Hilton Free Night Certificates Are Not More Valuable

Update: I originally started this post by claiming there was disagreement between me and the claims at Mommy Points and View from the Wing. I wish to retract that. I dislike their use of the words “free night” and “worth more” in a sentence together, even if they remain correct when they go on to say that a free night is worth more relative to points. But this post was never meant to attack either of them. I just wanted to provide a thought experiment for you guys, the readers, so you can learn to better value your points and miles now and in the future.

My comments were an introduction to the debate on how loyalty program awards change value, but it was unfair because those who believe they are worth more are using a relative measure of value and those who say they were worth less are using an absolute measure of value. Obviously, I’m in the absolute camp. If you’ll read on, nothing else has been edited, and I think you’ll agree that it stands on its own and does so without getting personal. End Update.

Before we get into issues of value, let me start by saying yes, I did pimp the Reserve card in my post on Wednesday. I did so for a different reason, though. I did not argue that the two free night certificates were any more valuable. All I said was that they were now the best option for getting a stay at an expensive property like the Conrad Koh Samui or Conrad Hong Kong. I’d rather use a free weekend night certificate than spend 90,000 points, and I’m sure you would, too. That’s different from saying the certificates actually became more valuable. More valuable relative to the points, perhaps, but not according to several other measures.

What Is a Free Night Worth?

So, let’s discuss value. Goods and services have value. When you barter, you exchange one good or service for another. Currency is similar because it’s a common unit of exchange. I will use the word “currency” sometimes in the rest of this post to make it easier to draw comparisons to an example using international currency exchange. I’ll also try to use real examples of goods and services. And I get to teach a little science. :D

If you wanted to stay at the Conrad Koh Samui, for example, you would have to consider the value of four different currencies. Let’s assume we’re trying to get a weekend night for the sake of simplicity and because we are, after all, considering the value of a certificate that’s only good on weekends. Equivalent amounts of those four currencies used to be:

  • One night at the Conrad Koh Samui (the thing you want)
  • $600 US Dollars (the price of one room)
  • 50,000 Hilton HHonors points (an alternative price)
  • 1 free weekend night certificate (an alternative price)

These are all equivalent units. Some of them have more or fewer restrictions on their use, but to keep things simple you can exchange the cash, the points, or the certificate to get the free night.

After the program was devalued, a new number of points was assigned to the cost of a free night. Here are the new equivalent units:

  • One night at the Conrad Koh Samui
  • $600 US Dollars
  • 90,000 Hilton HHonors points
  • 1 free weekend night certificate

Did the Conrad Koh Samui suddenly become an even more expensive floating palace in the sky? No. Did the US government default on its debt? Not yet. Did Citi start doubling the number of free weekend night certificates with every card application? Fat chance. None of those currencies changed value.

Promotional photo of the Conrad Koh Samui.

Promotional photo of the Conrad Koh Samui.

All that happened is that Hilton required 40,000 more points to use that one option for a free night. This means that particular currency became less valuable. Gary replied to my comment on his post yesterday saying he was talking about relative value, not absolute value. Well, I’m talking about relative value, too. And relative to dollars and free night certificates, the cost of a free night at the Conrad Koh Samui didn’t change. Relative to points, and points only, things changed for the worse.

Consider an alternative example, like exchanging Euros, US Dollars, Yen, and Zimbabwean Dollars. In this case, Hilton HHonors points are the Zimbabwean Dollars. The fact that Zimbabwe has runaway inflation doesn’t make the Euros, US Dollars, or Yen any more valuable — unless you have the unfortunate luck to be stuck in Zimbabwe and need to buy imported bread. It just makes Zimbabwean Dollars less valuable tomorrow relative to yesterday. The US Dollars, Euros, and Yen experience typically experience little or no fluctuation.

The Invention of the Hall-Héroult Process

Let’s use another analogy with actual goods and services, to bring this closer to the hotel example. Consider the state of the world before the Hall-Héroult process was invented, a time at which aluminum was extracted through an expensive chemical process and was more valuable than gold. In fact, the builders of the Washington Monument capped the obelisk with an aluminum pyramid to show off.

  • One night at the Conrad Koh Samui (the thing you want)
  • $600 US Dollars (the price of one room)
  • 0.4 ounces of aluminum (an alternative price)
  • 0.5 ounces of gold (an alternative price)

After the invention of alternating current by Nicola Tesla and the subsequent use of cheap electricity to separate aluminum from bauxite ore using the Hall-Héroult process, aluminum became something you throw away in the trash (or hopefully recycle).

  • One night at the Conrad Koh Samui
  • $600 US Dollars
  • 1,000 pounds of aluminum
  • 0.5 ounces of gold

The fact that aluminum is now worth much less does not change the value of the Conrad Koh Samui. It does not change the value of a US Dollar. And it does NOT change the value of gold, our stand-in for the free weekend night certificate. All it does is change the price of a free night when you prefer to pay with aluminum, because the price goes up when value goes down.

Image courtesy of Wikimedia Commons.

Image courtesy of Wikimedia Commons.

What would it take to make free night certificates more valuable? You would need to be able to convert a certificate to points, and that number of points would have to be more than the number required for a free night. For example, if a free night certificate could be exchanged for 90,000 HHonors points, enough for a top-tier property, you would then be free to redeem those points for more than one night at a cheaper property. But Hilton and Citi didn’t do this, so I find it hard to argue that anything has made free night certificates worth more than they were.

Why Free Nights Might Be Worth Less

There are several reasons to be concerned the free night certificates are actually worth less. Maybe only one or two apply in your case. Maybe none. But overall, they should be cause for concern.

Free weekends are worth less if you can’t afford free weekdays. These free weekend nights are great. But what about Monday night? With more expensive points redemptions, it might be more difficult to afford a longer award stay. Your ability to use the free night certificate is more limited, even though it has the same terms for redemption.

Free weekends are worth less if there’s more competition. Although most hotel programs don’t have blackout dates on their award stays, there are still capacity restrictions. You usually have to book into a standard room. I predict more people will be seeking these free night certificates for their ability to use them at more expensive hotels. They will also be competing to use them at more expensive hotels. Availability could decrease.

Free weekends are worth less if you don’t have status. Everyone who gets a free weekend night should have Gold status because you can’t get a certificate without holding a credit card that promises free status. However, I predict fewer people will seek Diamond status by spending $40,000 a year or staying multiple nights with Hilton. There’s just less incentive when the points you earn in the process are devalued. Are the perks of Diamond vs. Gold status that much different? Maybe not for some people, but they may be to you.

Which Rewards Credit Card Offers the Best Value?
Review: Grand Hyatt Seattle

Scott created Travel Codex after learning how to travel better on a budget during grad school. He now flies over 150,000 miles every year.
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  • http://www.facebook.com/garyleff Gary Leff

    At first in your post you seem to suggest that I am saying something that I’m simply not saying. And then you concede that we do not disagree at all, which means it’s unfair to mischaracterize my position at the top of your post.

    As a throwaway line, the last sentence of a post I wrote said that free weekend nights are more valuable post-devaluation.

    As I explained to you already in the comments to that post, I was not at all suggesting a free night at the Conrad Koh Samui was more valuable than before. The certificate gets you the same free night before the devaluation as after. There’s no change in absolute value.

    Rather, there’s a change in the relative value of a free night certificate *versus an HHonors point*.

    And the free night certificate also becomes relatively less costly to obtain than a free night through points. The free night certificate takes the same inputs as before — an approved credit card application plus meeting minimum spend — while the points redemption requires more investment than previous. It takes more in-hotel spend at Hilton properties or more spend on Hilton co-branded credit cards to obtain the points necessary for the free night.

    So obtaining the free night certificate becomes a better, less-costly relative strategy than obtaining the points than it was prior to the devaluation.

    My claim, in-context, was about points vs. the free night certificate — not about the absolute value of the free night certificate itself or the value of a free night at the Conrad Koh Samui (although the work of Cialdini would suggest that people might subjectively value that free night more dearly as it becomes more expensive).

    You acknowledge that midway through your post when you write, “relative to dollars and free night certificates, the cost of a free night at the Conrad Koh Samui didn’t change. Relative to points, and points only, things changed for the worse.”

    Which of course is the only claim I was intending to convey, as you well knew before writing this post.

    Now I only wrote one sentence about that, since it was hardly a central point that I was making. So I can completely own that my lack of clear communication could have led you to your initial misunderstanding of the point that I was making. That much was my bad.

    But you already had an exchange with me on this, which you acknowledge in your post, which means that you likely understood full well what I was attempting to convey when you wrote the post

    Which leads me to wonder why you imply or lead your readers to believe otherwise at the outset?

    • Mommy Points

      It’s too early here for me to use as my words as Gary, but more or less I feel the same way. We did also have exchanges about this (ah what a fun day on Twitter that was), and what I was sayings is that the two free nights are now worth more compared to how many points it will take for some properties that now now jumped from 50K to 95K points. So more incentive for me to just want to get the two free nights rather than save up 190K points for two nights at some properties. Clearly two nights is still two nights unless we have entered some sort of time warp where two nights now lasts for four or something like that.

      • DrTool

        So you can get 2 free nights faster compared to accruing points, but that doesn’t make the certs “worth more”. It makes applying for the Reserve card a quicker way to 2 free nights compared to another card (also happens to help someone with an affiliate link for the card!).

        Maybe some T&Cs have been updated but the latest I see on the Reserve landing page still refers, of course, to the current redemption scheme: valid at “category 1-7 hotels and select Waldorf Astoria Hotels & Resorts” Has Citi confirmed that the cert will continue to apply to all categories under the new scheme? And all seasons under the new seasonal rates at some locations? If not, advising readers now that the cert will be usable at top locations is misleading.

        And what will you do with 2 nights in some South Pacific island (for example) destination resort when other nights cost so much in points now?

        Scott is right that the fact that an alternate currency devalued itself is apples to oranges – the “thing” being procured is a free night which hasn’t changed. If you could exchange a free night for points, then it would be a fair comparison.

        • Scottrick

          Citi did confirm that all new categories 1-10 will be eligible for a free night certificate.

    • Scottrick

      It sounds like most of us agree, but I took issue with your line at the end: “the two free weekend night signup bonus with the card will still get you two nights at nearly all Hilton properties, despite the coming March devaluation. So those nights are even more valuable than before, since they’ll be harder to get on points alone.”

      This is the kind of comparison I’m arguing against. Free nights are still free nights. Free night certificates did not get more valuable. Points got less valuable, and that’s an important difference.

      • http://www.facebook.com/garyleff Gary Leff

        “Free night certificates did not get more valuable. Points got less valuable, and that’s an important difference.” That’s pure semantics, since you concede above my point is correct that the relative value of free nights versus points is higher than before, which is the only thing I was claiming. Which you knew when you wrote the post.

        We don’t disagree here, so I was simply flagging that you seemed to be creating a disagreement which you knew was false … by micharacterizing my position at the top of your post.

        The first rule of argumentation is to ALWAYS take the STRONGEST form of what you believe to be your opponent’s argument, not the weakest straw man version of it.

        In the end it’s great we can acknowledge we all pretty much agree on the analysis. Let’s just be a bit more charitable towards each other in the future, yes? :)

        • DrTool

          How was Scott not charitable to you? I read nothing personal, rude, or anything in his posts. Get a thicker skin.

          • http://twitter.com/jeff_at_cankm Jeff Kay

            The relative value of the cert versus the points went up. The relative value of the cert versus the cash did not. Geez. :)

        • Scottrick

          (1) You are correct that we value the certificates the same.

          (2) You are correct that my disagreement is about that line at the end. Maybe you see it as insignificant, but it helped motivate me to write this post.

          (3) That doesn’t mean this post is about attacking you and Mommy Points. I like Mommy Points, and we haven’t spoken in person but I like your blog, too. You almost always know what you’re talking about, including your analysis of Hilton this past week.

          (4) I wrote this post to explain in more detail how the value of a free night has not changed. It’s a thought experiment for readers to learn how to value their points and miles. I referenced you and Mommy Points as an introduction to why I wrote this post. That’s all. I think this post has value even if you hadn’t written anything about Hilton the day before.

        • C75K

          So you agree that bloggers are very good with semantics to pimp their affiliate links?

  • DrTool

    It was funny how the CC pimpers were quick to spotlight the Reserve card immediately after the HHonors bombshell.

    I think the point about the free night certs being limited in utility when the remaining nights cost drastically more HHonors points is a major downside to me at least…and worth careful thought by anyone looking to go that route, depending on their plans. Especially the folks who lean towards promoting so-called aspirational properties. I’m not likely to stay just 2 nights at a high end vacation spot. If it now takes nearly double the HHonors points to make up the remaining nights, that’s a huge hit that 2 free night certs will have a hard time overcoming.

    Are there places I may only be stopping at for a night or two? Sure. But I’m much less likely to be concerned with a more expensive property – in which case other options, including Priceline, etc.are probably going to be looked at.

  • LR

    I have to agree with Scott on this. The “relative to points” argument doesn’t really mean anything. Points are arbitrary and subject to change (usually for the worst!). The 2 certificates are worth the exact same thing. 2 nights in a standard room. That’s it. No more and no less.

    From a supply/demand standpoint, you could argue that they are worth even less as aspirational properties should lower their prices as they will have more vacant rooms with the higher 95k point redemptions. If the $600/night room goes down to $550, then your certificates bought you $50 less in value per night.

  • darrenmak

    The first portion of your post is just arguing semantics with Gary and Mommy Points… As a currency the certificates may not have a higher monetary value after the devaluation of points but we all will be earning the same amount of points going forward, assuming we continue to stay with Hilton. At many properties those points won’t go as far… so to me and many others, “I” would assign more personal value in that certificate. Not relative to cash, but relative to other ways I have of earning a free night.

    So with that out of the way, you make a compelling argument throughout the article that the certificates haven’t increased in absolute value, but only relative to points. I think everyone agrees on that. Where you go completely off the rails, is in your last three paragraphs.

    1. Free weekends are worth less if you can’t afford the weekdays
    – you are assuming that people use their free night certificates in conjunction with a longer stay, and when that stay does extend beyond the weekend that they pay for those extra nights with points. Big assumption to make.

    – You then go on to state that “your ability to use your free night certificate is more limited”. No it is not. Your ability to use that certificate is exactly the same. If you make the choice to spend a weekday night at that same hotel, you have a choice of using points, or paying cash. Its your choice and does not effect the “ability to use that certificate”

    – If you want to argue semantics in the first place, you should be concerned about it here as well.

    2. Free weekends are worth less if there’s more competition

    – your previous paragraph argues that people are going to have difficulty using the certificates because they can only be used on weekends, and will not be used as a part of longer stays, and then go on to say that competition for those weekend nights will increase. Make up your mind. Are they going to be more difficult to use, or easier to use.

    3. Free weekends are worth less if you don’t have status

    – This one is my favourite

    – in comparison of hotel loyalty programs, one often sees the same conclusion. The best mid-teir level of all the major programs is HH Gold. That may not be your or my opinion, but that is the opinion of most people who do that comparison. As “most” people with these certificates will have status from the Credit Card, they will have status, so your statement is invalidated.

    – You then go on to say that you predict fewer people will attain Diamond Status because of the point devaluation. With those people earning less HH points, you contradict your statement that there will be more competition for standard rooms on the weekends. If people are staying at Hiltons less, and have fewer points to spend on free nights, I think you will see that standard room availability will go up… not down. Unless of course the loyalty program isn’t what drives people to stay at a hotel!

    • Scottrick

      Responding to point (1): I think in the FlyerTalk/MilePoint/BoardingArea community it’s fair to rely on the assumption that people are trying to redeem points or certificates for free nights at expensive hotels. Many people are points rich but don’t have the cash to afford a $600 hotel room.

      Responding to point (2): They could be more or less difficult to use. I don’t know which. There are two forces that could pull it one way or the other. Maybe you’re right and enough people will pay cash for the weekday nights so that more people can redeem for free weekends.

      Responding to point (3): My argument was not that they would have no status at all but that they wouldn’t have Diamond status. I did say that they should all have Gold status. As for competition on the weekends, I was thinking about the people who get other Hilton cards. More people will be choosing the Citi HIlton Reserve, and they’ll end up with certificates that can only be used on weekends.

  • frequent churner

    People stressing about “aspirational” properties are missing the point of travel. It’s about the destination, not the hotel in which you should be spending minimum time. Everyone rushing to dump their Hilton points is wasting them.

    I get more value out of lower end properties because my personal value of a hotel night tops out at $100, maybe $150. There’s almost always cheaper ways to stay in a city. And I don’t see the point of flying to the other side of the world to sit on a boring tropical island for 5 days, so I’m not even taking those properties into consideration.

    • Scottrick

      A good policy.

    • DrTool

      Couldn’t agree more!

    • harvson3

      +1

    • Antonio

      Wow, what a deliciously solipsist view. I enjoy aspirational awards AND the destination. There is room for both.

      • Frequent churned

        To each his own but if it causes you stress when free awards devalue this hobby stops being fun.

    • www.Fishing4Deals.com

      The appropriate price to use in valuing a “free” stay is the cost of a room on Priceline — whether a 2.5 * room for $45 or a 4* room for $90. The hotels are not stupid. If they offer 1 free night, maybe you will stay 2 nights, or three. Whether traveling for business or pleasure, it is usually quite inconvenient to change hotels every night. From my bargain hunter perspective, the “deals” the hotels are promoting through their loyalty programs are to fill empty rooms during the low season, in less valued locations, or on a slow day of the week. These same rooms are available at a small fraction of the rack rate through opaque booking sites like Priceline and for slightly more on Hotwire. I always check the available inventory on Hotwire before booking a room. Usually, the same room is available for less on Priceline.

      • Scottrick

        I think that only makes sense for someone who would use Priceline as their alternative. I usually want to know my hotel in advance, and even if I can predict the one Priceline will offer, sometimes booking through a third party voids my elite benefits. So in my case, Priceline is a poor way to value free nights.

        Also, I disagree about the free nights offered through hotel loyalty programs. They often have fewer restrictions than airlines. I usually use my points to book rooms that would cost $300-600. The only time I’ve had an issue with peak demand is when basic rooms (the kind booked with points) were unavailable. But even if I can’t book a premium room with points, it’s also going to be too expensive for me to book with cash, so I don’t see it as a lost benefit.

  • http://twitter.com/TravelSummary Travel Summary

    This is cool for a couple of reasons. First, I was watching the entire twitter exchange and was going to write my own post on the topic. Thankfully you got to it first and did a much better job. Second, seeing the comments and continuing argument, I’m a little glad I didn’t have time to write out the post!

    I agree with your view, fwiw.

  • Alan

    Sheesh, talk about getting your knickers in a twist around semantics, guys!! :P

    Just be thankful you have such amazing credit card deals to begin with. If you want to feel hard done by then try having a card that only offers a single free night – ever. Not per year, but ever. You also only earn at 0.6 HHonors per $ (1.2 on Hilton spend) and can only get Gold status if you spend $16,000 in a year! When your cards have got that bad then you can talk about value or lack thereof ;-))

    Yours,

    A HHonors UK VISA card-holder

  • AKold

    The card is also worth less because once you put spending on it, you’re earning less valuable points.

  • jimmy

    it is good to see some blogger on blogger violence.

  • Truthiness

    I’m confused, isn’t the free night certificate only after meeting a minimum spend in a certain few months and then a minimum of $10k each year thereafter? If that’s the case, isn’t the free night certificate actually worth less? Because you would be stuck with at least 30,000 hhonors points (assuming 3 points per dollar on the low end) each year with $10k in spend. Compare that with say, AMEX MR points, or chase UR points, and it seems that the “value” of the certificate is worth less than $600 a night (using your valuation) because you now have a currency of HHonors points which are worth less than a UR or MR point because of 1. Lack of redemption flexibility (either via capacity controls or partner redemption) and 2. More points needs for the higher end redemption. So I’m not sure whether in absolute or relative terms the certificate had maintained its value.

    However, I still see value in the citi hhonors reserve card, and that is gold status. I’m gold (through visa signature promo) and gold gets me free wireless and breakfast at most hilton family hotels (breakfast is more valuable to me than bonus points). At $9.95 a night for Internet and $15~ish for breakfast, the card pays for itself after 4 nights. But as far as putting spend on a hotel card, I think one is better off looking elsewhere and keeping the card for its benefits (a la AMEX platinum).

  • jeff

    I understand your argument, but I think the value of the certificate has changed.

    What if I have a non-discretionary hotel visit (suppose it’s a destination wedding that I simply must go to). In the old point scheme, it use to cost me $500 worht of points for 2 nights, but now it would cost me $1000 in points. In that case, a certificate would be equivalent to the cash I’m going to pay anyway for those points. Therefore, the certificates increased in value to me.

    • Scottrick

      What do you mean by $500 worth of points changing to $1000 worth of points? Usually people value points according to the cost of the award had they paid with cash.

      For example, if a room costs $500 or 50,000 points, then my points are worth 1 cent each. If the room changes to 100,000 points, then my points are worth 0.5 cents each. It’s still $500 worth of points either way because the hotel only increased the number of points needed, not the cash price of the room.

  • bradR

    Scott, thank you for dropping some H-H mat sci knowledge in the post. That was awesome.

  • http://twitter.com/TravelPlaybook The Travel Playbook

    It’s science…