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I’m interested in the businesses behind loyalty programs, so I always wonder:
- What did that credit card company pay that airline for its miles?
- How much does American Airlines pay Qantas when an AAdvantage award includes a Qantas leg?
- How much did that hotel loyalty program reimburse that specific hotel for the free stay I just took?
Well last month I stayed at the Radisson Martinique of Broadway (review here), and I know exactly how much Club Carlson reimbursed the Martinique for my stay.
How much did Club Carlson pay the Martinique for my stay? How do I know?
I used two free one night stay certificates for my stay. When I checked out, I was surprised to be presented with a bill that read:
- NY State Tax (8.8875%) $10.47
- Occupancy Tax (5.875%) $6.93
- Hotel Room Tax ($2) $2
- Hotel Room Unit Tax ($1.5) $1.5
- NY State Tax (8.8875%) $10.47
- Occupancy Tax (5.875%) $6.93
- Hotel Room Tax ($2) $2
- Hotel Room Unit Tax ($1.5) $1.5
The total bill was $41.80.
Normally points stays have no taxes on them, and I had anticipated the free night certificate would be the same. Upon closer inspection, it did say on the back of the voucher that taxes were my responsibility, so I paid them, and then I started to wonder why I paid the amount I paid.
The percentage taxes make it easy to calculate that the “base rate” of my stay was $118 per night. I assumed that must be the rate at which Club Carlson reimbursed the Martinique for my stay, which was about one third of the prevailing room rate.
I emailed Club Carlson for confirmation on why I was charged taxes of $41.80 on my award.
The answer I got back from a manager at the Martinique:
The taxes are based upon a pre-determined value of the room rate of the free night of $118.00. The rate can fluctuate depending on the occupancy.
He didn’t quite confirm that the Martinique was paid $118 per night by Club Carlson, but I infer that from the line about the rate fluctuating based on occupancy. Everything I’ve read about hotel programs has said that the hotel program pays the hotel one rate far below the market rate as reimbursement for free rooms normally and one rate near the average daily rate if the hotel is nearly full.
Normally the Martinique costs 50k Club Carlson points for a free night. If Club Carlson then pays the Martinique $118 for the stay, that’s costing Club Carlson about 0.23 cents per point redeemed. With redemption costs that low, that explains why it’s so easy to earn Club Carlson points, and why Club Carlson has had some incredible promotions in the last few years.
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Parker Meridien was in a lawsuit with SPG. Apparently, SPG must pay hotel more if the hotel is closer to being full. So guess what SPG says hotel did? They made their own phantom bookings to get reimbursed more from SPG.
Gary Leff wrote about this here…
http://boardingarea.com/viewfromthewing/2013/03/14/more-prurient-spectating-in-the-parker-meridienstarwood-lawsuits/
Pretty interesting I think
It’s amazing how people respond to incentives sometimes.
I see both sides of the issue and would’ve questioned the amount too, but, it’s NYC after all which is more or less a licence to steal. That said, the taxes on a paid room would’ve more than likely been about the same anyway, so it doesn’t seem too much to pay.
The taxes on a paid room would have been 3x as high because the list price was 3x as high.
Thanks for the details. So I’m thinking that $41.80 was a real bargain. I didn’t bother to look into the average nightly rate or rack rates before responding, but was fairly certain being NYC it wasn’t going to be a bargain even though you confirmed it from the source you did. Thanks.
TY for the interesting post.
I’ve stayed at several low-end Hyatts (Hyatt Place, Hyatt House, etc, mostly 5000 or 8000 points per night) using gold passport points and sometimes they have accidentally given me a bill, which showed what they get paid by Hyatt Gold Passport. They were around $22 per night.
If you have any intel on how much AA pays JAL, etc or how much Citibank pays AA for a credit card signup, that would be VERY interesting. thanks Scott.
I stayed at the Martinique about six months ago on points; was not charged taxes. So this may be something new.
Scott didn’t stay on points, he used a free night certificate, which is different.