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United Has No “Second Tier” Hubs on Continental USA

The news that United Airlines would soon be announcing new international routes got me interested, as it did others, in trying to guess what might be some of those new routes out of the airline’s current 7 continental-USA hubs. To help me make an educated guess, I decided to use United’s online utility that allows one to quickly generate maps of all nonstop UA destinations from any city or airport. This meant that I could generate maps of all nonstop destinations from United’s 7 continental-USA hubs to get a sense of currently under-served international destinations that the airline might want to do a better job covering. The result of this fun exercise are the 7 maps below, which correspond to nonstop destinations from each of the 7 UA hubs (indicated by a red pin on the maps.) Click on any map to enlarge it, and then view the rest sequentially by using the left and right navigation arrows.

As one can see, there is clear logic to the international destinations that the 7 UA hubs serve:

  • SFO: Gateway to Asia-Pacific + transcontinental + 6 major Western European capital cities.
  • LAX: Western USA/Hawaii + Limited Asia Pacific.
  • DEN: Uniquely domestic USA.
  • IAH: Southern USA & Latin America – truly unique hub as the only way to latam on UA.
  • ORD: Balanced to serve middle America + some key Asian and Western European capital cities.
  • IAD: Eastern USA + mostly Western European capital cities. Like LAX but on the Eastern USA.
  • EWR: Gateway to Western Europe + transcontinental + 6 Asian destinations (like SFO but in reverse).

 Looking at the 7 maps sequentially as shown below more clearly conveys the sense that each map plays a unique role, while also complementing the others:

The notion that any of the 7 hubs is ‘second-tier’ is thus utterly silly. In terms of volume and destination, IAD and LAX might be considered ‘second-tier’, but I doubt that that is a term that United uses or recognizes.

As for potential new international routes that UA might announce, it seems from the maps above that the Middle East, Eastern Europe and Africa could use better coverage.

Update: My wishful thinking about seeing UA cover new destinations in the Middle East, Eastern Europe or Africa will remain a wish, as none of the new international routes unveiled include destinations to those three regions. 😦

 

Has Hilton Honors Surreptitiously Increased Reward Prices at “Tons of Properties”?

I feel compelled to jump in and rain on the parade of cacophony, cognitive dissonance and incoherence that Gary Leff has whipped up with his recent blogpost titled “Hilton Explains Why They Increased Reward Prices at Tons of Properties and Didn’t Tell You” – the latest in his ongoing quixotic quest to rehabilitate BONVoY when the program has been plainly a disaster – because it is a non-story. It’s the proverbial “tempest in a teapot” because in the real world nothing that Hilton Honors has allegedly done is deceptive or going to “gut” or devalue the program. In fact, it is something that other programs do regularly!

Why is it not deceptive? Because when Hilton Honors switched to the revenue-based dynamic pricing system, they did make it clear that the concept of hotel “categories”, which is inherently inconsistent with the revenue-based dynamic pricing model, would no longer be applicable by (a) getting rid of the their award chart, (b) providing a reward search tool as a replacement for the defunct award chart, and (c) clearly stating what members should expect, which was this:

Free nights can be redeemed for as few as 5,000 Points per night and no more than 95,000 Points per night for a Standard Room. The actual number of Points required may vary depending on the hotel, time of year, and cost of a room. Use this search tool to see the lowest and maximum number of Points required per night for each hotel.

Clearly, when in their response to Leff, Hilton representatives wrote “as we previously shared“, they were referring to the statement I just quoted above, which is clear and concise: all Hilton Honors ever promised was that their standard awards would cost between 5K/night and 95K/night. To date, except for one “breach” when they recently requested 120K points/night for a standard award at the new and highly anticipated Waldorf Astoria Maldives, which they swore was a one-off thing that did not represent a raising of the 95K/night cap, the promise has held.

So, not only is Hilton Honors’ raising of award costs at some properties from 5K to 10K not deceptive, since they did let members know to expect it, it is exactly what other programs have done and continue to do when they update their award charts, which invariably reveal, with each update, more hotels raised to higher categories than those that are moved to lower categories.

Because Hilton Honors no longer uses award charts, it is mindless to expect things to continue to operate in the program as if it still had award charts, which are inconsistent with the revenue-based dynamic pricing model. Also inconsistent with the dynamic pricing model is the concept of hotel categories and that is a critically important point to keep in mind because there are times in the Honors program when a 95K/night award would go for, say, 64K/night, which, if Hilton still used award charts and hotel categories, would have put the hotel in a lower, mid-range ‘category’, points-wise. Alternatively, a “low-end” property could have all standard rooms designated as ‘premium’, pushing award costs up to levels that would put it in a higher ‘category’, points-wise. Therefore, to get unhinged when award rates are adjusted in a program with such a model is utterly mindless.

On the other hand, what bears watching closely, and I said this from the day Hilton announced their move to the revenue-based dynamic pricing, is the 95K/night cap, which, if raised, would presage a massive devaluation – and I mean massive and not like the much-talked about and purportedly program-gutting “devaluation” of 2013 that was simply a necessary course correction designed to bring Hilton’s previously and ridiculously cheap award costs up to the levels of their competitors, where they remain to this day.

How “bad” is the “sneaky” devaluation that sparked Leff’s latest outburst against Hilton Honors? Unlike his fact-free pontificating, Brian Cohen over at “The Gate” has actually investigated and “found that the number of [5K points/night] hotel properties has been reduced from 27 to 23 hotel properties…” That is a change of just 4 fewer properties. Cohen also checked on the 10K points per night properties and “found that the number of hotel properties has been increased from 150 to 157 hotel properties“, i.e., just 7 more properties – hardly the “tons of properties” alleged by Leff!

Like I said, this is a “tempest in a teapot”, which I am sure will die quickly like all such tempests do.


In concluding his “outrage”, Leff asked:

Remind me why you think Hilton Honors is a better program than Marriott Rewards?

I will respond. First, in a Freudian slip, Leff said “Marriott Rewards”. However, “Marriott Rewards”, a much more competitive program that was quite similar to Hilton Honors, is no more. Second, it is appalling that one who anointed himself “thought leader in travel” would ask such a question when there is evidence all over the place that BONVoY is a failing program. Third, anyone who has been paying attention would have noticed that, currently, the dominant and last standing hotel loyalty program is unquestionably Hilton Honors, which has been rock solid, mature, and as rewarding as ever, with non-stop targeted and quarterly or “global” promos when other programs have offered few or none; a whole host of imaginative and innovative programmatic changes; and industry-leading co-branded credit cards that are now exclusively offered by AMEX after Citi petered out.

Lastly, once upon a time, there were two hotels loyalty programs, Starwood Preferred Guest (SPG) and Hyatt Gold Passport (HGP), that self-anointed “travel gurus” a.k.a travel bloggers, had inexplicably placed on pedestals and almost universally pointed to as “la crème de la crème” of hotel programs, while Hilton Honors and Marriott Rewards were constantly disparaged. Now look at what’s happened:

  • Starwood failed, went up on the auction and was acquired by Marriott, which initially bowed to the pressure to turn their own decent program, Marriott Rewards, into SPG, an expensive and unsustainable program that travel bloggers swooned over. The result has not been pretty: Marriott Rewards cum BONVoY sputtered so badly in its attempted makeover that they are no longer even trying, with the company’s CEO characterizing spoiled, demanding and highly vocal former SPG loyalist as “noise around the edges“. Ouch! SPG was the “best” loyalty program only if you believe in reverse Darwinism or the “demise of the fittest.” Well, there is no such thing.
  • HGP, another darling of ‘travel gurus’, underwent a wholesale metamorphosis, emerging as World of Hyatt or simply WoH!, which sounds about right as an expression of what they did with the program. Three elite levels with strange-sounding names were created, and the benefits were so tilted to the top elite level that WoH! is essentially a one-elite-level program, like HGP was but worse because there are now more levels, among which only one matters. But that was not all. Hyatt did not only stuff all the benefits in the program’s top elite level, they also made sure that only a limited number of die-hard members could afford those benefits by raising the qualification requirements to 60 nights or 100,000 base points for a program with the tiniest footprint. Ouch! And, some people consider WoH! to be a generous program! Yeah, right. It is easy to offer expansive benefits when only a limited number of people are targeted.

Contrast the preceding with Hilton Honors, especially in conjunction with its leading co-branded AMEX cards, and you will see that not Marriott, not even Hyatt, comes close to being as rewarding as Hilton Honors has been, consistently. Other than dropping an extra, superfluous and annoying ‘H’ from its name, Hilton Honors has remained stable and rewarding. In the meantime, other programs were rebranding with bizarre names like BONVoY; one program (SPG, R.I.P) outright failed; another program (BONVoY) is failing; and a third program (WoH!) has essentially become a niche or “boutique” program for the “affluent”.

Do you want to speak of “generosity”? How about a huge program that offers free breakfast not only to its very top elites, but also to all its mid-tier elites?

‘Nuff said!

No, The Base Earning for Hilton Honors Is Not Less Rewarding Than At Other Major Chains

Based on “fuzzy” math and very bad assumptions, self-anointed ‘thought leader in travel’, Gary Leff, has repeatedly claimed that “the base earning for Hilton Honors is less rewarding than at other major chains”. However, just simple common sense would easily show the claim to be without merit. More rigorously, there are at least a couple of deficiencies with his underlying arguments: (a) the claim is based on his own subjective valuation of hotel points currencies, meaning that the claim’s merit depends on whose valuations one trusts; and (b) undoubtedly to enable him to reach his pre-ordained conclusion, Leff did not include in his estimates of base earnings bonus points from each program’s top-earning co-branded credit card. In short, for Leff’s claim to have any merit, one has to (a) subscribe to his subjective valuation of points currencies, and (b) be stupid enough to pay cash for revenue stays, instead of using a co-branded credit card to maximize one’s earning. The likelihood that either (a) or (b) or both is true is close to nil.

Fortunately, there is an infinitely better way to estimate and compare different hotel loyalty programs’ base earnings that does not rely on any assumptions or on subjective valuations of points currencies. It is based on estimating the size of the “rebate” for future free stays that one gets for spending real money.

So, here we go. The modeling will be done only for top elites and the most expensive (i.e., “aspirational”) awards in each program because that is where there is clear differentiation among programs. However, the results do generally scale pretty well up and down the award charts and with elite level.

Class is now in session for some easy math…

First, The Real Data

1. On-property base earn rates for top BONVoY, HHonors and WoH elites, excluding co-branded CC bonus points:

Marriott: 17.5 pts/$

Hilton: 20 pts/$

Hyatt: 6.5 pts/$

2. Award costs in points for top Marriott, Hilton, and Hyatt properties:

Marriott: 85K (before it goes up seasonally to 100K/night)

Hilton: 95K (one property, WA Maldives, now costs 120K/night)

Hyatt: 30K (many properties now cost 40K/night)

Second, The Easy Math

Let’s calculate the spend in hard currency required to afford 1 standard award night in each program’s most expensive standard room, i.e., let’s calculate the Spend Per Free Night (SPFN), which is the closest thing to the monetary cost of the award night:

  • Marriott: 85,000 pts/(17.5pts/$) = $4,857
  • Hilton: 95,000 pts/(20pts/$) = $4,750
  • Hyatt: 30,000 pts/(6.5pts) = $4,615

Third, Lesson #1

The preceding result shows what I’ve shown many times before: Marriott, Hilton, and Hyatt awards cost almost exactly the same when one does not include any additional sources of points (e.g., bonus points from co-branded credit cards). Without making any assumptions, we have already debunked one of Leff’s points: top elites in all three programs need to spend about the same amount of money in hard currency to be able to earn enough points to afford a standard award night at each program’s top properties. By contrast, top SPG awards were almost one order of magnitude more expensive (no wonder the program went belly-up), while IHG and Radisson awards are the cheapest any way one looks at them, although IHG’s increased somewhat recently.

Fourth, Let’s Estimate the Size of the “Rebate” or “Base Earning”

Since without including any other sources of points, the “base earnings” for top elites in the three programs are virtually identical, we now need to include what is a constant source of additional points in each program: their co-branded credit cards, which no one should leave home for a revenue stay without!

The best earning co-branded credit cards for BONVoY, HHonors and WoH award 6x, 14x, and 4x, respectively, for in-hotel spend, so that the earn rates for top elites in each program, including CC spend, are:

  • Marriott: 17.5pts/$ + 6pts/$ = 23.5pts/$
  • Hilton: 20pts/$ + 14pts/$ = 34pts/$
  • Hyatt: 6.5pts/$ + 4pts/$ = 10.5pts/$

To afford 1 award night at a 85K/night, 95K/night or 30K/night, a top BONVoY, HHonors, or WoH elite, respectively, must spend:

  • Marriott: 85,000pts/(23.5pts/$) = $3,617
  • Hilton: 95,000pts/(34pts/$)= $2,794
  • Hyatt: 30,000pts/(10.5pts/$)= $2,857.

Fifth, The Bottom Line

Now, let’s paint the big picture. For each program, we’ll provide the Spend per Free Night (SPFN, i.e., the cost of an award in cash), without and with CC spend, to estimate the ‘rebate’ due to having a co-branded CC, as the difference between the two earnings:

Program Name SPFN w/o CC SPFN W/CC Size of Rebate
Marriott BONVoY $4,857 $3,617 $1,240
Hilton Honors $4,750 $2,794 $1,956
World of Hyatt $4,615 $2,857 $1,758

See the picture? Notice the relative sizes of the “rebates” for on-property spend. Rather than ranking last, as claimed by Leff, Hilton ranks tops:

Hilton: $1,956

Hyatt: $1,758

Marriott: $1,240.

That is why one should never leave home for a revenue stay without one’s co-branded CC, and why Leff cannot simply leave CC earnings out in estimating his so-called “base earning” and then turn around and claim that his fuzzy math shows Hilton’s “base earning” to be the least rewarding! He got it exactly backwards! Also, rather than requiring more than $4.5K to earn enough points to afford a SINGLE award night at a top-tier hotel, top Hilton and Hyatt elites equipped with their respective program’s best co-branded card would require just over $2.5K, while top BONVoY elites would require over $3.5K, making the latter currently the most expensive program.

The Clear Lessons

  1. A co-branded CC is a MUST if one is to play the hotel loyalty game in a way that makes sense, i.e., with a “full deck”. Period. It would be utter stupidity to play without it.
  2. The top HHonors credit card (AMEX Aspire) provides the biggest bang for the buck (a rebate of nearly $2K), followed closely by the WoH card. BONVoY’s best card’s rebate lags far behind.
  3. Of the three programs, Hilton and Hyatt awards cost about the same (HH’s a bit cheaper) and both are much cheaper than BONVoY’s. However, Hyatt now has a category of hotels, especially in Europe, that costs 40K/night, and BONVoY’s top seasonal rate of 100K/night will kick in some time this year. That would leave HHonors as the least expensive and more rewarding of the 3 programs.
  4. Lastly, because the effect of  promos is to decrease the Spend Per Free Night (i.e., promos decrease award costs or increase the size of the ‘rebate’), programs that consistently run promos are generally more rewarding than those that offer them sparingly, and we know which program has offered promos nonstop over the past several years!

Conclusion

 The preceding trivial math should once and for all establish just how ludicrous is the claim that “the base earning for Hilton Honors is less rewarding than at other major chains…”.  You would notice that no assumptions were necessary in deriving each program’s ‘rebate’. All the input data are publicly available, and there were no subjective values of points currencies to manipulate to support biased views. It is just simple math using objective data.

Class dismissed!