For all the talk of financial synergies, scale in dealing with online travel agencies, and the operational skill Marriott brings to managing Starwood hotels, at core there’s still guests of the chain and in particular Starwood Preferred Guest members who drive an outsize portion of room nights. Marriott doesn’t want to lose Starwood’s customers to competitors.
Meanwhile American Express is desperate to find a way to keep its Starwood Amex intact with Marriott buying Starwood.
St. Regis Bali
They re-signed Delta for $2 billion a year. But the Starwood deal is nearly half that, they just re-signed Starwood even, but if there’s no Starwood Preferred Guest it’s hard for their to be a Starwood Preferred Guest – American Express relationship .. especially when Chase is the exclusive card issuer for Marriott in the U.S.
The Starwood name is expected to go away. Nonetheless, there’s 9 figures a year on the table that Marriott wants to find a way to keep (and they won’t do as well just attempting to transition members to the Marriott co-brand product). And Starwood members don’t love the idea either, no one chose to be loyal to Starwood because they were going to be equally happy with Marriott.
This is a problem all around. Starwood’s caretaker CEO recognizes it as well.
- HM: When the acquisition was announced, SPG members cried foul. Allay their fears.
TM: We heard them loud and clear. The blogosphere lit up with concerns. What has made Starwood so valuable is its brands and loyalty program.
We are confident that Marriott would approach it with a due-no-harm approach. We do not want to alienate our most valuable members, who drive about 50 percent of occupancy. But, because of antitrust reasons, we haven’t been able to talk about how to put these programs together, so, unfortunately, it has created a bit of a communication vacuum. People want to know, but it’s an area we can’t talk about or collaborate on yet, as we still need to compete.
SPG won’t switch over on day one. It will need to take longer. Marriott needs to learn about the special sauce.
W Union Square
The deal hasn’t closed yet. That won’t happen until mid-year.
Then at the very least there’s a 12-18 month data migration and broader integration project. So in all likelihood Starwood Preferred Guest will remain separate through 2017.
They know they have a problem. Seeing it articulated by the CEO of American Express and the CEO of Starwood (with the CEO of Marriott simply reassuring that they don’t believe in devaluations) means they take it seriously… but they don’t know how to fix it.
The thing is there’s no way to fix it other than to:
- Keep Starwood Preferred Guest separate, with separate benefits, for legacy Starwood brands the way they’ve kept Ritz-Carlton Rewards separate. Over time the program becomes more like Marriott Rewards because it’ll be run by Marriott people and because running a single program for a single hotel company helps them generate efficiencies.
- Revamp Marriott Rewards elite benefits to promise suite upgrades when suites are available, guaranteed late checkout, and breakfast at resorts. That’s an investment they haven’t believed they needed to make given their size (which only gets bigger with the Starwood acquisition), and one that existing Marriott properties didn’t sign on for.
At least they recognize the problem. That’s the first step.