Marriott’s CEO Laid Out Vision for 2019’s New Combined Loyalty Program

In Marriott’s earnings call yesterday Arne Sorenson laid out his thinking on the loyalty program that will combine Marriott, Starwood, and Ritz-Carlton in 2019.

110 million loyalty members and in excess of half of our rooms revenue coming from those loyalty members, who are disproportionately booking direct with us. We believe that the loyalty program is the name of the game for the future. And we’ve been impressed by SPG from the moment we acquired Starwood about the passionate loyalty that they have in their program.

A big part of that is the value that’s been available to those travelers both through their credit card and through the elite benefits particularly that Starwood offered them. And we’ve got – we will be announcing these new cards as the year goes along. We will be announcing the plans with respect to harmonization of benefits for the two loyalty programs. And we’re making great progress having virtually eliminated all of the restrictions to merging these programs towards a single unified program, hopefully, later this year.

And when we roll that out, we will see that we’ve got extraordinary benefits to our cardholders and to our hotel guests. We will have a materially more cost-effective program for our hotel owners and we’re going to do great, too.

Already Marriott has added 4 p.m. late check-out for Golds and Platinums, and has ported over experiential redemptions. However Marriott Rewards doesn’t promise suite upgrades in the U.S., or breakfast at Courtyard properties, at resorts or Ritz-Carltons. They need to fix all of that at a minimum.

Sorenson clearly gets that Starwood generated disproportionate passion from its members because it delivered benefits and experiences that Marriott Rewards did not.

The merger was done to gain scale and leverage but they quickly figured out that the loyalty program would matter a great deal in a world with 30 brands no one can make sense of. Customers attracted to the loyalty program will book directly with the chain and choose from the hotel options offered to them on the website. That allows them to maintain brands that themselves customers don’t understand and that may not even need differentiated identities. At least that’s the bet.

What’s more they think they’ll get increased wallet share from customers as they improve program benefits, and that will drive higher revenue for the company.

The only thing from Sorenson’s remarks that worries me is that they’re driving down the cost of the program for hotels, although no doubt that’s a part of how they get properties on board with program changes they’re planning to announce in the coming months. Here’s Sorenson again,

Loyalty rates have been reduced already twice and they will be reduced a third time, while strengthening the benefits to guests and strengthening Marriott’s own P&L contribution from the credit cards, and that’s because of the bigger program.

Marriott keeps devaluing its points. Sorenson attributes the lower costs to scale but if hotels are paying in less, I have to imagine the amount the program is willing to pay per point for rooms will continue to go down over time as well.

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. I wish there were more affordable options in Seattle , Washington to use Marriott points. Sheraton as a much more affordable hotel for stays when we go to Mariner games. Other than Seattle, I love Marriott.

  2. This doesn’t give me a good impression. The most valuable feature of SPG is the points transfers to airlines. That feature appears to be on the chopping block. As far as competing with Hilton, Marriott needs to offer breakfast as a consistent benefit. Marriott needs to give potential guests a reason to stay with them. I see more of a World of Hyatt disaster developing than anyone wants to admit.

  3. I want to give all my thanks to Marriott Marquis in New York, they are an exceptional team,
    My wife and had and amazing time
    Thanks

  4. Marriott is absolutely gaining leverage from consumers on a loyalty program aspect. Just think of where we were a couple of years ago. There was much debate between which of two programs was superior: SPG and Hyatt Gold Passport. Marriott absorbed SPG and Hyatt generally devalued their elite program (except for those truly dedicated to Hyatt). With those elite programs essentially gone, there is no longer any need to offer the generous benefits that SPG was known for. I know people are hoping that Marriott will retain a lot of key features, but really they just need to be competitive. And their current loyalty program is competitive. I expect Marriott will make their combined program appear nicer (perhaps they might require ‘resort’ hotels to offer $10/day in credit in place of an actual breakfast requirement) but I don’t anticipate many positive changes. They simply don’t need to be that generous.

  5. Get ready for St Regis and Ws to go to 70000 or more, so, Marriot will devaluate. Because there is no way that some St Regis or W that today cost 30.000 spg or more will cost 45000 marriott next year. Marriott will either create a new program like the one for the Ritz Carlton, or will devaluate more the current program.

  6. Marriott’s biggest issue with their loyalty program in my opinion has been the lack of free breakfasts at resorts, Courtyard properties, and Ritz-Carltons.

    I remember the first time I stayed at a Marriott resort on points. I was shocked that as a 60 night elite member I got nothing. A basic level room with no breakfast. Completely within the Marriott rules, I had just assumed and was the biggest reason I no longer chased Marriott and went back to my Hyatt program. That entire stay I went out of my way to not eat at the Marriott property.

    The free breakfast is what has kept me loyal to Hyatt instead of Marriott.

  7. @Kae there are lots of options at different prices for Marriott / Starwood in Seattle, just I’d imagine a huge variance in cost depending on whether there is a convention in town (the city literally sells out with some) and otherwise (the lobbies look empty even at some big hotels, even parts of summer).

    New rooms are coming online over the next 2 years — most not yet branded by anyone, though a giant Hyatt — which should moderate all hotel pricing here.

    Also, there’s an Aloft opening close to SeaTac, so at least one new Starwood property.

  8. SPG currency is just so valuable. Everyone chases the currency because of its value and flexibility. I don’t feel that Marriott values it as much as the loyal customer does. They never refer to it ( specifically the airline point transfer). Given Hyatt now has SPGs program creator on board. They are going to sit back and wait until Marriott launches their program and pounce quickly on all of the unhappy customers. I believe Hyatt will have a better understanding of the SPG customer loyalty than Marriott.

  9. All there are a large number of new properties coming online and in the process in the Seattle area. My company is working on a number of them, signing another contract shortly. I agree that the room pricing in Seattle is horrible I know first hand as I am there every other week and even with trade agreements it’s still a wallet buster. There are two coming online in South Center Holiday Inn Express and another yet to be named.

  10. Gary, let us know if the airline transfer policy is about to change. I have a bunch of SPG points which I need to transfer before that happens.

  11. “We will have a materially more cost-effective program for our hotel owners ….”

    That’s going to end up being bad news for the program.

  12. The whole thing sucks, and I love Marriott/SPG, but the reality is the same for hotels as it is for the airlines. They are selling a ton of seats/room nights. Even my friends in the business who have marginal off brand hotels are hitting $80 RevPAR in what I would consider sketchy submarkets. Marriott, nor any other hotel brand, needs to chase us as much as we would like to be chased.

    *sad day*

  13. I agree with the comments about super benefits and cost-effective programs. Both can’t be true. I want to spend money on my SPG ownership, and see my loyalty not being understood by the new owners. They must see that customers will not tolerate higher points for the same travel they have
    supported in the past.

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