In yesterday’s earnings call Marriott CEO Arne Sorenson addressed how he thinks they’ve done integrating the Marriott and Starwood loyalty programs.
Just last week he referred to member frustrations as ‘noise around the edges’. He got into much greater detail with financial analysts.
- Marriott is “halfway through moving legacy Starwood hotels on to our Marriott reservations platform” (When properties migrate to the Marriott platform opportunities for playing games with award night availability become more limited, and all properties should be moved by next month)
- Marriott has reduced costs for both their own legacy properties and for Starwood properties. (Sorenson previously explained that the new program was designed to reduce costs to hotels and certainly their new credit card deal helps fund that.)
Costs for both legacy Marriott and legacy Starwood hotels have been reduced as we captured synergy cost savings at properties, reduced loyalty program charge-out rates across the system, and realized procurement savings.
- Hiccups integrating Marriott and Starwood programs were about what you’d expect, and fixed quickly. There remain a few minor issues with some members:
While there are always unanticipated challenges with complex systems integrations, our loyalty and IT teams were driven to make this integration go as smoothly as possible. In the days following cutover, many loyalty members checked their online statements and some discovered errors. Telephone volume to our loyalty lines increased running up 35% at the peak. Our team immediately identified the problems and our loyalty telephone agents were quickly trained to help customers with these issues.
To be sure, wait times were sometimes too high. Today call volume to our loyalty lines is running roughly 2% to 3% over seasonal norms and wait times are back to normal. While we have solved the most significant problems, we are still addressing issues for some customers.
- Starwood members complain too much.
One powerful learning from this aspect of the integration, we discovered just how passionate our members are about our loyalty program.
- So how is the new program doing?
Our total loyalty membership is now 120 million members. Post-program integration data reveals accelerated bookings from loyalty members, higher luxury redemptions and a growing proportion of bookings from our direct
2018 is the high point of the Marriott program, awards get more expensive next year, so “higher luxury redemptions” makes good sense.
- Buying Starwood finally gives Marriott Rewards members something worth earning towards.
Obviously lifestyle and luxury and resort all of, we would say, are important growth areas for us, and important features for us to have in our loyalty portfolio. So I don’t think we want to say it’s only about lifestyle. But we do think that one of the things that motivates regular business travelers who are the folks for whom the loyalty program is most relevant is where can I go when I take my free vacation, if I’ve earned enough points to get a free vacation.
And they are interested in resorts. They’re interested in luxury. They’re interested in lifestyle. They’re interested in breadth of distribution, all of those sorts of things. And by acquiring Starwood we think we meaningfully increased our attractiveness in all of those places.
Al Maha Desert Resort
Several airline analysts read this blog. I’m less familiar with whether hotel analysts do. For the most part what they’re likely to know about Marriott’s loyalty program is what Marriott tells them. So it’s not surprising to see a financial analyst question start noting “the impressive integration that you’ve gone through” — it’s almost like saying “great quarter guys.”