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.”
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.
[…] American Express Speaks About What’s Happening With the Starwood Preferred Guest Credit Card by View From The Wing. Basically, American Express have no idea and they are basically at the mercy of Marriott if the deal goes through (although you’d expect them to have a very profitable payout if they were forced to sell the back book). Really think it’s time for American Express to launch an AirBnB credit card. […]