Is It “Unfair” To Earn Elite Status With Credit Cards?

Airline and hotel loyalty programs make a lot of money with credit cards. Travel brands are giving pathways to elite status with credit cards. If you have a credit card, you can get elite status, but if you spend too much, you will not. Is that right?

Some people who earn Globalist status without sleeping one night in a Hyatt hotel are using co- branded credit cards.

The objection to people earning status in a non-traditional way is nothing new. This is an interesting topic and should be addressed broadly.

Yes, people earning status with credit cards is “fair”

It is argued that it is unfair to award status with credit cards. Airline and hotel loyalty programs don't award status through credit card spending out of kindness of their hearts, but they do it because it's profitable

I don't think it's fair for a publicly traded company to not maximize shareholder value because they can get greedy It makes sense for airlines and hotels to give credit card status. It is profitable to do so.

The economics of credit card status make sense

The World of Hyatt Globalist status can be used as an example. To earn this status, you need to accumulate 100,000 base points or 60 elite nights in a year.

While $20,000 is a lot to spend with one business, how much of that goes to Hyatt? The exact arrangements between Hyatt and individual hotels are confidential.

• Hyatt has management and franchise agreements for a vast majority of its properties, and doesn’t actually own them; royalty and marketing fees are a small percentage of the room rate
• Not only is revenue for Hyatt a small percentage of room rates, but there’s a cost to World of Hyatt for providing benefits offered to members, ranging from free night awards, to confirmed suite upgrades
• Another major reason Hyatt invests so much in its loyalty program isn’t necessarily because the clients as such make Hyatt that much money, but rather because the way that Hyatt lures hotel owners to become a Hyatt is by proving it has a robust loyalty program and distribution network

If you spend $20,000 a year with Hyatt as a Globalist, you aren't contributing to the company's bottom line. The majority of that goes to Hyatt.

Is it possible for someone to earn World of Hyatt Globalist status without actually staying at a Hyatt? They would have to spend at least 120K a year on a Hyatt credit card to be Globalist.

Credit cards have three ways in which they make money. The loyalty program, the bank and the payment processor split the money. If you assume 2% return on 120K-150K of spending, you will get between 2,400 and2,800 in revenue. Hyatt gets a small portion of that.

The impact on Hyatt's bottom line is likely to be similar to that of a real client earning Globalist status through stays.

There are further benefits to having engaged members

Someone earning Globalist status does not stay at a single Hyatt. That's right, well:

• Then you shouldn’t care as a fellow Globalist member, because the person isn’t really competing much with you for benefits
• The consumer isn’t very savvy if they’re earning elite status purely through credit card spending, because there’s probably a better return on spending to be had with another method if you’re not actually going to be benefiting from the status

Making it easier for customers to earn elite status with a credit card is a good idea. Hyatt makes a lot of money from both staying at hotels and using a credit card, so giving customers the chance to take a hybrid approach to earning status is logical.

• Generally speaking, loyalty program elite members spend more at hotels than non-elite members
• The ability to partly qualify for status through credit card spending might cause someone to seek out a Hyatt when they travel, when they wouldn’t otherwise do that

From the point of view of loyalty program executives, it is all about generating direct profits and influencing consumer behavior to increase revenue. Credit card elite status checks out the logic.

Bottom line

I understand why some people don't like it, but we're increasingly seeing loyalty programs make it possible for people to get status through credit card spending. It is profitable to qualify for status through credit card spending, while giving an airline or hotel consistent business is not.

There is a bigger question regarding what is fair. We assume that life isn't fair. Some people have a company that will pay for them to spend a lot of money with Hyatt, while others don't, so it's not fair.

Is it possible to earn elite status with credit cards.