Few loyalty programs get announced with their fair share of pomp. No press release, no advance notice to members and no recognition from the program, often. Instead, it's what occurred last weekend with Marriott Bonvoy rates for awards going up for a wide range of properties and members who were keeping tabs on certain redemptions suddenly find their stay costs more than previously anticipated.

Bonvoy's latest adjustment isn't a huge single-property update, but rather a step-up in the formula that determines how many points you'll need for any night at a hotel. The impact on members' point balances is far-reaching where such a large number of properties are involved, although the individual hotel's increase may not appear to be very large.

What's Actually Changed

A few years ago, Marriott Bonvoy replaced the point award chart with “dynamic pricing,” meaning the amount of points required varies depending on the day, the hotel's “cash rate,” and a number of undisclosed factors. Dynamic pricing has its advocates theoretically at least, it can provide opportunities for real value for properties that are not in demand and during off-peak hours. As a consequence, it is also easier in practice for a program to raise prices across the network in a stealth manner without creating the attention that a formal chart revision would.In practice, it also makes it easier for a program to raise prices across the network in a stealth manner without creating the attention that a formal chart revision would.

The changes we are seeing today are not about to be individual property changes, they're about formulating. The direction is one and the same; towards upwards. There are some properties that have gone up by over 5-10% and some that have not, but the trend has been seen at enough properties to indicate that it is a conscious, system-wide change, not far-to-far fluctuations.

A tangible example of how this repricing has affected what "average" means at Marriott Bonvoy Bangkok: If you have a million redemption points, the average value of those points is around 0.56 cents in USD (after taking taxes and fees into account). Typically it's not a city where you'd find particularly high pricing, so it's a good indicator of what's considered a typical Bonvoy redemption redemption in a “fair” and “average” pricing city.

The Uncomfortable Truth About Base-Level Bonvoy Value

This is where it becomes pertinent to all the people who have been gathering up Bonvoy points for a future use. Marriott Bonvoy points have been trending toward the uncomfortable for quite some time now and this new series of hikes makes it that much difficult to ignore.

The typical benchmark for what a redemption would get you is 0.7 cents per point and that's the standard value of Bonvoy points to date. That's been tested, however, and more and more, the number of real-world redemptions is now coming in below that benchmark. For instance, a random pick: right now, one night near Frankfurt Airport is just under 0.5 cents of value per Bonvoy point, which is comparable to the lower-value hotel loyalty options, which have historically been Hilton's redemptions.

But it's not as bad as that 0.5 cent figure. Points earned for a hotel stay are points that are not being spent; they're being surrendered in exchange for the points that you won't earn if you pay cash for the hotel stay. A premium Marriott member who pays on their credit card (co-branded) has a range of between 23x points per dollar for paid-stays. That's another 16%-plus return on cash investment at 0.7 cents. The 0.5-cent mark is thrown even further into the shade by a points redemption that has to generate more than 0.8 cents of value per point to break even against paying cash.

The notion of an “outsized value” won't go away, and it's not as simple as it sounds

Redemptions that appear to make sense on paper often tend to group at the very top of the Bonvoy portfolio. When you calculate the cash rate per point on ultra-luxury properties in high dollar destinations like The Gritti Palace in Venice at $3,700 or The St. Regis at $2,600, you can get some eye-popping cents-per-point.

However, there's a rationale test to consider before being too happy about those numbers. If you wouldn't be willing to pay $2,600 or $3,700 in cash for a hotel room, the hypothetical cash value of that redemption is not real to you personally, it is a mathematical abstraction. At the points cost (usually 150,000 to 170,000 Bonvoy points per night), they're spending a lot of points for what is basically a “points farm” hotel that is charging specifically for the loyalty redemptions of members who have little other place to put their points.

A quick recap of the repricing situation for Bonvoy members:

• System-wide average increase: 5-10% in Bonvoy properties, which is a formula-level adjustment and not due to individual property changes.
• Average base level number: About 0.5 cents per point in most typical destinations; comparable to Hilton Honors.
• The breakeven threshold is >= 0.8 cent per point, because it is the opportunity cost of the earned point that constitutes the cost.
• Best remaining value: Ultra-luxury properties at very high cash rates, but “best” is what is best for the person who is looking for them and many are cutting prices specifically to account for loyalty redeems.

For those who already have some Bonvoy points, here are some ideas on how to use them

This devaluation trend isn't exclusive to Marriott, it is the course that most big hotel loyalty programs have taken many years. That's not how points accumulate any more value, though, nor does it do anything to strengthen the argument that points accumulators have long championed: redeem points before the next devaluation not after.

For those with a large Bonvoy account with considerable amounts sitting in the account, it's probably a good time to review the portfolio and determine which redemptions are best in the market before next pricing changes. Properties that offer a cash rate that is still considerably higher than the points cost remain the best use of the money, despite the slight drop in cash rate reflect the latest increase.

With members still building up Bonvoy points, the current climate has even more reason to diversify than focus heavily on a single hotel currency that is less than 0.7-cent for the typical redemption.

The Bottom Line

In a no-name, no-shout repricing of awards, Marriott Bonvoy has raised rates by an average of 5-10% across the portfolio. The change pushes the already stressed base-level redemption value even more in the wrong direction; typical Bonvoy redemptions in traditional destinations are becoming more like 0.5 cents per point, which is less desirable than the program's historic 0.7-cent mark, and more in line with Hilton Honors territory. 

All the luxury properties currently have the highest headline value, but considering the opportunity cost of not earning points on their paid stays and considering breakeven economics, most standard redemptions are truly hard to justify at current prices. Those who have large balances in their accounts are encouraged to look for and secure the best redemptions they can, before waiting for the next wave of increases.