American Express is struggling and even they do not know what the Marriott acquisition of Starwood will mean for the Starwood American Express card. They admitted as much during their earnings call.
American Express executives said on an earnings call Thursday that it is unsure of what will happen to the program once the acquisition becomes official sometime this year
Starwood is the second biggest American Express co-brand product after Delta. And there are any number of things that could be in its future. American Express knows what its contract with Starwood that was only recently re-upped says in the event of change in control and that’s not public. However,
- Assuming Starwood gets folded into Marriott Rewards, we’ll have a Marriott Visa. Will Starwood cardmembers continue to earn points with their American Express (like US Airways cardmembers continue to earn American miles after the merger) with with Amex unable to issue new cards? What would the earning rate be, a mere 1 Marriott point per dollar as with the Chase Marriott co-brand?
- Or will the Starwood American Express card simply go away?
- American Express is talking up the idea that Marriott could leave the Starwood Preferred Guest program separate. That seems unlikely, because even though there’s value in a separate program (and Marriott runs a kind of sort of separate Ritz-Carlton program) ‘merger synergies’ are going to pretty much require they get everything onto the same platform.
The idea of a separate Starwood Preferred Guest is a message that the CEO of American Express seems to be pushing by negging Marriott.
“If you have a group of customers that in fact have relied on getting very strong value for a product, the last thing you want to do is diminish the value of the product,” said American Express CEO Ken Chenault. “I think that the Marriott people are very customer-centric, very smart, and I don’t think they would have done this deal if the objective was to dilute the value of products to some of their most important customers.”
(Emphasis mine.)
Chenault isn’t wrong of course that Marriott will be destroying value in the form of customer loyalty by folding Starwood Preferred Guest into Marriott Rewards. And Starwood members will certainly be bitter not just about the loss of elite benefits but the value of their points as well if points are converted at less than 2.5 to 1 (at an absolute minimum).
But I also don’t think his description is accurate of the genesis of the deal, that Marriott had the SPG value proposition as a key asset in its merger calculation. My guess is he’s merely talking hopefully, not quite ready to tell Wall Street at a time of disappointing earnings that they’re going to lose another significant business line.
I have no interest in a Marriott relationship. I am hopeful this deal falls apart. Hyatt will be my preferred program if SPG is gone. Three more years to lifetime platinum. Do I just give up now.
Amex is going south in this space. Add that to the horrible concur product, pain in getting airline credits, weak credit limits, delay in posting reward points, etc. And I would rate them as a hold or sell from an investor standpoint. Even if they could go in and take over the Marriott side it wouldn’t matter as they would have to buy the business.
@Leonard – totally agree. Once SPG is gone so am I. I wonder what type of research Marriott did(nt?) to see this as a good merger when most fellow SPG elites feel just as strongly ???
Amex is in the toilet. Lots of shops, spas and restaurants are no longer accepting the card and AMEX is still charging sky high merchant fees. They lost CostCo and are about to lose SPG along with all the card members!
I’ll give up my SPG Amex when they pry it from my cold, dead fingers. Or when it becomes anything involving the word “Marriott”. Whichever comes first.
Anyway, I have a fair number of points in my SPG account, in significant part due to Amex charges. I’ve been thinking that the best thing to do with them, if I’m not ready to use them, would be to transfer them to a valuable FF program. Of the best such programs that have transfer partnerships with the SPG Amex, which have reasonable mileage expiration rules? By “reasonable”, I mean that I can keep my miles from expiring by periodic activity, where periodic means about once a year, and activity could include something like crediting a car rental to the FF account.
Ha ha! Was Chenault’s last quote directed to Marriott or delta?
Im a Hilton hound. Sucks to be you guys.
For Amex, there just does not seem to be light at the end of the tunnel. Cutting $1 billion in expenses only means they are heading towards becoming someone like Capital One. Looks like a total s**t show at Amex.
I would send my spg points to Alaska. they’re the last one standing with good transcon biz redemption rates and dining portal activity can keep them alive.
There are a couple of arguments in support of keeping the companies and programs separate in some capacity in my mind… First off is the differences in the loyalty programs. You are going to lose a tonne of customers if you don’t transfer the benefits of SPG to the Marriot program with equality. Secondly, with Starwood having 11 brands, and Marriot having 30, integrating them would be tough. 30 brands would be unruly to manage. Could you knock it down to 25? 20?
It may be wishful thinking, but keeping them separate just seems to make more and more sense.
One thing I haven’t seen analyzed is how the management and franchise agreements factor into all of this. Talking to some managers of smaller starwood properties, Ive got the impression that they are not only unsure of what all this means, but also they are under the impression that keeping the brands and programs separate is an option that they are interested in seeing happen.
typo… 19 Marriott brands… total of 30.
I wonder if it’s time to blow out my points and just move on to a new loyalty program.
Having Lost Costco, there is now no hope for Amex after this.
Perhaps Starwood could spin off the spg rewards program to Amex
That may keep some loyal to Amex
Either bulk up Membership rewards or get the SPG program itself.
Gary: isn’t the Amex WPG card MUCH MUCH more successful than the marriott chase card? spg is a great every day spend card- i seriously doubt anyone is using a marriott card for spend away from marriott. ergo, why wouldn’t the Amex SPG be the card that stays?
that said, based upon the Amex quotes above, it doesn’t sound that way. also, if the Amex/SPG contract was favourable to Amex staying in a merger, they would have mentioned it. they didn’t. thus, i fear they didn’t negotiate their contract very well.
They also lost Fidelity portfolio.
@rick b
I already have close to 600K points with Alaska, and in the 400K range each with American and United, so my thought is to put them into a program where it would be difficult for me to redeem F/C awards under usual circumstances.
I am not pleased by the buyout like a lot of the SPG members, But my understanding is that it will also take a vote from share holders. Voting no on this merger would certainly send a message and may not pass with share holders. It only take one share to have a voice in the final outcome of a merger or no merger. Like wise on MR side. I now which way I am voting
Good and appropriately timed article (and comments so far)…
I am all about getting as many AAdvantage miles as possible from my spend, and the SPG Amex has been unbeatable in that area. I also choose SPG properties for my hotel stays as much as possible solely for the Starpoints – which I will immediately convert to AAdvantage miles as soon as I hit a 20K balance (25K AA miles). I easily maintain my Platinum status with SPG.
All I care about is accumulating as many AAdvantage Miles as possible and am already thinking of contingency plans once Marriott takes over SPG. Either I stay with the new Marriott / SPG program if / when what happens, or I take my business elsewhere (Hyatt?).
If the SPG hotel stay earning rates and SPG Amex were to disappear thanks to this Marriott deal, are there any suggestions from others for a ‘Plan B’? Any feedback from others who just care about accumulating miles would be appreciated. What would be the next best hotel loyalty program / CC combination that maximizes earning AAdvantage Miles?
@abby….I don’t agree with your comment that there aren’t very many people using their MR Chase Visa outside of Marriott! Fact of the matter is that most people that focus on points earning and maximizing their redemption DEFINITELY don’t BUT there are a tons of people that are actually more than happy to get 1 MR points per $1 spend. I know plenty of them and no matter how much I try to convince them that there are better products out there they think they are actually being smart using their MR Chase card for everyday purchases. Same applies to other cards like IHG and HH that offer these earnings potential.
A few thoughts:
1) Perhaps American Express needs to go back to when it was a premium product. It’s no longer such, even thought it maintains a certain prestige and is even an aspiration for some. Not everyone has a Mercedes. Does everyone need an American Express? I only keep my Delta-branded American Express for the few perks it gives me with Delta. I’d never book travel directly through American Express because it’s an inferior service that winds up screwing me and others in terms of seats, mile earning and so forth.
2) Perhaps Marriott and Starwood will dissolve their programs and create a new one for the merged company. The best of both?
3) Absent number 2, I think you could see significant brand consolidation. There really is no difference between an average Sheraton and an average Marriott. Merge the best and either re-flag or de-flag others.
Gary-
Is Marriott beholden to Chase the way airlines were tied to banks? If not, why wouldn’t they put their ongoing points program credit card affiliation out for bids?
@Sam these are multiyear contracts. More broadly, the Starwood Amex earns points that are more valuable that Marriott Rewards points and that transfer to airlines in a pretty valuable way. That’s not just about how much Amex was willing to pay for points but about how Starwood saw the use of its points — which differs from Marriott.