What Marriott’s CEO Told Wall Street About Their New Loyalty Program

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.”

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. “Just last week he [Marriott CEO Arne Sorenson] referred to member frustrations as ‘noise around the edges’.”

    Yes, well…what Sorenson doesn’t seem to realize is that

    a) member frustrations are >>>MEMBER FRUSTRATIONS<<< and need to be handled quickly and smoothly, and that doesn't include 30-minute hold times or waiting weeks (if not months) for points to be credited to their accounts, and

    b) that we members have alternatives…it's *really* easy to switch loyalty to Hilton, especially when you get top-tier Diamond status just by holding a credit card.

  2. Lol…no, analysts aren’t asking polite questions because they only know what management tells them, they are asking polite questions so they don’t blow a hole in the portfolio’s of their largest institutional investor clients who may have a position in the stock.

  3. Sorenson lost his mind or likes lying. I’m SPG Platinum and now wait 20+ minutes to talk to someone who doesn’t know what they are talking about. I never waited more than a minute when I called SPG prior to August 2018. I stayed at a Marriott property in Europe this week were the Internet was in and out…due to the hotel moving from Starwood to the marriott system. At checkout my dad wanted to pay with visa, but couldn’t again due to switching over systems. I’m still missing points from Ritz Carlton that never transferred over even though my accounts are linked. Two stays from last month didn’t post, my Starwood stays always posted, I never had a problem. I filled out a form last week so I could get credit for the two recent stays that I didn’t get credit for. The process involved uploading the bill. At the end there was a message, if the stays don’t post in two weeks calls us. Really! Reverse the sale and short the stock. Marriott sucks.

  4. It seems that everyone is missing one very important data point: while Marriott revenues were down for Q3, so too and in comparable amounts were those for all of its competitors, including Hyatt, Hilton, IHG, and Accor.

    So while many Marriott elites complain plenty about the IT integration issues, Marriott isn’t noticing any impact on its bottom line and also isn’t seeing any noticeable customer migration to its competitors. Nor are any of its competitors seeing any noticeable customer migration from Marriott.

    All despite the preferred narrative that many want to perpetuate. Oops.

  5. Marriott has ruined SPG, which was exactly what everyone feared would happen. Yes, it took a few years to do so but this summer’s integration was truly awful and next year’s award chart is the final nail in the coffin.

    As a liftetime SPG Plat, I’ve moved 95% of my business between Hyatt & Hilton (mostly Hyatt). Sad to see the premier rewards program in SPG gutted and even more that some amazing hotels will get lost in this, but I guess all good things….

  6. Both chains were better as separate entities; customer service is atrocious.

    Happy to also have Hyatt status

  7. For over 20 years, I have been a Platinum member of both SPG and Marriot – and a Diamond member of Hilton. SPG was always my favorite, Marriot second, and Hilton third.

    Since this merger, I have seen SPG properties go downhill, employees become overworked, discontent, and surely. Hilton, properties, and programs have simultaneously been improving. I have to wonder if that is because several former Marriott execs left and joined Hilton. The average stay price point is also now routinely beating Marriott Hotels.

    Marriott nickel and diming its best guests is a stupid mistake. We want room upgrades, extra points, free breakfast, club lounges, and lifetime platinum memberships. We also want to be able to use our points for our own vacations.

    I have doubled the amount of time I now stay in Hiltons, drastically cutting my Marriott stay volume. I am also looking to start building up status at Hyatt.

  8. It’s not as simple as some wrote above. Spent years as an SPG Platinum. Worked hard to get to Platinum for Life. Customer service has been non-existent after August 18th and they were the one to choose that date after a long engagement. It has been inexcusable.

    In terms of going forward, hard to leave something you have highest status for life. They know that. But for me, the 3:1 conversion was fair but ongoingly, my award stays will come to an end once my accumulated points are gone. I have traveled the world on points, staying at amazing hotels, all due to my ownership of a small business and the ability to generate lots of points – AND the fact that the most expensive hotel was 30,000 points. How long will it take me to charge 85,000?!

    My Ultimate Rewards points will probably all go to Hyatt stays as long as their redemption prices stay where they are.

    Years ago, it became clear that Delta was not really concerned with their award program. And they have certainly made it work for them. I think this is Marriott’s model.

  9. “Our team immediately identified the problems and our loyalty telephone agents were quickly trained to help customers with these issues.”

    There’s a word for that, and it rhymes with “pie.”

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