Betting again on top value Marriott travel packages. Analysis of the “no upgrades/downgrades” rule.

As Nick reported a few hours ago, Starwood Lurker IV, via Flyertalk, revealed new information about Marriott Travel Packages:

• Travel packages set to expire during the booking blackout period (you can not book unattached old Travel Packages certificates between August 18-September 18) can be extended upon request
• Members will still be able to cancel unused 7-night certificates and get points back at a reduced amount.
• After 8/18, certificates cannot be upgraded or downgraded, regardless of when they were purchased.
• Between 8/18 and 9/18, you can cancel a Travel Package reservation, but you will not be able to rebook until after 9/18.

If we believe Starwood Lurker IV, then we now know that Marriott Travel Packages purchased today are like a box of chocolates: You never know what you’re gonna get, and you can’t trade in what you get for something else (i.e. you can’t upgrade or downgrade your package in the new program)

On the surface, this appears to void the logic in my post: A case for gambling on top tier travel packages.  After all, that post was based entirely on the following postulate:

• It will be possible to upgrade and downgrade certificates (as of September 18th) and you will pay or get back the difference in price between categories based on new pricing.

That said, there is a bit of good news in the latest Lurker info leak:

Members will still be able to cancel unused 7-night certificates and get points back at a reduced amount.

While we don’t know for certain what that “reduced amount” means, I think it is a safe bet that certificate cancellations will work in the same general way as they do today.  Today, certificate cancellations work like this:

• If you cancel a category 1-5 certificate, you get back 45,000 points (I believe this is what they mean by a “reduced amount”).
• If you cancel a higher level certificate, you get back 45,000 points plus the difference in price between that travel package and a category 1-5 package.

In other words, with today’s packages, if your goal is simply to exchange points for airline miles at a favorable rate, it doesn’t matter what package you buy.  If you cancel the certificate, your final out of pocket cost will be the same.

Stated another way, if you buy a 7 night travel package today and then cancel the stay certificate (under today’s rules), your final cost for the miles received will be 270K – 45K = 225,000 points (or 75K Starpoints).  This is a fantastic transfer ratio.

How will cancellations of current certificates work in the new program?

There are two likely scenarios:

1. Old residual value: Regardless of how Marriott maps old to new categories, you’ll get back the same number of points as you would today.
2. New residual value: After your existing certificate is converted to a new category in the merged program, cancelling the certificate will give you back the same number of points as if you had bought the new travel package and cancelled it.

Personally, I think that option 1 is far more likely, but let’s look at each…

Old Residual Value: You can’t go wrong if your goal is to buy miles cheaply

The above table shows the pre-merger travel package prices, the per night value of each package (e.g. how many points that category hotel currently costs), the refund amount if you cancel the stay certificate, and the final out of pocket price if you cancel the stay certificate.  The chart clearly shows that if your goal is simply to buy miles at a very low rate, it doesn’t matter which package category you buy.  The final price will be the same.

So…

If cancellations are worth the same in the new program (i.e. the likely “old residual value” hypothesis), and if your main goal is to buy miles cheaply, then you can’t go wrong with any package.

Old Residual Value: What if you want to stay at Marriott/SPG properties?

Suppose Marriott maps your current stay certificate to a category that you’re unhappy with.  What options will you have if you really want a long stay at a Marriott or SPG hotel?  One option will be to cancel the stay certificate to get points back and then use those points for a regular award stay.

This chart is similar to the one above, but shows how many 60K nights you can afford with your refunded points.  The reason I picked 60K is that 60K will be the most expensive rate between this weekend and “early 2019”.  So, during that time, it should be possible to book the most expensive hotels in the Marriott / SPG portfolio for 60K points per night.

At the lowest category, you won’t get enough back to stay even one night at a 60K property.  With a Ritz Tier 4-5 package, though, you’ll get back more than enough for 6 nights.  How did I get to 6 nights when the chart says 5.3?  Thanks to Marriott’s 5th Night Free awards, the first five nights cost the same as four nights, so you’d still have enough to add on a sixth night, and you’d still have some left over.

It’s important to note that the math actually works out the same whether you start with 540,000 points and buy a Ritz Tier 4-5 Package or buy a category 1-5 package and hold onto the left over 270K points.  Either way, you would have 315,000 points in your account after cancelling your package and you can then use those points to book up to 6 nights at a 60K hotel.

In other words, as with the first scenario, in this one you can’t go wrong as long as you keep enough points in your account to cover the difference between the cancellation value and the cost of the stay you want.

New Residual Value: Greg’s Best Guess

What if cancellation point values are based on new residual value?  I described this scenario, above, as follows:

After your existing certificate is converted to a new category in the merged program, cancelling the certificate will give you back the same number of points as if you had bought the new travel package and cancelled it.

I think that this scenario is far less likely than the “old residual value” scenario, but let’s play this out…

We’ll start with the following hypotheses:

• If you cancel a category 1-4 certificate, you get back 45,000 points (It’s possible that the new bottom cash-out value will be more than this, but I doubt it will be less)
• If you cancel a higher level certificate, you get back 45,000 points plus the difference in price between that travel package and a category 1-4 package based on new pricing.

Now let’s look at how this all plays out with my best guess mapping of old categories to new:

The above chart shows my best guess of how old categories will map to new.  It also shows the refund amounts you may get in the unlikely scenario that refunds are based on new package prices and if the base refund stays at 45K.  Finally, the two columns on the right show:

• Apply refund to 60K nights: This shows how many 60K nights you could get from the refund.  Keep in mind that 4 nights really means 5 thanks to 5th Night Free awards.  New category 6, would get you very close to 4 nights, so that really means that it would get you close to 5 nights at a top tier property.  Ignore the category 7 row because if you really wanted a 60K per night property, you might as well not cancel the certificate but rather use it as intended.  The really interesting row is on the bottom.  Cancelling a new category 8 certificate would give you almost enough points for 8 60K nights (you’d only be 15K points short of 8 nights).  If you book those as two separate 5th Night Free awards, then you would get 10 nights out of your 7 night certificate!
• Final price for 120K miles: If you don’t care about the hotel stay, then this column shows you how many Marriott points you paid for 120K airline miles (or 132K United miles).  As you go to higher and higher categories, the value gets better and better.  The best overall is where cancelling a category 8 certificate would leave you with a final out of pocket cost of 75,000 Marriott points (25K Starpoints) for 120K airline miles (or 132K United miles)!

Based on my best guess category mapping and the scenario where cancellation values are based on new travel package pricing, buying a Ritz Tier 4-5 package today (if you have enough points) would result in a huge win whether you want to stay in top tier hotels or simply want to buy miles for less.

Next I’ll look at different category mapping scenarios…

New Residual Value: Map based on peak pricing (worst case scenario)

If Marriott maps old to new based on new peak pricing (and there’s a good argument that they might), they might map Ritz 4-5 to new category 7.  I consider this the worst case scenario.  Here’s what it looks like if you cancel your resulting package:

With this worst case scenario, things look far less rosy:

• Apply refund to 60K nights: In this scenario, you have to go up to Ritz Tier 1-3 to get close to 4 nights (5 nights with 5th Night free Awards).  Ritz Tier 4-5, though, results in a category 7 certificate which will be good for 7 nights in a standard 60K per night property until early 2019 when they introduce category 8 and peak pricing.
  
• Final price for 120K miles: If you don’t care about the hotel stay, Ritz Tier 1-3 is the only option that may save you points over the base category 1-5 package (a 30K savings).  Most other packages cost you 30K more than the base package.  But, category 9 in this scenario is the worst: it would cost you 60K more points.  (Note though that it is distinctly possible that if this category mapping happens, Marriott may refund the difference in points you paid between category 9 and category 8 or category 7 to make up for the reduced value of your certificate).

Based on this worst case scenario, Ritz Tier 4-5 is still the best bet if you want to book a 60K property.  As long as you don’t cancel your certificate, it should be usable for 7 nights at any property in the world until category 8 and peak pricing is introduced in 2019.  If you primarily value the miles, then the Ritz Tier 4-5 package isn’t your best bet.  You could hedge your bets with a Ritz Tier 1-3 (which does best in this worst case category mapping, and second best in my best guess category mapping).

New Residual Value: Map N to N-1

Another theory of how Marriott may map old to new categories is to drop down the category number by 1.  This makes sense since old category 5 maps perfectly to new category 4 (based on standard pricing, not peak pricing).

Let’s look at how this plays out:

• Apply refund to 60K nights: Old category 8 maps to new category 7 which can be used to book 7 60K nights if you don’t cancel the certificate.  Even better, old category 9 maps to new category 8 which, when cancelled results in nearly enough points for two 5th Night Free awards!
  
• Final price for 120K miles: This option gets ridiculous.  If you buy and then cancel an old category 9 (new category 8), you would then have more points than you started with.

Old category 9 is a huge winner in this scenario.  It’s also possible that the Ritz packages would be huge winners if Marriott decides to refund the original point difference between the Ritz packages and category 9 (since all result in the same new category in this scenario).

New Residual Value: Map N to N

Another theory of how Marriott may map old to new categories is to map by name.  Old category 6 becomes new category 6.  This seems crazily optimistic to me, but let’s look at it anyway:

• Apply refund to 60K nights: Old category 7 maps to new category 7 which can be used to book 7 60K nights if you don’t cancel the certificate.  Even better, old category 8 maps to new category 8 which, when cancelled results in nearly enough points for two 5th Night Free awards!
  
• Final price for 120K miles: This option is super-ridiculous.  If you buy and then cancel a category 8, you would then have many more points than you started with.

Category 8 is a huge winner in this scenario.  It’s also possible that the category 9 and  Ritz packages would be huge winners if Marriott decides to refund the original point difference between the higher level packages and category 8 (since all result in the same new category in this scenario).

Summary

The inability to upgrade or downgrade packages in the new program is unfortunate, but there may still be huge wins thanks to the promised ability to cancel stay certificates.

In the analysis above, I noted two key cancellation scenarios:

1. Old residual value: Regardless of how Marriott maps old to new categories, you’ll get back the same number of points as you would today.  I think that this is 95% likely.
2. New residual value: After your existing certificate is converted to a new category in the merged program, cancelling the certificate will give you back the same number of points as if you had bought the new travel package and cancelled it.

And I showed that with the old residual value you can’t go wrong with any level package.  As long as you bought a package resulting in 120K airline miles (or 132K United miles), and if you end up cancelling your certificate, you will have bought those miles for only 225K points (75K Starpoints).  That’s a phenomenal value.

With the far less likely residual value scenario, I looked at different theories as to how they may map old categories to new, and I came up with these “winners”:

• Greg’s Best Guess Mapping: Ritz Tier 4-5 packages result in a big win
• Peak Price Mapping (Worst Case Scenario): Ritz Tier 4-5 is the best bet for a top tier 7 night stay.  Ritz Tier 1-3 is a better bet if you plan to cancel for points back.
• Map N to N-1: Category 9 is the huge winner here.
• Map N to N: Category 8 is the huge winner.

The “make us whole” hypothesis: Regardless of how Marriott maps old to new categories, it’s possible that they’ll “make us whole” when multiple old categories map to a single new category (which happens in every scenario since there are fewer new categories).  By this I mean that they would refund the difference in original price between the package you bought and the cheaper package that resulted in the same new category.  If this happens, then Ritz Tier 4-5 is always the best bet across the board.

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