Marriott Bonvoy Devaluation: How Bad Will It Be?

There was a discussion in the comments section of my review of St. Regis Aspen.

Marriott Bonvoy devaluing in March 2022

Major changes are coming to the Marriott Bonvoy program in the coming weeks.

• Starting in March 2022, Marriott Bonvoy will transition to dynamic award pricing, rather than using the current published award chart (which already has some variability, due to off-peak, standard, and peak pricing)
• Between March 2022 and the end of 2022, pricing at 97% of properties will continue to range between off-peak and peak redemption rates
• Starting in 2023, there will be no more limits on award pricing across the board

The current Marriott Bonvoy award chart has award pricing between 5,000 and 100,000 Bonvoy points per night.

I value Marriott Bonvoy points at 0.7 cents each.

The economics of hotel loyalty programs

I think it's worth mentioning how the economics of hotel loyalty programs work before I share my predictions of Marriott Bonvoy's award pricing devaluation.

• Marriott doesn’t own a vast majority of properties, but rather has a management or franchise agreement with them
• When a member redeems Marriott Bonvoy points, the loyalty program pays the hotel some amount for that stay
• The amount reimbursed is dependent on a combination of how full the hotel is, and what the average daily rate is; if a hotel is nowhere close to full, the reimbursement rate is low (just enough to cover the incremental costs of serving that guest), while if a hotel is close to full (think 95%+ occupancy), the hotel is reimbursed at pretty close to the average daily rate

Marriott Bonvoy would rather have you redeem points at the St. Regis Maldives than at the Courtyard during a football weekend. The latter will cost Marriott Bonvoy more in the long run, not even accounting for the experience that requires more points.

I don’t think Marriott Bonvoy will have fixed award pricing

Some people think Marriott will give each Bonvoy point a certain amount towards a redemption. Let's say that each Bonvoy point gets you half a cent for an award redemption.

A hotel that costs $100 per night would cost you 20,000 points, while a hotel that costs $2,000 per night would cost 400,000 points. The direction the Bonvoy program will go is something I feel strongly about.

Why? It wouldn't make sense based on the economics of loyalty programs. Marriott Bonvoy executives want you to redeem points, they just want to control costs. Simply making each Bonvoy point worth a certain amount in comparison to the cash rate wouldn't make sense because it wouldn't factor in the single biggest cost variability that the program has.

I think Marriott Bonvoy award pricing will be occupancy driven

I have no idea what the new Marriott Bonvoy award pricing will be, but I think it will reflect the costs incurred by the program.

• For the average, run-of-the-mill redemption, I wouldn’t expect the elimination of award charts to be bad news
• I’d even expect that many high-end hotels will continue to have award pricing that’s similar to what it is today, at least for much of the year
• I suspect Marriott Bonvoy will use historical data on redemptions and occupancy to figure out which awards are likely to be most costly, and price awards accordingly
• Personally I think there will be some unofficial cap on redemption rates; I don’t see Marriott Bonvoy charging more than 200,000 points per night for a standard room, even in peak season (I just made up that number, but that’s my best guess)
• Marriott Bonvoy’s goal (in part) isn’t just to have award pricing that reflects costs, but also in general to shift member behavior so that there are fewer redemptions during peak periods

I don't think all properties will become outrageously priced. The good news is that I think it will have a bigger impact.

• Currently a Category 8 property costs anywhere from 70,000 to 100,000 points per night
• In the future I wouldn’t be surprised to see lower pricing than that in the off season, if you’re prepared to go to Al Maha Dubai or the St. Regis Maldives in summer, or Gritti Palace or the St. Regis Florence in winter
• However, in peak season I think pricing will be way higher than what we’re seeing right now; so expect that those hotels could cost significantly more than 100,000 points per night

That's my best guess, and from a program economics standpoint, that's what makes sense. I don't think Marriott's best properties will suddenly be too expensive. If you don't want to pay an arm and a leg, you will just have to go during non-peak season.

Bottom line

The Marriott Bonvoy program will be devaluing in March 2022. Marriott will eliminate award charts and eventually introduce dynamic award pricing at all properties.

Some people think that the devaluation will look different. Many people think that each Bonvoy point will be worth a certain amount in comparison to the cost of a stay in cash.

My take is very different. I think we will see award pricing reflect the costs incurred by the program, rather than the cash cost for staying at a hotel. Pricing at hotels that aren't full will be reasonable, while we will see a huge increase in pricing at properties during peak season.

I think there will be limits on how much is charged. The most expensive properties currently cost 100,000 points per night, and I think we will see a cap on that with the new program, give or take. It would deter many people from redeeming at those kinds of properties.

What are you anticipating from Marriott Bonvoy?