat than ever — and the use of loyalty programs as an
enticement is a major part of that struggle. At the same time
hotel companies seeking to cut costs are wary of offering too
many free rooms.

Hilton, acquired in 2007 by Blackstone Group LP (BX.N: ) and
now struggling under a huge debt load, in mid-January rejigged
its loyalty plan — effectively devaluing members’ point
balances by about 20 percent.

Many of the company’s top-tier customers have lit up
message boards with complaints about the move, showing they are
not quite as devoted to the brand as the road-warrior played by
George Clooney in the recent hit movie “Up in the Air.”

InterContinental, operator of brands like Holiday Inn and
Crowne Plaza, plans to give out more than 400 million loyalty
points to its members who lost Hilton points, while Carlson
early this month dropped by as much as a third the number of
points needed for a stay at one of its top-tier properties,
like the Radisson Aruba Resort & Casino.

Best Western said on Thursday it would match the elite
status of any other hotel loyalty program free of charge.
Operators like Marriott International Inc (MAR.N: ) and Starwood
Hotels & Resorts Worldwide Inc (HOT.N: ) will do the same thing,
but typically require a certain number of stays to keep the
status.

“What we heard loud and clear was that there was quite a
lot of customers that seem to be upset about this,” said
InterContinental chief marketing officer Tom Seddon. “People
think about loyalty points as cash in the bank.”

Executives from hotel companies, including
InterContinental, Marriott, and Starwood, are due to speak at
the Travel and Leisure Summit, being held at the Reuters office
in New York this week.

LOUNGE REPLACED BY COFFEE AND PASTRY AT STARBUCKS

It is not unprecedented for hotel operators to change their
loyalty reward structures, but Hilton’s move at a time of great
economic uncertainty and weak hotel rates has some
observers scratching their head.

“I understand the business challenges Hilton faces — the
points are a financial liability for the company on their
balance sheet,” said Henry Harteveldt, a travel industry
analyst at Forrester Research. “Hilton for a while … had a
more generous program. Apparently they didn’t see a
commensurate improvement in market share or room rates paid by
honors program members.”

The loyalty plan for the operator of chains ranging from
Hampton Inn to Waldorf-Astoria is called Hilton HHonors.

“We had an increase in free night redemptions. We did see a
need to recalibrate,” said Jeff Diskin, senior vice president
of global customer marketing at Hilton.

He said the Hilton program is now in line with loyalty
plans at key competitors like Marriott and Starwood and the
company plans to widen the scope of its program beyond just
points.

But one perk for frequent guests that may be getting
shorter shrift at some brands these days is the executive
lounge — an area of the hotel that caters to its most loyal
customers with free drinks, breakfast and hors d’oeuvres.

High-profile Hiltons, like those near San Francisco’s Union
Square and Anaheim, California’s Disneyland, have closed their
lounges. Top-tier Hilton HHonors members now receive coupons
for coffee and pastry at Starbucks.

Hilton’s flagship San Diego Bayfront property, which opened
a year ago, has no executive lounge.

“Executive lounges were a cost center, not a profit center
— especially in union markets,” Bjorn Hanson, a hospitality
professor at New York University said, in reference to hotels
that have higher wages because of labor union agreements.
“Owners didn’t mind running them when things were doing well,
but now they are cutting back.”

Harteveldt also said hotels in general have been paring
back their executive lounges.

“The reason is some of their most frequent guests are the
least profitable — they know how to shop and get discounts.
The hotel ends up not making money,” he said.

He and others said hotels are going to have to take a look
at loyalty programs and say “if you pay us more, you will get
more.”

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(For summit blog: http://blogs.reuters.com/summits/)
(Reporting by Deena Beasley, editing by Tim Dobbyn)

RPT-Reuters Summit-Hotel loyalty points struggle intensifies