Uh, No: the Marriott-Starwood Merger and American Devaluation Aren’t a Social Lesson on Rich and Poor

Changes in the travel industry are often a rorschach test for one’s own priors. Matthew Yglesias says “Marriott/Starwood merger is another case of the rich getting richer” but he gets it exactly backward.

I’m not going to make any points about income inequality in the United States or the world. But I am going to make a point about the particulars of how Marriott Rewards and Starwood Preferred Guest work, and about his take on American AAdvantage devaluations. Because they simply do not get him where he wants to go in making broader claims about society.

Yglesias claims that “since Starwood’s portfolio is disproportionately tilted toward destination properties while Marriott’s client base is disproportionately tilted toward utilitarian frequent travelers, you’ll see more Marriott loyalists cashing in at Starwood properties than Starwood loyalists wanting to cash in at Marriott properties.”

The result of this is supposed to be that Marriott Platinums will eat up all of the Starwood award rooms. Starwood Platinums will still be fine since “[t]hey’ll still be at the front of the line for goodies,” but Starwood Gold and general members will be shut out.

Of course, this makes no sense.

  • Starwood has long offered last standard room availability for awards.
  • Marriott isn’t quite as generous, but even if we assume a total shift to Marriott Rewards as it stands today those rooms are ‘first come, first served’ for redemption (although more space can be opened).
  • If there’s competition it will be among the top tier for perks that trade off amongst members, most of all suite upgrades — everyone wants suite upgrades at the Westin Maui at Christmas not the Sheraton Tucson midweek. But Marriott Rewards doesn’t even promise suite upgrades at all. Hardly the elite rich getting richer with Marriott, and even less competition for benefits if fewer benefits are offers.

He’s on firmer ground claiming that:

This is essentially what we’ve seen happen in repeated rounds of airline loyalty program revaluations (most recently American Airlines) in the wake of industry consolidation. Building a larger network means more convenience for fliers with the highest tiers of frequent flier status, but it’s also meant there’s less excess capacity to share with lower-tier elites. Airline after airline has responded to this by devaluing the lesser tiers of its loyalty programs in order to focus on the newly enlarged bloc of superloyalists.

Except that in the latest round of changes at American AAdvantage the top elites don’t get more and they don’t even stay the same. They get their base level of international upgrades cut from 8 to 4. They can earn that 8 through additional flying (150,000 qualifying miles for 6 and 200,000 for 8) but in the past ‘overperforming’ Executive Platinums could earn beyond 8 for their additional flying. And of course even top elites are subject to the most draconian changes in the program which are — contra Yglesias — to internetional first class redemptions.

It’s precisely access to the greatest luxuries in flight that are being scaled back the most, even for the most frequent American flyer. The same was true with United’s devaluation.

What’s more, the notion that any of this is an allegory for broader social narratives about rich and poor simply doesn’t work.

  • ‘The rich’ may often (though certainly not always!) fly private. Senior enough executives don’t have to spend their lives on the road. At the top end, people come to them.

  • The Road Warriors, traveling on their companies dimes, are the nation’s middle managers, the sales staff, and the consultants.

If the road warriors who get cut the least in program devaluations were ‘the rich,’ at the top of the food chain, not only wouldn’t they need to pay as much attention to their miles they also wouldn’t be accumulating as many through travel in the first place.

Hat tip to @ScottDrenkard who says, “middle managers get richer while the rest of us…um…”

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Yglesias is Yglesias, it wouldn’t really matter what happened, he’d come to that conclusion. When the only mental tool you have is a hammer…

  2. To take “rich and poor” literally is to completely miss the point of Yglesias’ piece, which I find to well reasoned. You, @Gary, would the “rich” in Yglesias’ context. It refers to those who were previously savvy enough [ because they read , e.g.,”View From the Wing”, 😉 ] or fortunate enough [through their regular work] to earn top elite status. In this context, I too am “rich”, though I would not be considered “rich” in the traditional sense of the word.

    Therefore, Yglesias is on solid ground in saying that the Marriott/SPG merger will make top-tier Marriott elites “richer” because it would give them access to SPG’s more luxurious properties, which may become the preferred outlets for their points. While this won’t affect the SPG’s “rich” because “[t]hey’ll still be at the front of the line for goodies,” Starwood Gold and general members will be shut out and, thus, get “poorer” [in the same figurative sense].

    This is a valid “allegory for broader social narratives about rich and poor” if one defines “rich and poor” as Yglesias — a very smart progressive thinker — defined them.

  3. I agree with DCS. I’m glad I read the Yglesias article after reading your post. Normally I have a lot of respect for you Gary but you really let your emotions or something get the better of you with this post, and I am disappointed. I think you intended to take a subtle jab at Yglesias along with the inequality people. The commentary is not talking about “rich people” getting richer, its about the “rich frequent flyers” getting richer. Middle class road warriors are “the rich” in this instance. DCS is spot on, if you take the time and consideration to understand what Yglesias is saying, it does make sense. You became reactionary upon hearing trigger words “inequality” and “Yglesias.”

    In general, the middle class does get squeezed with all these mergers. The only value I have gotten in 5 years of being gold on AA is two upgrades and no fees on close-in award ticketing. The “rich” will come out just fine, as they will always be at the top of the pyramid.

  4. At this point I see no basis for any claims that customers will get “richer” from the Marriott-Starwood merger. The terms of the new program are currently unknown. But I do think there is valid reason for concern for all SPG members from those with lifetime SPG status to Platinum Ambassadors down to the general member.

    If the airline mergers are instructive, the ones getting richer in the Marriott-Starwood merger will be Marriott and Starwood shareholders, new management at Marriott, and Starwood executives who benefit from lucrative change-in-control provisions of their executive contracts and benefit plans. Mergers are done generally to benefit shareholders through cost savings and the benefits accruing to a business with larger scale and scope. Mergers can also benefit shareholders through a reduction in competition which allows companies to increase profit margins by extracting more money from their customers. In the airline mergers, reduced competition also allowed the airlines to increase profits by reducing benefits for all levels in their loyalty programs. I wouldn’t expect any customers to get “richer” as a result of Starwood-Marriott merger. Some may lose less than others.

  5. @Gary — LOL. No, YOU missed the point by light-years. In fact, with that denial, you just proved @TheAJ’s point that “…you really let your emotions or something get the better of you with this post…” and that “You became reactionary upon hearing trigger words “inequality” and “Yglesias.””

    Anyone — save for right-wing bloggers apparently — reading Yglesias’ piece, which was likely inspired by the NYT piece by Josh Barro about disgruntled SPG loyalists in which you proudly let everyone know you were quoted, would conclude that it was about frequent flyers!!!

  6. @DCS I am not making any point about inequality. But I think the facts I present in the post speak for themselves, that there really isn’t a rich-poor case to be made here as the original piece attempts to. And you don’t explain there is or refute the points I’ve made. Your comment doesn’t come close to constructing an ‘argument’.

  7. @Gary — You are right. Your comments speak for themselves and what they say loudly is that you completely misunderstood Yglesias’ piece, thinking that he’d used “rich and poor” in their literal sense!!!

  8. @Gary — Thank you for confirming that “…you really let your emotions or something get the better of you with this post…”

    Your readers can read English. They can read Yglesias’ piece and decide. You got this one totally wrong because you went after the messenger rather than the message.

    I am done here.

    G’day!

  9. “. For the very top-end Starwood elites, that’s no problem. They’ll still be at the front of the line for goodies, and they’ll have an expanded portfolio of hotels to take advantage of. But for the middle class in the Starwood program, it’s going to be a huge problem — they’ll be pushed down in the pecking order and find it harder and harder to gain access to the hotels they want to stay in.”

    I think this is generally a fair comment – don’t you?

    “Starwood has long offered last standard room availability for awards.

    – As if they will keep that policy.

    Marriott isn’t quite as generous, but even if we assume a total shift to Marriott Rewards as it stands today those rooms are ‘first come, first served’ for redemption (although more space can be opened).
    If there’s competition it will be among the top tier for perks that trade off amongst members, most of all suite upgrades — everyone wants suite upgrades at the Westin Maui at Christmas not the Sheraton Tucson midweek. But Marriott Rewards doesn’t even promise suite upgrades at all. Hardly the elite rich getting richer with Marriott, and even less competition for benefits if fewer benefits are offers.”

    The rich get richer – they will have more access to top-end hotels, slightly compromised by some more elite-level competition. The middle class will never have a chance of experiencing any of this.

    That is the point. The increased number of flights offsets the increased competition at the top end. The increased number of flights does NOT offset the increased competition at the lower end.

  10. @Gary sez: “you need to understand who the author is and where he’s writing.” It is generally a good idea to stop digging when you are already in a hole. You keep confirming with each statement what we already know. You took issue with the piece not because there was anything wrong with it, but because of who wrote it.

    FYI, I am more familiar with Matt Yglesias’ writing and thinking than you will ever be because, considering your political persuasion — which is why you suspect an ulterior motive here — I doubt that you have ever read him objectively, your misreading of his innocuous piece in Vox [the brainchild of Ezra Klein, who used to write “Wonkblog” at WaPo] being exhibit A. Are you even familiar with Vox at all and how they pride themselves in being more wonkish than rabidly partisan?

  11. @DCS “FYI, I am more familiar with Matt Yglesias’ writing and thinking than you will ever be” obviously suggests that you do not know who I am, and where I’ve spent the past decade of my life.

  12. Call it the Godfather syndrome: “Everything I think I am out, they bring me back in…”

    I have some idea about where you passed the last decade of your life and that is precisely why you simply are incapable of reading it objectively to know anything about it. Most Fox News viewers “know” who Yglesias is but know very little about his writing because they have never read it since it would nothing short of heretical to do so…

  13. Gary,

    I will give you another example –

    I just purchased an $1800 ticket on United, to fly to Asia. Normally I would be earning 15000 miles on this award but as a lowly “member” of United I will earn a little more than half that. 9000 Miles. The top tier earns 20,000 miles, which is slightly less than they would have normally earned BUT, they will receive the benefit of that fact that I and the rest of the middle class / poor class will not even be able to afford to buy an award ticket. This opens up more inventory for them. They are experiencing a real gain here.

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