Insight: Marriott surprises with early loyalty linkage

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By: RickFerguson |

Posted on September 27, 2016

Marriott Rewards and Starwood Preferred Guests (SPG) members woke up Monday morning this week to find that, contrary to conventional wisdom and Marriott's own public statements, the two loyalty programmes are very much linked, with memmers now able to transfer both points and status across programme. What does this jump-started linkage mean for consumers, and for the respective brands themselves? Join us after the link for our Marriott-Starwood news roundup.

Here's what we know for certain. After clearing a potential hurdle from Chinese regulators, the two hotel brands completed the acquisition process on September 23. Marriott and Starwood now collectively make up the largest hotel company in the world, with 30 hotel brands, 5,700 hotels and 1.1 million rooms in over 110 countries. The two companies' respective loyalty programmes combined now boast 85 million members.

The sheer complexity of merging such massive databases, let alone engineering a fair transition of benefits that doesn't immediately melt down social media with complaints, led most industry wags to conclude that Marriott would take its sweet time in merging the programmes - after all, the United-Continental programme merger took five months to lurch to a start. This view was reinforced by public comments from Marriott CEO Arne Sorenson stating that the two programmes wouldn't merge until at least 2018.

How surprised we all were, then, to find out that the two programmes are already effectively linked, if not yet combined. Marriott first announced that members will have their status matched across both programmes. The Preferred Guest logo now appears on the Marriott Rewards site, and SPG members can already transfer their points over to Marriott, maintain their status, and then redeem those points for free nights at thousands of Marriott properties. For Marriott Rewards members, meanwhile, the key ratio 3 to 1: the exchange rate for Marriott points to Starwood points.

Members can now switch back and forth between programmes, earning and burning points at both major programmes as well as the Ritz-Carlton programme. What's most impressive is that Marriott and Starwood had this linkage mechanism completed and ready to launch the moment the acquisition was completed on September 23. That's a significant feat of engineering and project management that clearly demonstrates Marriott's commitment to retaining in the combined programme as many of its elite travelers as possible. Money quote from Skift's Grant Martin:

"Marriott and Starwood may be moving fast as part of an effort to keep loyalty members happy in the face of upcoming changes. Starwood's Preferred Guest programme, though significantly smaller than Marriott Rewards, enjoys fierce support from its user base because of strong redemption options and a co-branded credit card. To prevent membership attrition, management may be rolling out shared benefits as fast as possible."

Overall, industry reaction about the swift linkage has been positive. Says Taylor Rains, managing partner at Flugel Consulting, quoted in Luxury Daily:

"Despite all that has been publicized regarding the merger, I doubt either brand will see any significant implications. In fact, I strongly feel that the merger will attract a higher level of loyalty among customers of both brands. They will see available properties within the new company's portfolio grow and will likely be pleased with the opportunities for travel. There may be a brief dip once the merger is finalised while there is still a measure of uncertainty among consumers, but once that is addressed and assuaged by the two brands, it will likely regulate then begin to grow."

On the consumer side, meanwhile, analysts remain optimistic if wary. Money quote from commentator Mark Jackson on Brad's Deals:

"Comparing award charts between Starwood and Marriott, this [3 to 1 conversion] seems fair to me. Lower tier properties on Marriott's chart start at 7,500 points, which, under that conversion rate, comes out to be 2,500 Starpoints, or the average of low and high season redemption rates in Starwood's programme."

A few other analysts have pointed out potential pitfalls from the acquisition. Over at Inc., commentator Dan Ruch warns about the impact of dilution of elite benefits on Starwood loyalists:

"Frequent travelers, the ones who benefit most from hotel loyalty programmes, can be quite particular about their hotel preferences. Being able to earn and redeem rewards at a Marriott means little to someone who always stays at the Westin (a Starwood hotel), while the massive influx of customers from another loyalty programme could have a negative effect on that person's elite status. "Elite bloat," a coin termed to describe the ever-growing tiers of loyalty status levels for airlines, could potentially apply to an unwieldy Marriott-Starwood rewards programme."

Ruch also points out the potential for price-gouging corporate travel managers, since the combined company "will have nearly a third - and in some cases half - of the corporate travel hotel spend in 14 of the world's top 20 cities." Should this potential become reality, road warriors could find their programme participation constrained by corporate travel departments looking for cheaper room rates.

These worries aside, Marriott overall earns high marks for proactively demonstrating their loyalty to both SPG and Rewards members by enabling the linkage infrastructure so rapidly - certainly well before anyone expected them to. Should the new company continue to demonstrate that loyalty, members of the combined programme should have plenty to cheer about.

- Rick Ferguson



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