Yesterday I wrote a post entitled “Does The Merger Impact How I’m Redeeming Starpoints?” The premise of the post was that I’m not in a huge rush to redeem Starpoints despite the impending Starwood takeover by Marriott.
The reason I’m in no rush to redeem points is because a large part of my valuation of Starpoints comes from the ability to convert them into airline miles at a lucrative ratio. As long as they give us some advance notice of the integration, we can “cash out” our Starpoints at a decent value, in my opinion. Which is why I’m not rushing to redeem them.
In the post I speculated that Starpoints would be converted into Marriott Rewards points at a 1:3 ratio, which generated some really interesting conversation in the comments section, especially when it comes to redeem points at high end hotels. The comments really got me thinking…
How do earnings rates for Marriott and Starwood compare?
In theory you’d think the current rates at which you can earn points in both programs is the best indicator of the rates at which points will convert.
So let’s compare them.
Earning points for hotel stays
Starwood Preferred Guest members earn Starpoints for hotel stays at the following rates:
- Base members: 2 points per dollar
- Gold members: 3 points per dollar spent
- Platinum members: 3 points per dollar spent
Meanwhile Marriott Rewards members earn Marriott Rewards points at the following rates (which are a bit more complicated):
- Base members: 10 points per dollar spent (5 at limited service)
- Silver members: 12 points per dollar spent (6 at limited service)
- Gold members: 12.5 points per dollar spent (6.25 at limited service)
- Platinum members: 15 points per dollar spent (7.5 at limited service)
Furthermore, even at the properties which accrue 10 points per dollar, some count all qualifying charges, while others only count spend on room rate.
So the two currencies don’t compare perfectly in that regard, but it’s as close as we can get to a comparison.
Earning points from credit cards
The Starwood American Express offers:
- 1 Starpoint per dollar spent on every day purchases
- 2 Starpoints per dollar spent on SPG hotels
The Marriott Rewards Visa offers:
- 1 Marriott Rewards point per dollar spent on every day purchases
- 5 Marriott Rewards points per dollar spent on Marriott hotels
Crunching the numbers
When you do a side-by-side comparison like this, it’s amazing how much the earnings rates vary based on the type of activity:
- At full service properties, Marriott base members earn 5x as many points as Starwood base members
- At full service properties, Marriott top tier elite members earn 5x as many points as Starwood top tier elite members
- At limited service properties, Marriott base members earn 2.5x as many points as Starwood base members
- At limited service properties, Marriott top tier elite members earn 2.5x as many points as Starwood top tier elite members
- For every day credit card spend, Marriott and Starwood members earn the same number of points
- For credit card spend at hotels, Marriott members earn 2.5x as many points as Starwood members
As you can see, the rate at which members of both programs accrue points varies significantly, ranging anywhere from earning the same number of points to earning 5x as many points.
My valuation of both points currencies
Personally I value Starpoints at ~2.2 cents each, and Marriott Rewards points at ~0.7 cents each.
So I think the “fairest” conversion rate would be 1:3. I know that would leave some SPG members unhappy, so I don’t think a 1:4 ratio is unreasonable either.
Unfortunately I wouldn’t be surprised if they converted points at a 1:2 ratio either. Not to put too much weight on a single blog comment, but reader MR left the following comment:
Being familiar with the Marriott business and merger integrations, I would expect a 1:2 transfer with >90% certainty. A 1:3 ratio would be somewhat unreasonable for the business actually, because there would be additional value unlocked in the transaction.
I would place bets with 100% certainty that they will give advance warning of the transfer. What I am hopeful of is some innovation in the couple years prior to merging programs. I don’t expect the programs merging until at least end of 2017 if not 2018.
I’m not taking it as fact or anything, but I do agree that I wouldn’t be surprised if they try to get away with a 1:2 conversion rate for points.
What do these transfer ratios mean for high end redemptions?
Here’s the Marriott Rewards chart for stays at Ritz-Carlton properties:
Here’s the potentially good news for SPG members. Assuming that Starwood category 7 properties will be priced at most as much as the top Ritz-Carlton properties, you’ll be paying at most 70,000 Marriott points per night for those stays.
At a 1:2 ratio that’s the same you’re paying now for “peak” dates at Category 7 properties. At a 1:3 ratio you’d come out significantly ahead. In theory many of those properties should price at lower levels, as Marriott’s highest redemption tier is 45,000 points. In other words, I wouldn’t expect W properties, for example, to price at Ritz-Carlton levels (St. Regis properties might, however).
Both programs offer fifth night free, so at least there’s comparable value to be had there.
Given that it’s still early in the merger, I think this is the right time to start making clear what we, the members, think are the appropriate rates at which points should convert.
In the video, he said the following, word for word:
“To state the obvious, devaluing points or member benefits is not the way to preserve and strengthen these programs.”
I’ve long valued Starpoints at roughly three times as much as Marriott Rewards points, which I think is a fair valuation. On the whole I think it’s safe to say that Starwood Preferred Guest members are more worried about the merger than Marriott Rewards members. So if Marriott’s CEO really believes that devaluing points or member benefits isn’t the way to preserve or strengthen the program, I hope he’ll go with at least a 1:3 transfer ratio.
What do you think? What’s the “fair” ratio at which Starpoints should be converted into Marriott Rewards points?
I’ve set up a poll below, and am curious to see what you guys think. Of course feel free to share your thoughts in the comments section as well to explain!