[fwlr]

Generally, no, loyalty programs from hotels are not a scam. Or, I guess, it’s probably most accurate to say that they do not have to be a scam to be profitable, some places may run them as a scam anyway.

Speaking from the other side of the desk, guests can vary wildly in how much they cost to accommodate. A good guest (mostly one who cleans up after themselves) can cost as little as one-quarter of the average guest, that significantly improves the margin on the room and we can definitely afford to pass some of those savings on to you once we know you’re a good guest.

Speaking from a broader view, the kind of guest who stays often enough to meet loyalty targets is usually travelling for work. Their demand for accommodation is inelastic (job needs them in this place for this long) but very substitutable (pretty much any clean room will do). It makes sense to sacrifice some margin to capture that.

So there’s a few good reasons why hotels or hotel chains can offer real discounts in their loyalty programs.

[steveBK123]

Right, and as a hotel/airline, if given the choice between upsetting two paying customers.. who do you upset: someone who has done 100 nights/flights with you this year, or the guy who got a last minute rate from an online travel site and picked you because you were $5 cheaper?

The 100 nights/flights guy is also probably a much lower touch customer as they are just in&out for work, and "know how things work" generally so doesn't have unreasonable expectations for what they have paid.

[Scoundreller]

It can go both ways. The 100 nights/flights person gets really familiar/routined to what's on offer and is going to complain when you change the brand of rum. Corporate expects you to personally welcome them, read their preference notes and make sure you give them something to bring to their kids because it's their birthday.

You're expected to upgrade them to the best available room/seat but they complain to corporate when someone that does 101/year gets the upgrade instead. If their flight gets cancelled/delayed because they flew into a known hurricane, you better watch out for it and proactively re-book them or hand out food/hotel vouchers.

The $5 discount OTA person... give them the crap room/seat that nobody else wants and just ignore their whining.

Just based on my experience of being the latter and trolling flyertalk...

[steveBK123]

I think Flyertalk are somewhat of a self selecting bunch of over optimizing nuts, to be fair to your average frequent flyer.

[chx]

Nah, we are fruitcakes not nuts :P

(used to be. then came covid. now i use my points to fly volunteers to ukraine.)