Loyalty programs are just a scam for you and the hotel to rip off your employer, right? Or are you really getting a cheaper/better deal than using a marketplace such as booking.com
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.
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.
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...
(used to be. then came covid. now i use my points to fly volunteers to ukraine.)
Another way to look at them is they are a gamified & transparent method of becoming "a regular" at a hotel/airline and generally get in return, commensurate better product/treatment/service, especially in cases of adverse events like short notice changes, delays, cancellations, etc.
Just like if you go to the same pub/restaurant in your hometown over & over, you'll get recognized as a regular.. and maybe on occasion get some free apps, access to a table when they might otherwise say they are full, and friendlier treatment. Except at a national/global scale across a brands properties/planes/airports/etc.
It is interesting to me that travel is one of the few remaining places where customer loyalty is in any way rewarded. And why shouldn't it be?
Or at least a tax-free retirement benefit (not bad if you have an employer).
But it is funny to read on the travel discussion boards how much road-warriors hate hotel/airline X Y or Z because their points program isn't great, but they're substantially cheaper.
Some country's tax policies consider employer-paid meals a (partly/fully) taxable benefit, but if the hotel provides it for free, that's cool.
Same thing with credit card points. That's a huge one for squeezing out tax-free income out of your business.
However, if you get into any quarrel with your employer that can be fatal. Now they have an good argument to fire you with any compensation because of your wrongdoing. This had recently happened to the head of a Finnish government agency, ironically enough the audit office.
EU regulation is pushing back on the MFN clauses, but I'm not sure what the current state of things is.
If the difference was small enough, many guests would still book through booking.com instead of the hotel out of ignorance, not caring enough, or because booking provides a better experience.
It'd cut their profits by limiting the commissions they can charge, but I don't see why they would go out of business.
But it doesn't apply in my specific case. I'm not employed. I pay for everything out of my own pocket.
I bet a better deal from Marriott directly as a member than by going through a third-party.