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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:
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.”
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.”
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.”
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.”
Our take on all of this after reading the comments:
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.
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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