Marriott/Starwood must clear loyalty hurdle
 
Marriott/Starwood must clear loyalty hurdle
18 NOVEMBER 2015 10:09 AM

For now Marriott Rewards and SPG remain two separate loyalty programs. Eventually combining them will be one of the deal’s biggest challenges—and opportunities. 

REPORT FROM THE U.S.—One of the driving forces in Marriott International’s planned $12.2-billion acquisition of Starwood Hotels & Resorts Worldwide also stands to be one of the biggest logistical hurdles.
 
The deal eventually will combine two of the largest loyalty programs in the hotel industry: Marriott Rewards with 54 million members and Starwood Preferred Guest, or SPG, with 21 million members.  
 
The resulting size and scope was one of the main sources of attractiveness in the deal, said Marriott President and CEO Arne Sorenson during a conference call to announce the merger. 
 
“They are both extraordinarily powerful programs, and we will make them more powerful and relevant,” he later told Forbes.
 
For now, nothing changes. The two loyalty programs will operate separately, according to an email sent to SPG members on Tuesday.
 
“Today is the first day of a long journey as we combine our two companies. For now, we remain separate, and there is no change to your SPG program status, your Starpoints or your existing reservations. You will continue to earn Starpoints and elite stay/night credit for your stays, as well as bonus Starpoints for any promotions in which you are participating. There is no change to how you manage your SPG account or book reservations,” said the email, authored by SPG’s senior VP, Chris Holdren. 
 
He wrote that he would share more news in the “coming months” as the two companies work through a plethora of challenges. Marriott Rewards and SPG have starkly different points structures and values, redemption thresholds and benefits. They also have different clientele with their own inherent loyalties, sources said. 
 
The biggest temporary roadblock, however, is existing contracts with credit card providers, explained Brian Kelly, founder of loyalty program blog The Points Guy. 
 
Loyalty programs are “big, big profit makers, huge profit centers mostly because of the co-branded credit cards,” he said. “You can’t just change that overnight to a Marriott credit card. Beyond just logistical issues, there are legal issues. It would breach their contract.”
 
SPG co-brands with American Express, while Marriott Rewards co-brands with Chase. 
 
“What I suspect will happen is they’ll operate separately for a few years until it’s time to renegotiate the contracts,” Kelly explained. “Then Marriott will go to Chase, Amex and some other credit cards carriers to see who wants the contract.”
 
Such a delay is not unprecedented. InterContinental Hotels Group completed its acquisition of Kimpton Hotels and Restaurants on 16 January, but the companies’ IHG Rewards Club and Kimpton Karma Rewards programs still remain separate.  
 
Neither Marriott nor Starwood responded to requests for comment by press time. 
 
Lost in translation
Another major challenge is translating the respective platforms into the same language, sources said. 
 
A side-by-side comparison conducted by WanderBat shows stark differences, particularly in the value of points.
 
 
Some of the WanderBat comparison was confirmed in a separate survey conducted in July by IdeaWorksCompany. In the resulting “Switchfly hotel reward payback survey,” one Starpoint was valued at $0.029, while one Marriott Reward point was valued at $0.009.
 
As that survey explains, face value can be misleading because of differing rates of accrual. For instance, SPG members earn two points per dollar spent on property, while Marriott Reward members earn 10 points per dollar spent. 
 
The resulting “reward payback” further underscores the point, with Marriott Rewards returning an average of $9.40 for every $100 spent. SPG, by comparison, returns an average of $6.10 for every $100 spent, ranking it the lowest of the four hotel loyalty programs studied in the Switchfly survey.
 
Loyalty loyalists
SPG is widely regarded as having some of most ardent and loyal constituents. But independent rankings and satisfaction scores suggest otherwise. 
 
U.S. News ranks Marriott its top hotel rewards program. SPG, meanwhile, comes in eighth. 
 
In J.D. Power’s “2015 Hotel loyalty/rewards program satisfaction report,” SPG ranked 13th among 15 programs studied with an index score of 661 out of 1,000. 
 
 
“People have such a high elevated view of the Starwood SPG program,” said Rick Garlick, global travel and hospitality practice lead at J.D. Power. “Marriott, by contrast, in 2014 was the top-ranked program (with an index score of 707). Last year, it dropped to fifth place but only because there was an extremely crowded field above it.” 
 
The discrepancy between that “elevated view” and reality, as unveiled by the survey, lies in the treatment of top-tier travelers versus all members, Garlick explained. 
 
“My hypothesis is that if you have status in the SPG program … you’re probably much more satisfied and engaged than just if you’re a more casual member,” he said.
 
Kelly, himself an SPG platinum member, corroborated that hypothesis. 
 
“Starwood spoils its top-tier elites more so than any other chain,” he said. “I get free bottles of wine. They really, really go over the top. The SPG team is top-notch in all aspects. … They truly, truly think about what they can do to make their guests’ lives better.”
 
From the perspective of a frequent traveler, Kelly viewed a merger between SPG and Marriott Rewards with some hesitation. 
 
“I share the concern that when you merge it in with a mega program like Marriott that there’s this huge risk of everything being watered down. … If you simply try to blend the two in a blender, the SPG side of the house is going to be very, very angry,” he said. 
 
Garlick pointed to the potential positives—namely, the more than 700,000 Marriott rooms that SPG members will be able to tap into. 
 
“One of the things people love about rewards programs is the distribution and the opportunity to earn a whole bunch of points at the Fairfield Inn and turn them in at the Ritz-Carlton. … If the SPG program was folded into the Marriott Rewards program, it would be nothing but a plus for the participants,” he said. 
 

2 Comments

  • Kailey July 24, 2016 9:34 AM

    Woah nelly, how about them apselp!

  • Kailey July 24, 2016 9:34 AM

    Woah nelly, how about them apselp!

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