Grant Martin over at the most excellent travel industry news site skift.com has been following closely the impact of the Marriott-Starwood merger on the companies� soon-to-be-combined loyalty efforts. In his latest take, he looks at Marriott�s recent revaluation of its award categories and the hunger of the new company�s competitors to poach elite frequent-travelers from their programme roles. Martin�s conclusion: while programme devaluation isn�t a forgone conclusion, Marriott will need to make a strong overture to Starwood members soon�or the brand could suffer defections.
Martin points to Marriott�s recent redemption rate adjustments as providing a mixed signal about the future of the combined Marriott-Starwood loyalty programme. Money quote #1:
�Both Starwood and Marriott updated their award categories last week, adjusting about 20% of the properties in each stable. Of those changed, 70% of Marriott properties and 60% of Starwood properties are getting more expensive. The rest are going down.�
These numbers can be read one of two ways. To the optimist, they are a sign that Marriott is performing a normal and healthy adjustment of its award categories based on demand, availability, and cost to deliver. To the cynic, the fact that most properties are getting more expensive are a sign that the hotelier is clearly devaluing its points.
The cynic�s view flies in the face of post-merger comments from Marriott CEO Arne Sorenson on a company earnings call:
�How do you take these two leading loyalty programmes in Marriott Rewards and Starwood Preferred Guest and create something which is more powerful. The only concern we hear in response to the deal are Rewards and SPG members who want to know their points are protected. The principle reason for the deal is to redouble our commitment to them.�
Of course, the deal was also about the potential windfall from the company�s impending post-merger real estate sale, but that�s beside the point. As for Marriwood�s competitors, they�ve been quick to pounce on the cynic�s view with both pointed comments and attempts to woo potential programme defectors. As Martin points out:
- Competitors are calling Marriott out: Wyndham Hotel Group�s Noah Brodsky, SVP Worldwide Loyalty & Engagement, has called the Marriott/Starwood award changes �a significant devaluation� and suggested that the company is deliberately hiding the changes in an overly-complicated programme.
- Competitors have also started poaching: A recent promotion from Hyatt reportedly poached about 10,000 defectors from Marriott and Starwood, while Hilton recently offered matching elite status for defectors through the end of January 2016.
Martin stops short of agreeing with Wyndham�s Brodsky that Marriott is deliberately devaluing their programme�but he does agree that competitors are nonetheless wise to pounce. Money quote #2:
�As to whether the category changes to Marriott and Starwood reflect as stark of a dystopian industry as Wyndham suggests, the reality is a bit more complicated. Much goes into the value of a hotel loyalty programme, including the rate at which members earn points, the number of hotels in the network and the strength of any partner programmes � so changing the value of a handful of properties may have little overall effect on a programme�s global value. For those on the fence about changing their loyalty though, Wyndham is smart to shake the tree.�
The Bullet Point: To add to Martin�s analysis, the optimist in me believes that Marriott will pay more than lip-service to Starwood�s legion of elite travelers. The Preferred Guest programme has long been the gold standard for the industry�and the value of that programme, the loyalty of its members, and the resulting treasure trove of transaction and behavioral data on those members was assuredly a key factor in Marriott�s pursuit of Starwood. The money here is that, lever-pulling aside, the new combined loyalty programme will look a lot more like Starwood�s current programme than Marriott�s.
The alternative? If Marriott guts the combined programme with a significant devaluation of points and a curtailing of benefits, the effect on the industry could be dire, with an overall industry-wide devaluation of hotel programmes and rampant disloyalty. Should Marriott goes this route, their competitors should continue their efforts to woo defectors with smart promotions and superior programme value. The arms race for Marriott customers would be beneficial for travelers, and the company that best masters the tools of customer loyalty will emerge as the new king of the hotel loyalty landscape.
Read the Martin piece here.
- Rick Ferguson
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