February 26th, 2008
Ever wonder how Starwood decides which hotels fall into which categories? There are some incredible hotels that I have stayed in that are considered Category 1 properties, costing 2,000-3,000 starpoints, while I have been to dumps that are Category 3 properties costing 7,000 points/night (although those do have the 5th reward night free, nights and flights options, and are only 2,800+$45 with Starwood Cash and Points…)
The answer is RevPAR, which is a hotel’s average daily rate multiplied by the hotel’s average occupancy rate=Revenue Per Available Room, aka RevPAR.
Each of the 7 Starwood hotel categories are divided up into RevPAR brackets.
This formula is what causes there to be true bargains and incredible rip-offs in the Starwood program.
I have seen $400 hotel rooms placed in Category 2 (3,000-4,000 starponts). Presumably this hotel has a low occupancy rate, which drops their RevPAR down to Category 2 levels. On the other hand a hotel charging just $100 per night may find itself ranked at a Category 3 if they have consistently high occupancy.
So why does Starwood use RevPAR to categorize hotels?
Because the Starwood program has no blackout dates for hotel rewards (if a Starwood hotel has a room available for sale, you can get it with points. Don’t you wish airlines did that as well!) RevPAR is a decent indicator of what your free stay will cost Starwood.
You see, Starwood doesn’t own most of the Starwood branded hotels, individual owners simply license the Starwood brand name, and pick an appropriate Starwood brand (Sheraton, Westin, W, Four Points, S. Regis, Le Meridien, Aloft, The Luxury Collection, etc.) When you use Starpoints at a hotel the Starwood Preferred Guest program compensates the hotel based on its ranked category and the occupancy rate for the night of your stay. If the occupancy rate is over 90% then the program winds up paying top dollar to the hotel, if it is under that rate it pays a much lower rate.
Coming soon: Part 2; The Annual RevPAR adjustment.