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What Marriott’s CEO is saying about Starwood elites, and what’s not mentioned that’s more important

by on Tue March 22, 2016 • 26 Comments
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The Marriott / Starwood merger is back on again, at least for now, and Marriott’s CEO spoke this week in more detail about the loyalty side of the Marriott / Starwood merger than ever before.

Starwood is a smaller chain than Marriott, with a rewards program designed to compensate for the inconvenience of not having so many hotels to choose from, so you might ignore having a less convenient location in favor of the rewards. So, with Starwood, you can earn a free night faster without hotel stays, like via credit card spending, and if you stay often, you’re rewarded with more generous perks, like suite upgrades.

Marriott, by contrast, is a big chain, with a rewards program designed to best reward people who spend a lot of time in their hotels, and there are lots of them, so it’s easier to do that than at a smaller chain like Starwood. Free nights often require twice as many points or more, but you earn them 3-5x faster than Starwood via hotel spending.

And the bar for earning top Marriott status is higher than at Starwood, with fewer benefits.

There’s a lot of conflict here, and that’s why so many Starwood Preferred Guest members are worried about the merger.

On paper, with slides, things look positive.

Marriott has a better grasp of how important the Starwood Preferred Guest program is, wants to take time to combine the programs, and thinks a stronger program will mean a stronger credit card offering. 

But reading the transcript of what Marriott actually said about the slides reveals a less rosy picture if you’re not one of Starwood’s very top level elites.

Here are some of the key points:

Marriott recognizes Starwood elites, and the power of recognizing them.

For Marriott, it’s really all about the bigger network for these frequent travelers, and it thinks having a hotel in the same loyalty program in places that wasn’t possible with Starwood will be a big advantage.

“SPG is a powerful program, no doubt about it. So it’s got a strong group of elite loyalists, a strong group of loyalists, who like the brands, who like the way Starwood treats them when they travel. But too often, they do not have a Starwood Hotel that’s available when they travel.

And as a consequence, they end up hopefully staying with Marriott. But sadly, they don’t always stay at Marriott so sometimes they stay at some of our competitors.”

Marriott will take putting the programs together slowly.

 But early on you may be able to earn points or receive benefits while the programs are separate

“We believe that initially with the loyalty programs, we will run them in a parallel way, Marriott rewards and SPG. Longer term, we’ll look for a combined platform.”

“I think by pulling these two programs together over time and providing some connectivity even sooner than that, we will see, for example, that those SPG guests find places within the network that they can stay in our place, which should allow us to take a greater share of their wallet than Starwood and/or Marriott and/or the two combined have today.”

It will be all about size, choice, and recognition.

What’s missing from that is the concept of value. Marriott hasn’t expressed any interest in maintaining the value per point Starwood provides, so if you tend to earn most of your points from a few stays, or your credit card, you’ll be worse off if they move to Marriott reward prices.

“We think that this will generate a hotel loyalty program that truly meets everything a hotel guest could want and believe we can position this program so that customers can conclude that there’s really no other program that they need to be members of. In size, in choice and in the recognition, we can provide to our guests, we think this loyalty ecosystem gives us the best tool we can possibly have to compete in the digital marketplace.”

It wants to better recognize people via the loyalty database.

Translation here – don’t expect great point opportunities, but more clever ways to market to you as a program member.

“And with the advantages of investing in only one platform, we expect to be able to accelerate spending not just on the infrastructure but on tools that allow us to get to know our customers better and to personalize our relationships with them. And of course, a strong program will open up more partnership opportunities, including with our great credit card partners, co-brand credit card partners.”

marriottview

Our take on all of this after reading the comments:

Marriott will work hard to make top Starwood elite members happy via recognition.

We think that means suite upgrades and other recognition benefits are likely to stay if you’re a big spender. Think 75 night Starwood Platinums. And since very top Starwood elites are already big hotel spenders, the new program will be more rewarding for many, with Marriott’s program offering more generous point earning for hotel stays.

Mid level elites and credit card spenders may be disappointed.

That Marriott makes no mention of the value of Starwood points, and focuses on the elite members who can’t find a Starwood when they travel reads to us that they want to more heavily reward frequent guests, rather than frequent credit card spenders. So expect the award prices to be a lot more more like Marriott Rewards than the old Starwood.

Most ominous of all, Marriott  says it wants to improve Starwood’s revenue per room to match Marriott’s.

Part of that may come at the expense of the rewards program, since Starwood traditionally has a higher mix of reward stays than other chains.

So, freeing up more rooms for paid stays rather than award nights could increase the revenue of Starwood hotels at the expense of the rewards program.

That’s the heart of why Marriott has paid lots of lip service to ‘recognizing’ elite members, but none to maintaining the value of the program for redemption.

And it may well be the issue that breaks the loyalty chain even for Starwood’s top elites, who value both recognition and unusual value. Yes, you may earn points much faster as a big hotel spender, but when award prices get inflated it’s hard to feel you’re getting a better deal, even if the math works out in your favor.

There are 54 million Marriott Rewards members, and only 21 million Starwood Preferred Guest members, and with Marriott hotels consistently earning more per hotel than Starwood it’s hard to get your hopes up that Starwood Preferred Guest will live on in much more than recognition.

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26 thoughts on What Marriott’s CEO is saying about Starwood elites, and what’s not mentioned that’s more important

    1. MileCards.com

      @Troy – No details on that yet, but it’s a reasonable assumption. The biggest issue is Marriott’s current top tier Platinum level benefits don’t include things like suite upgrades.

      Reply
  1. Caryn

    I am not a heavy credit card in general. I travel anywhere 5-15 nights maybe a year. Do you think Marriot or spg card is better w current promotions? I typically stay at ritz cartons as most of travel is in the Caribbean

    Reply
    1. MileCards.com

      @Caryn – Which of the Starwood hotels would interest you / be good alternatives to the Ritz Carltons you stay at in the Caribbean?

      For getting started with big value if you stay Ritz, hard to beat the 2 free nights at most Ritz Carltons with the Ritz Carlton Rewards card. Yes there is a hefty annual fee, but if you stay at Ritz mostly some of the other perks like club level upgrades may be valuable.

      Reply
  2. Shalimar price

    Not big spender but I have a timeshare with Starwood vacation and wonder how this would affect my ability to exchange my week points into spg points. Also will the 1:1 ratio change if I convert my spg points to miles?

    Reply
    1. MileCards.com

      @Shalimar – Too early to say on that. Eventually, the 1:1 conversion of SPG points to miles may change if they switch to Marriott. But our bet is SPG points will get trued up to Marriott levels before that happens, so you’ll have ample time, or maybe even be made whole on the balance of points you have.

      Reply
  3. Andrew

    I don’t travel much for business anymore, but I have around 460000 star points I believe will make a nice trip before they devalue and destroy the program.

    Reply
  4. Stephen

    I fit in to the spending category. I do about $400,000 a year with my Starwood American Express card. I have stayed at some of the top 50 hotels in the world in Florence, Venice, and Paris on SPG points. Most of those stays cost between 12,000 and 20,000 points per night. It appears that I am going to take a serious hit in benefits if the Marriott deal goes through. At first I was excited with the prospect of Marriott taking over Starwood due to the increase places I could stay. Not anymore after reading this article. Bummer.

    Reply
  5. Gerhard

    I am a lifetime Gold Level member. What happens to that status? Does it get converted to a similar Marriott status?

    Reply
    1. MileCards.com

      @jason – Nothing at all. The merger isn’t a done deal. And even then the programs will remain separate for a while. So probably no change for 1-2 years.

      Reply
  6. Jen

    As a Lifetime Plat, I’ve spent years & lots of money with Starwood. I just want assurance that my status and perks remain the same. If that status is revoked, I’ll go back to Hilton. Suite upgrades and status are the reasons I stay with Starwood. Marriott will ruin that program if they revoke those.

    Reply
  7. Jason

    My thoughts on this debacle correlate something along the lines of what it is like to recruit top talent – when a company culture and employment brand do not mix yet must go hand in hand to attract and retain assets. Any two companies can have a synergy on paper and culturally, just not be a fit. Comparatively, a candidate can have the right skills, on paper look great and not be a fit for the organizational culture or managerial style. For these reasons, hedging this merger while it may fit from a “market expansion” standpoint, from a real life case study perspective will be a catastrophic mess. No doubt there are already huge training issues with their respective employees and systems, which will then trickle to customer experience mishaps and ultimately the loyalty programs suffer when shareholders demand ROI after a few golden parachutes are deployed. Great example: Look at Delta and Northwest. Medallions suffered and their Loyalty Program went down. Every time an announcement comes it’s another whack to Frequent Flyers and more emphasis is placed on credit card alliances. It is coming, the writing is on the wall.

    Reply
    1. MileCards.com

      @Jason – Indeed, and United / Continental is another example of a challenging fit of cultures, both from the organization and customer side.

      Reply
      1. Jen

        I completely agree. I lost so much in the UA/CO merger! So when I heard of Marriott’s bid, I cashed in my Starpoints for a 2 week trip to Greece. I can always repopulate my account with Starpoints but I could not handle devaluation. So come May, I’ll be enjoying my dream trip. 5 nights at Hotel Bretagne, one of the most famous hotels in the world, for 12K points a night, plus a FREE night. Will Marriott be able to keep the Luxury Collection hotels so affordable?

        Reply
  8. Brian W

    I am a lifetime platinum member with SPG and gold with Marriott. I want to rest assure that my lifetime status will carry over.

    Reply
    1. MileCards.com

      @Brian W – We don’t have many worries about lifetime status being carried over. The issue is, what will the benefits be? Marriott’s version of Platinum is not as rich with upgrades as Starwood Platinum. So they could honor lifetime Platinum status, but it might not quite be what you’re used to.

      Reply
  9. Rick Grant

    I am a Marriott Platinum “Premier” member, and I like Marriott way better than SPG, IHG, Hyatt or Hilton. I spend 250 night’s a year in hotels and have been platinum (l’m spire ambassador with IHG) or diamond with all mentioned. If you learn how to play the game, Marriott is the top rewards gig out there, since November I have made over 350,000 points, I have made lifetime platinum in 5 years. I don’t have to stay at Marriott, but I prefer to because of the benefits. I stay at all of their full service properties and get upgrades and lounge perks and air & hotel packages, year after year… SPG doesn’t compare to Marriott.. Ritz-Carlton, JW Marriott, Autograph, Marriotts, A.C. Hotels, Delta, Gaylord … SPG has nothing close.

    Reply
    1. MileCards.com

      @Rick – Indeed if you’re a really heavy stayer and spender the Marriott program is tailor made for you.

      Reply
      1. Steven

        Is 350K at Marriott that much more valuable that the 125K you’d get at SPG in the same amount of time? Everything Rick described you get at SPG for 50 nights/year

        Reply
  10. Rick Grant

    I am a Marriott Platinum “Premier” member, and I like Marriott way better than SPG, IHG, Hyatt or Hilton. I spend 250 night’s ayear in hotels and have been platinum (l’m spire ambassador with IHG) or diamond with all mentioned. If you learn how to play the game, Marriott is the top rewards gig out there, since November I have made over 350,000 points, i have made lifetime platinum in 5 years. I don’t have to stay at marriott, but I prefer to because of the benefits. I stay at all of their full service properties and get upgrades and lounge perks and air & hotel perks, year after year… SPG doesn’t co pair to Marriott.. Ritz-Carlton, JW Marriott, Autograph, Marriotts, A.C. Hotels, Delta, Gaylord … SPG has nothing close.

    Reply
  11. Jameson

    Great article. Thank you for the information.

    I currently stay approximately 150 nights a year in a hotel. Last year I was able to earn platinum status with both Marriott and Starwood. I was able to status match with Hyatt for Diamond status and with talks of the merge, I thought it would be easiest to maintain Marriott platinum and Hyatt Diamond. I also could maintain Marriott Gold with my United 1k status.

    The most obvious problem is the much more limited hotel offering from SPG and Hyatt forcing me to stay at Marriotts more often when I travel to small cities.

    With the uncertainty of the SPG program and when they will merge thre rewards programs, it raises my question. Should I maintain Platinjm Marriott status with SPG Platinum or Hyatt Diamond?

    Reply
    1. MileCards.com

      @Jameson- If status benefits are the key for you, Marriott Platinum isn’t a whole lot better than Gold. So probably go for SPG Plat and Hyatt Diamond, and then use the free Marriott Gold for when you have no other option.

      If SPG / Marriott end up merging, sounds like you will easily be top tier, and maybe even be able to maintain Hyatt Diamond as well.

      The 150+ night per year SPG guest who spills over to Marriott is exactly the kind of guest Marriott wants to please with the merger.

      Reply

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