Big Questions Regarding The Marriott & Starwood Merger

Yesterday it was announced that Marriott will be taking over Starwood in a $12.2 billion deal which should close in mid-2016. This makes them the world’s largest hotel chain, with 5,500+ hotels in 100+ countries spread across 30 brands.

Marriott-Starwood-Merger-1

The announcement sort of came out of left field, as there had been a ton of speculation regarding a Starwood takeover, though up until now it had been centered around Wyndham, IHG, and Hyatt. The first public knowledge of Marriott possibly taking over Starwood was when the deal was announced.

As an SPG loyalist and newly minted Starwood Ambassador member, I’m sort of sad to see this merger:

  • If there’s one thing we’ve learned from the US airlines over the past decade, it’s that consolidation isn’t a good thing, in particular for loyalty programs
  • I love Starwood partly because they’re a smaller chain with unique properties, and I think that’s part of why they have such a rewarding program, since they don’t quite have the global coverage of Hilton, IHG, or Marriott

With that in mind, at this point all we can do is wait and see what happens. The good news is that nothing is changing overnight, given that the deal is only closing in mid-2016. I suspect both programs will continue to be run independently through at least all of 2016, and it’ll be the 2017 program year where we see major changes. We may see reciprocal benefits before that, but either way I suspect we have at least a year before major changes happen to either program.

I received an email from Starwood yesterday, which read in part as follows:

We will work to bring you the very best of SPG and Marriott Rewards®, two of the most rewarding loyalty programs in our industry. Our members are at the core of everything we do, and that will not change.

Today is the first day of a long journey as we combine our two companies. For now, we remain separate, and there is no change to your SPG program status, your Starpoints® or your existing reservations. You will continue to earn Starpoints and elite stay/night credit for your stays, as well as bonus Starpoints for any promotions in which you are participating. There is no change to how you manage your SPG account or book reservations.

Marriott-Starwood-Email

I think the part of the email which stuck out most to me was this line:

Today is the first day of a long journey as we combine our two companies

No matter which US airline you’re loyal to, you’ve no doubt recently been through one of these “long journeys,” and I think we can all agree…

Vicki-Gif

I’ve had just about all the “long journeys” I can handle!

Anyway, now that I’ve had a day to think about this takeover, I figured I’d share a few further thoughts I’ve had regarding different aspects of Marriott Rewards and Starwood Preferred Guest.

Admittedly everything is speculation at this point, though I’ll share my thoughts in the context of what we do know about the current programs:

What happens to Marriott & Starwood lifetime status?

Years ago I stopped caring about lifetime status. That’s because I quickly learned that lifetime status is based on the program’s lifetime as opposed to the member’s lifetime, and we’re certainly seeing lately that those can be two very different things.

The good news is that both Marriott and Starwood offer lifetime status.

Marriott’s current system works as follows:

  • Lifetime Silver Elite: 250 nights and 1.2 million points
  • Lifetime Gold Elite: 500 nights and 1.6 million points
  • Lifetime Platinum Elite: 750 nights and 2 million points

Marriott-LIfetime-Status

Starwood’s current system works as follows:

  • Lifetime Gold Status: 250 nights and 5 years of elite status
  • Lifetime Platinum Status: 500 nights and 10 years of Platinum status

We don’t know what the new elite program will look like, let alone what the new lifetime status program will look like. Based purely on the numbers, it looks like lifetime Marriott Silver is most comparable to lifetime Starwood Gold, while lifetime Marriott Gold is most comparable to lifetime Starwood Platinum.

Which isn’t very good news for SPG members, since I think just about anyone would agree that SPG Gold is worth more than Marriott Silver, and SPG Platinum is worth more than Marriott Gold.

So we’ll see what elite tiers the new program has, and also what benefits they come with. If you’re a Marriott Rewards member I don’t think you have anything to worry about when it comes to lifetime status. Meanwhile with Starwood I’d be a bit more worried.

I’m a lifetime SPG Gold member and a few years from reaching lifetime Platinum status, so I’m rather bummed about that, because something tells me the threshold will be changing, or at least the benefits associated with the status will change.

SPG-Gold

Which card issuer wins the contract: American Express or Chase?

The huge implications of this takeover aren’t just limited to consumers. Credit card issuers have a lot at stake as well. Chase presently issues Marriott’s co-branded credit card, while American Express presently issues Starwood’s co-branded credit card.

So which will be the surviving issuer?

  • History suggests that the larger loyalty program generally also has the surviving card issuer
  • This would be a huge loss for American Express; Chase already issues cards for Hyatt, IHG, and Marriott, so it would be less of a loss for them, while Amex recently lost their Costco partnership, which hurt them immensely
  • Hilton has cards issued by both American Express and Citi, so in theory I suppose they could co-issue cards, though at the same time I don’t see that as being especially likely

What happens to SPG Crossover Rewards & Uber partnerships?

SPG has some unique partnerships, including:

Crossover-Rewards

What’s the fate of these partnerships?

Marriott has a partnership with United, so I doubt they’d keep a partnership with both Delta and United.

Marriott-RewardsPlus

I think which card issuer survives might indicate what happens here. Delta and Starwood are both with American Express, while Marriott and United are both with Chase. Which issuer issues the combined program’s card might also dictate which of those partnerships survives.

As far as the Uber partnership goes, hopefully that continues, at least in the short term. Only time will tell if it’s necessary in the long term. Consolidation translates to fewer member benefits (at least in the airline industry), so at some point they may decide it isn’t necessary anymore.

What about Starwood mileage transfers?

What makes SPG unique as a program is that you can convert Starpoints into airline miles efficiently, at a 1:1 ratio. Then for every 20,000 points you transfer you get a 5,000 point bonus, meaning each Starpoint can be worth 1.25 miles. That can be a great use of Starpoints, and really makes the points much more versatile. If Starwood devalues their own redemption rates, the option to transfer to dozens of airline programs is still there.

SPG-Airline-Transfers

Meanwhile Marriott offers Hotel + Air Packages, whereby you can redeem points for a package including a set number of nights in a hotel plus a set number of airline miles. It’s also a great use of points.

Aeroplan-Points

However, I would assume only one of these offerings will survive — either the ability to transfer points to airlines at a lucrative ratio, or the ability to book these lucrative packages. Assuming the current Marriott “currency” survives, it goes without saying that 1:1 airline transfers won’t survive. We can just hope some other lucrative mileage transfer option continues to be available.

Bottom line

We have a long road ahead of us, and I’m certainly not excited about more consolidation in the travel industry. During a conference call Marriott’s CEO said they “will take the best of both of these programs and make sure that those bests are preserved and that the program is enhanced.” We can hope that’s true, but I’m pretty sure I’ve heard that with every merger, and it’s almost never true. 😉

Above are some of the topics I’m most curious about, and I’ll be waiting with baited breath to see what ends up happening.

In the meantime it’s “business as usual” for me, as I won’t be rushing to redeem Starpoints, etc. We have a good amount of time before anything drastic happens.

How do you feel about the potential for the above changes?

About lucky

Ben Schlappig (aka Lucky) is a travel consultant, blogger, and avid points collector. He travels about 400,000 miles a year, primarily using miles and points to fund his first class experiences. He chronicles his adventures, along with industry news, here at One Mile At A Time.

More articles by lucky »

Comments

  1. I’m most worried about suite upgrades. I’d guess SNAs survive but space-available upgrades disappear.

    And Starwood also already has their own Nights + Flights program so it’s possible that both programs survive there but I suspect that while SPG is small enough not to mind being the world’s points broker for various FFPs, the bigger program would see that as a role which is below its dignity (or something like that).

  2. I can see the appeal of HHonors and Marriott Rewards to occasional vacation travellers and the bulk of business road warriors like sales teams and IT consulting (who are primarily concerned with earning and spending ratios, footprint and who do not spend quite as many nights as to attain top tier status)

    However, the most impacted will be the segment that pays themselves and value on-property benefits at non-cookie cutter hotels (most bloggers) and the high night count urban road warriors (consultants). SPG was far and away the best for such customers.

    I value on-property benefits (breakfast at luxury resorts/suite upgrades) much more than a good spend per free night ratio at a dozen niche properties and Marriott is the weakest of the top 4 there.

  3. Lifetime status aside, do you think that your Starwood status will carry over into Marriot status when the two programs combine?

  4. I’d also wonder, if they do straight out combine programs, how Starwood points will be valued in the Marriott program. Will it be 1:1; I think of Starwood’s points as having a greater value than Marriott’s.

  5. Long live SPG moments. They have built up a nice collection of luxury suites and access to events that are truly unique. I hope it survives. It is hard to get out of a suite contract so that may be a consideration.

    OTOH, if this is opened up to MR members the competition to redeem for the event will dramatically increase.

  6. I’ll take the contrarian view here. My needs are leisure travel, but global, and frequently to 2nd or 3rd tier cities, and paying out of my own pocket, with occasional urges to splurge on a higher-end property.

    To me, a vast geographic footprint plus sufficient number of brands to cover the entire pricing spectrum are what makes this merger excellent. So to me, things like SNAs or LT PLT mean rather little.

  7. Something tells me American Express will be the next target for a takeover. After losing Costco and if they lose SPG they will be in deep trouble.

  8. Yesterday I was looking for a Marriot hotel to book in New Orleans…most nice ones are 60.000 points…and we are not talking about Ritz quality. So guys…do you really think that that luxury SPG hotel that today cost 30.000 points will stay at 30.000 points?? Wake up! Time to look for another program…

  9. @Santastico : AXP is still $70B market cap. That’s a really tall order for anyone to attempt to take it over.

  10. This would rank pretty low on the list of silver linings, but I hope that AmEx would relax the churn restrictions on the SPG cards in an effort to make a last push for members, not unlike how Barclays is holding on to the bitter end.

    We can hope that TPTB pull a Kimpton and keep the loyalty programs separate.

  11. Marriott is the “United” of the hotel industry in my opinion. In fact they have a relationship with them as you know. Poor customer service across the board.

  12. I think another big question is what, if anything, the other hotel loyalty programs will do to lure unhappy SPG members.

    2017 might be a good year for status matches.

  13. @patricia: Chase has a $260B market cap, Citi a $160B, Visa a $192B and Mastercard a $110B. Also, Amex share price is down 26% YTD. Not sure how they can handle losing Costco and SPG almost at the same time.

  14. Outside of an article by Andrew Ross Sorkin in The New York Times Deallbook, have you seen other speculation that another entity might jump in with a counter bid? Thoughts ?

  15. @Lucky sez: “I love Starwood partly because they’re a smaller chain with unique properties, I think that’s part of why they have such a rewarding program, since they don’t quite have the global coverage of Hilton, IHG, or Marriott.”

    Repeating that claim over and over won’t make it true. There is simply no evidence that small loyalty programs are more rewarding than large ones. SPG may work out nicely for you because you live in hotels and on airplanes and thus rake in loads of starpoints, but the program is by far the most expensive and, hence, the least rewarding because the whole point of playing the miles/points game is to travel on the cheap!

    One more time: there is simply no evidence that smaller programs, which tend to be on the expensive side (stayed at Hyatt properties lately?), are more rewarding. If you have evidence that supports your claim, then put it out here and let’s debate it, but to simply repeat a claim that is almost certainly true for you but false for most people seems disingenuous to me…

  16. I’m far more concerned as to what Marriott is going to do to St. Regis. Ritz Carlton was a very fine brand until Marriott got its cheap hands on it and bitch-slapped it into mediocrity.

  17. “[I]t looks like lifetime Marriott Silver is most comparable to lifetime Starwood Gold, while lifetime Marriott Platinum is most comparable to lifetime Starwood Platinum.

    I think you meant to write that Lifetime Marriott GOLD is most comparable to Lifetime Starwood Platinum — as the stay requirements are, indeed, the same as you point out above.

    If you really meant to write Platinum for Platinum, you are doing your readers a disservice, as I can’t think for a moment that Marriott is going to let slide into its Platinum lifetime status people who have as many as 250 hotel nights less than their dedicated Marriott program members.

  18. Wouldn’t it be great if they just left both of them alone and just established a transfer ratio so you could move points back and forth as needed? Of course, it may be hard to justify the nice things in the SPG program now that the footprint issue has been overcome.

  19. And Starwood just sent points buy discount offer (usual 25% for 20K)… maybe it is dying sooner than we thought?

  20. @ Marija — They offer that promotion consistently twice a year at the same time, so I wouldn’t read too much into that.

  21. I suspect many of the Starwood elites are of the former United 1k kind i.e. “Over entitled” and not really contributing much to the bottom line. They are going to be the big losers in this merger.

  22. I see a lot of comments about the value of Marriott points and redemptions. Many of you fail to point out that Marriott gives you many more points for paid stays (I think 10 per dollar) compared to Starwood. As a business traveler that has a lot of paid stays in the US, I have always preferred Marriott when it comes to earning points.

  23. I have a hunch that the “average” SPG elite member is worth more than the “average” Marriott elite, at least in terms of spend. I’m lifetime Gold with Marriott, but most of those nights were in Springhills and Fairfields. My lifetime Gold with SPG, on the other hand, is the product of nights in Ws, Le Méridien and Westins. Let’s just say one of these paths generated more revenue than the other.

    That’s something that won’t go unnoticed as they think about how/whether to merge the programs.

  24. I’m interested in 2 things.

    1.What would happen to SPG’s interesting partnerships like Uber and Emirates.?

    2. Why are people saying Starwood has been underperforming as of late?
    According to Yahoo Finance the Market cap for Starwood is 12.1B and for Marriott is 18.7B. So Marriott is only 50% bigger from that perspective.
    The P/E ratio for Starwood is 22 whilst for Marriott is 23.8. This in essence means that Marriott is overvalued and earning the least for their shareholders
    Even based on dividends and yields, Starwood paid a dividend of 1.50 per share whilst Marriott paid 1.00. So again Starwood performed better for its shareholders.

    Furthermore, although Marriott reported Revenue of 12B which is 2 times higher than Starwood’s 6B. But consider this, Starwood earned that from their 1,100 properties, whilst Marriott has 4 times more properties and could only achieve 2 times as much revenue. BUT, the kicker, according to wikipedia, Starwood’s Net Income (the actual profit that can be distributed) was 635m vs Marriotts 612m. So even with Marriott’s massive number of properties and higher revenue, they could not even make the same amount of profit as Starwood.

    Honestly, looking at these figures, I cannot understand why Starwood had to be sold. It was a good independent company with 10 great brands spanning the full scope from Four Points and Sheratons through to St. Regis and also sideways to Aloft and W brands.

    I sure hope they will not give us 1:1 SPG to Marriot points. But I fear that Marriott as the buying entity will not want to admit that the SPG programme is superior to Marriott’s programme. Alas.

    And yes, I hate Marriott. My experience with Marriott as been bad even including a hotel with rooms at about 105 degrees fahrenheit throughout the night… in the whole hotel and it could not be switched off. What an unpleasant night that was

  25. Just wanted to point out that while Amex lost Costco, they then signed a deal with Sam’s Club. Probably not as big as Costco, but still helped the bleeding………..

  26. Yeah it sucks that Marriott is taking over SPG. I was just in Zurich at the Sheraton and the staff was not happy about the merger. The next one will be IHG merging with FRHI, which will also be a disappointment. Two good loyalty programs will be lost with these mergers.

  27. So, once again, us spending money consumers will get royally screwed. Can anyone think of any benefit that has come from all the airline mergers? This is a sad turn of events but not at all surprising. America, home of “free enterprise”, market driven choice, etc, has become, in reality, the home of monopolies that end up totally ripping off us, the “consumers”. So much for the “free market”. And the amazing thing (not really) is that all these mergers/takeovers in multiple industries continue to get “approved” and WE continue to pay….

  28. Hi,

    I think the qualification for platinum status (25 stays or 50 nights with SPG vs 75 nights with Marriott) is the biggest one. How would I handle this – I’d tweak both programs. Marriott is not going to reduce the qualification tier from 75 nights for sure so my guess would be that the qualification criteria for SPG Platinum will go to 75 nights as well.

    However, to make the program more “like” SPG, Marriott could make it 30 stays or 75 nights. That’s a bit like what Hilton do as well – Diamond status with Hilton is 50 nights/30 stays/120,000 points in a calendar year. That offers members a bit more flexibility in choosing how to approach the qualification.

    I think if Marriott takes this flexible sort of approach and are willing to compromise, then the pill would be a lot less bitter to swallow for SPG members…but of course that remains to be seen.

  29. I am a Platinum SPG (Gold Lifetime soon) and I do a ton of business with Costco on my SPG card. We use these points to travel personally in Europe. We were wanting to visit Scandiavia recently but SPG is not strong there. Marriott should open some doors for us in that market.

    The best defensive move for me seems to be getting a Marriott Visa (Chase) card to keep getting points at Costco soon (April) and hope that they will be able to be used on either hotel/side in 2017.

    Without the merger I would be up the creek without a card as I can get great SPG points on Amex at Costco. Sad it is changing from Amex at Costco but great that the Marriott Visa is here.

  30. I am a Platinum SPG (Gold Lifetime soon) and I do a ton of business with Costco on my SPG card. We use these points to travel personally in Europe. We were wanting to visit Scandiavia recently but SPG is not strong there. Marriott should open some doors for us in that market.

    The best defensive move for me seems to be getting a Marriott Visa (Chase) card to keep getting points at Costco soon (April) and hope that they will be able to be used on either hotel/side in 2017.

    Without the merger I would be up the creek without a card as I can get great SPG points on Amex at Costco. Sad it is changing from Amex at Costco but great that the Marriott Visa is here.

    Great summary on all this @lucky.

  31. With this merger, i am personally worried about the PET POLICY with the combined brands. SPG (Sheraton and Westin are the one i stayed the most) are pet friendly and pet stays FREE! For Marriott brands, some chains are pet friendly but required a non-refundable deposit. If i bring my dog, i tend to stay with SPG because its free and they cater for pet pretty good. I just hope they consider the pet policy for the good of all pet owners.

  32. I am sooo in agreement with you. I depend on SPG to have good hotels where “pets are welcome”. I wish more hotels would consider allowing pets. I don’t even travel as much anymore, because I can’t take my 5 lb Maltese and I’m a Marriott Vacation Club owner!

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