Time to Start Gnashing Teeth: Marriott is Buying Starwood

Three Chinese firms were supposedly seeking government permission to make a bid to buy Starwood Hotels. Hyatt was rumored to be the lead bidder.

There had earlier been speculation about a Starwood-IHG (or Wyndham) merger. Wyndham hired away enough Starwood talent that it’s recently been referred to as Wynwood.

Starwood’s CEO, whom I interviewed on stage earlier this year, made clear he expected to sell by the end of the year. And it looks like he made good on that promise, because Marriott just announced that it would acquire Starwood for $12.2 billion in cash and stock (a figure that strikes me as odd, because it’s a slight discount to recent trading prices which may be inflated by the expectations of an acquisition).


SkyCity Marriott, Hong Kong Airport

Marriott investors and Starwood customers should see this very differently:

  • Business-wise this makes more sense than a Hyatt deal, Marriott has reach and strength in both full and select service but lacks presence in the luxury market where Starwood is strong.

  • For consumers this means less competition in the hotel loyalty space, and one of the very best hotel loyalty programs getting swallowed up.


Marriott Seattle Airport Atrium

Marriott Rewards members most frequently say that they value the program because wherever they go they can earn their points and because of the consistency. However no Starwood Platinum ever said to themselves they’d rather be a Marriott Platinum. Marriott neither promises suite upgrades (out of Asia Pacific) nor late checkout (which is “based on availability”) and elite breakfast is not offered at Marriott Courtyard properties or even at resorts.

This is an opportunity for Marriott to really up its game and learn from Starwood Preferred Guest. However the more generous programs tend to be the smaller ones for a reason. It does not take any effort to be loyal to Marriott or IHG. If you walk down the street in any city you can wind up in one of their hotels. It takes effort to be loyal to Starwood or to Hyatt, and so they must give you a reason to do so.

Nonetheless, while Marriott is strong in consistency and size they could certainly learn something about treating their members as individuals and creating special experiences from the folks at Starwood. Let’s hope that happens.

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 »

More articles by Gary Leff »

Pingbacks

Comments

  1. As a SPG lifetime Gold, close to being lifetime Platinum, I am utterly disappointed. Marriott will seriously devalue the benefits.

  2. It may take longer than expected; it still has to go through DoJ (?) approvals. It is expected to close mid 2016, if the companies have paid off the right people. Then it will take time to merge the programs.

    I doubt (hope) anything will change before end of 2016.

  3. Disappointed. The spg program and Amex cc is superior for the customer. I’ve enjoyed many years of platinum benefits. I agree, I hope Marriott learns something from Starwood. Now may by my opportunity to test Hyatt.

  4. Marriott is best chain. Guess Gary is gonna have to stop hating on and like Delta and Marriott now ? Haha. They are the leading airline and hotel companies. Can’t hate and avoid the leaders.

  5. One thing SPG has always done well with is mattress brand standards. Matters a lot to the woman in my life. Hope that doesn’t get messed up

  6. This could be a big negative. The earlier rumors proved wrong. Now that I hear its Mariott, I wish it was Hyatt. SPG was by far my goto program for many reasons. I still feel there is a big bang for the buck. Some hotels during events and such could go from 200-300 to 500+ but I could still get them for SPG points. In some cases at the original 12K -15K or so a night. As a Plat for 2016, we will know more mid next year. The late checkout and other Plat benefits for me are just that good and I do alot of straight point spending. Four nights/1 free I use alot as well. Will they leave things alone or merge into the Mariott program? But even more important , will they uend the award charts, which always matters the most.

  7. Saw this in the press release:

    Leading Loyalty Programs: Today, Marriott Rewards, with 54 million members, and Starwood Preferred Guest, with 21 million members, are among the industry’s most-awarded loyalty programs, driving significant repeat business. **They** should be even stronger when the companies merge.

    Hope maybe?

  8. Did you really interview the Starwood CEO on stage? Really? Not just an interview, but on stage, with other people watching? Why haven’t you mentioned this before?

    In all seriousness, this isn’t good news. Time to burn the SPG points while I can.

  9. @Kevin good point. I could be wrong but the SPG Amex card from what I know is one of their better products as far as volume and users, per a co branded card. The card has a business and personal card. Chase has the Mariott card which I have not in many years as there is little value

  10. I’m a Marriott Rewards gold member (reciprocal UA match) and even I don’t like this. From a value perspective, Marriott Rewards is terrible.

    That said, unless you travel a lot in Asia, or have top status, SPG is better in theory than reality. Unless you just travel to the biggest cities, they don’t have enough properties, and their aspirational hotels cost too much (in both dollars and points). So I’ll miss SPG, but it won’t much affect my travel life.

  11. Marriott is willing to let the Ritz Carlton program retain its own identity. And they have to be aware that the elite profiles are very different. Might not be a disaster.

  12. Wow.

    Looks like Starwood treated the Chinese buyers and Hyatt as a stalking horse, and I anticipate that SPG’s benefits will get snuffed out.

    I do not know that DOJ will view this as a competition issue – after all there is heaps of competition WITHIN the Marriott brands, many of which are owned by distinct franchisees.

    What I do wonder is whether this may be viewed as limiting competition in the hotel franchising market – that is, will Marriott stifle competition in the sale of franchises to new franchisees?

    And this raises the stakes in the competition over where Marriott relocates its headquarters.

  13. There is no threat to limiting competition in the hotel market. There are plenty of other chains and the barrier to entry into the market is far lower than the airline industry. This is the market speaking, while SPG’s program may have been good for the few elites who could make it work, it wasn’t leading to increase profits or growth. Get used to having less than 3 or 4 percent of your stays upgraded to suites!

  14. I wish it would have been Hilton that purchased SPG! They give out points like free candy and HHonor points are so easy to collect! Would have been nice to use some points at SPG properties..

  15. Would this merge have to be approved by Starwood shareholders? I am NOT sure that Starwood shareholders are so excited to sell at this price.

  16. Since the requirements for tiers at SPG and MR are different, it will be hard to see where many of us will end up unless MR adopts the stay count in addition to the night count. On the surface it appears there will be a tier devaluation for SPG elites, since by night count MR Gold = SPG Platinum, MR Platinum = SPG Platinum+. SPG Golds drop down to MR Silver. Surely lifetime SPG status will have to be adjusted. On this front, we’ve unlikely to know much before well into next year, with the deal closing mid-2016. Any merger is unlikely until at least the start of the 2017 benefit year if airline mergers are any indication. What will be interesting is how any reciprocal treatment will be handled through 2016. (There may be a carve out with the Ritz-Carlton program being spread to the Luxury Collection/St. Regis, but SPG will be merged into MR.) And it looks like UA will remain the elite tier benefits “match” partner, not SPG’s DL. As an SPG Platinum, I’ll likely lose though having made use of MR Gold through my UA status benefits “match” I found stays at Marriott branded properties delivered about the same benefits as SPG Plat…lounge access (though a better breakfast option).

  17. I do like SPG properties more than Marriott, though the more limited reach of SPG meant they often weren’t an option especially for work trips. But I do try to stay at SPG locations when it’s possible to do so. Still, I am not overly concerned about the merger of the hotels per se.

    What will be the biggest blow is the (I presume inevitable) loss of the myriad transfer partners for SPG points – not to mention the 5K bonus on 20K transfers – and of the SPG AMEX. I just don’t see Marriott keeping up anything close to the transfer scheme of the SPG program.

  18. I haven’t checked lately, but if there is a limit to the number of points that one can transfer out of Starwood in a calendar year, then we will have to get some points converted before the end of this year??

  19. Gary,
    I probably won’t be able to use my 80K+ SPG points at one of the Starwood hotels until 2017 at least. What’s the transfer play for someone who likes to fly to Europe and Australia/New Zealand in 1st or Biz class?

  20. It is not likely that the deal will close and get all the DoJ approvals until later on 2016. Integration (especially IT) will likely take a while to get sort out. If there are any program changes, it will not likely to happen until 2017. If Marriott merges SPG into its program, expect benefits like 4pm check out (SPG Gold onwards), confirmed suite upgrades (SPG Platinum 50) and 24 hour stay anytime (SPG Platinum 75) would disappear.It would be interesting to speculate how SPG lifetime members would be treated in the Marriott program.

    Given there are over 25 brands combined, it would not be surprising for Marriott to divest some of the properties (to appease the DoJ’s approval conditions) or reduce unprofitable/less known brands (by merging them with others). New brand development will likely be postponed until more is known.

  21. As an SPG Platinum, lifetime Gold and almost Lifetime Platinum, who travels with some frequency to Asia, I find this news to be quite distressing. The Marriott cookie-cutter approach to hospitality (and I tend to think of those cookies as dollar-store brand rather than Mrs. Fields) could be devastating, especially for elites.

    What can we do to derail this?

  22. A few comments here:

    1. As many have said, it could have been much worse (Hilton, Wyndham, or chinese coalition).
    2. Hyatt would have been nice, but Starwood is BIGGER than Hyatt – a reverse takeover makes less sense.
    3. From a consumer perspective, I’d rather have two very strong brands (Starwood and Hyatt) competing for high value travelers than pulling their resources together. Starwood has historically kept the closest tabs on Hyatt’s promotions.
    4. SPG is the best loyalty program in the world, and not just for hospitality/hotels. It often shows up in case studies in business schools, gets written up in press, etc. I hope that Chris Holdren is promoted (the way they did with Suzanne Rubin at AA post merger), rather than sidelined for someone else. If he is ousted, you can bet that wherever he does go will eventually become another SPG like program in strength.
    5. As another post mentioned, Marriott folks are not idiots. Quite the contrary it’s much harder to pitch a loyalty program with little value while driving hard at the bottom line. I don’t think they will maintain both MR and SPG, but I wouldn’t make it a foregone conclusion that SPG is the program they kill.

  23. not so fast though. 2 shareholder lawsuits already filed. Price too low. The lawsuits only need enough muscle. Example: if Paulson hedge fund still has nearly 1 billion stake bought over summer at $80-$87/share, do not expect this price to hold. If Paulson sold already, will need other muscle behind the lawsuits. His filings will be known soon…

  24. Oh great, another massive merger in the travel space. And, as usual, consumers will always lose once there’s less competition.

  25. jay, why do you think the chinese take over is worse than this?
    the chinese would have preserved the program as is.
    i hope the chinese would offer a counter bid.

  26. @ steven,

    A chinese takeover could/would have a substantial effect on those who book government stays/rates, especially in particular parts of government.

  27. Good news for those of us who are Marriott Gold/Plat as we will soon get free breakfast at Starwood properties and maybe some other perks.

    SPG Plat was always the most difficult status to obtain for those of us who do not travel enough for 25 stays so those wonderful perks were simply out of reach as SPG Gold was basically worthless.

    For those who don’t have Marriott status it is easy to obtain if you have UA status or you can just buy it through use of cheap meeting room contracts.

    Really only bad news for SPG Plats who will lose out on the upgrades once the program is merged with MR. And maybe Amex once Marriott cancels the SPG contract.

  28. I think it is a given that SGP will die and MR will be the main program. That is something that I will take in account as I book my business in the next year (I stay at hotels 300+ nights a year).

    So having accepted the loss of SPG…here is my concern:

    a) What will happen to SPG points. What will be the exchange rate at merge. The value right now is at least 3:1, but will Marriott do that or something stupid like 1:1?

    b) What happens to my lifetime Gold SPG? Will it just disappear? Will all my stays at SPG count towards Marriott lifetime status? They way AA and US Airways did their merge?

  29. @Mike

    I’m not sure I would consider it a given. Here’s what Arne said this morning on CNBC:

    “SPG and [he said with slightly more hesitation] MR are the top two programs”. Followed by something about integrating them. I don’t know much about MR, but it sounds like everyone agrees it’s not a great program. So he says MR because he’s CEO and has to.

    As I said before, look for a decision on Chris Holdren- as Chris goes, so does the SPG program.

  30. I agree that MR will want to devalue SPG points with a 1:1 transfer instead of the 3-3.5:1
    ratio that we all value SPG points vs MR points. Time to spend down the SPG points.

    Gary how long do you think we can spend SPG points for the value we get today before MR and the takeover make a rewards change?

  31. It’s nice to think that Marriott will keep some of the better features of the SPG program, but history says they won’t. They’re the largest and most successful hotel company (well, maybe Hilton is bigger in some metrics). They didn’t get that way by being incompetent. They’ll think that Marriott Rewards is the right program for them. And it may be true — there’s little correlation between being generous in a loyalty program and being profitable (ask Delta or Spirit). So I’m pretty sure the end result will look a lot like the current Marriott program. The choice will be to deal with it or stay somewhere else. Everyone will make their own judgment based on their own travel preferences.

  32. @Gary sez: “….one of the very best hotel loyalty programs getting swallowed up.”

    Imagine that! How did that happen? How is it possible for “one of the very best hotel loyalty programs”, the program with “the single best and most valuable points currency in the history of travel loyalty programs”, and the hotel chain with “the most luxurious hotels” since the palaces of Babylon” to get swallowed and face extinction?

    Simple: because the bloggers’ – like @Gary’s or @Lucky’s — superlatives in describing SPG notwithstanding, the program was by far the most expensive and least rewarding in the business. There is no such thing as “reverse Darwinism” or “Survival of the Weakest”. SPG is about to disappear because it was fundamentally and structurally a weak program, whose approach to loyalty or hospitality was highly flawed: they were out to our-price the competition out of existence (and it boomeranged!) and to make it very tough for their loyal members to redeem their hard earned points for free stays at SPG properties; they could trade starpoints for miles a slight gain, if they wished, but starpoints were (are) useless for redeeming free stays because the program had (has) the highest priced awards in the business.

    And, please do not even get me started about the bogus and mindless claim that the starpoint is the “single the most valuable points currency” because it is worth 3X more than the Marriott Rewards point or 6X more than the HHonors point. Anyone who makes that claim, with a straight face and without taking into account the fact that one earns 3-5X more Marriott Rewards points or 6X more HHonors points a pop than SPG loyalists earn starpoints, is stoooooopid and has no credibility because he or she may even have flunked grade school math.

    This is a great development, if only because it will at long last get travel bloggers to shut off the bogus claim about how SPG and its currency are the “best in the business”. As a Marriott Gold through the UA-Marriott JV and a SPG Gold through my AMEX Biz Platinum, this is a win-win for me, since both programs were my fallback options and now that they will likely be consolidated, they will conveniently offer more second choices under “one roof” than ever!

    G’day!

Leave a Reply

Your email address will not be published. Required fields are marked *