Marriott Bonvoy Is Cashflow Negative This Year – And That’s Expected To Continue

During the Marriott third quarter earnings call they shared several interesting data points about the Bonvoy program.

  • Enrollments “driven by digital signups accelerated during the quarter” and they have 157 million members as of the end of September. This is the number of guests in their loyalty marketing database, not the number of active members.

  • They’re presenting “status, award and point extensions” as something that will “ncourage members to stay with [Marriott as global travel rebounds”

  • More than 76% of global room nights are booked through direct channels, half through digital channels. As online direct bookings grow, then, presumably they’re best able to capture program signups.

They’re seeing growth in one element of revenue from their credit card issuers at least, “credit card branding fees of $113 million up 11% compared to the 2019 third quarter on the back of strong new account acquisition and robust” card spend

This is revenue separate from the purchase of points for future travel – credit card deals treat some revenue from issuer banks as for use of the brand, use of mailing lists, etc. apart from payment for the benefits and points provided to cardmembers.

They are actually cash flow negative on the loyalty program this year, though. That’s because they got cash up front during the pandemic by extending their co-brand deals. Banks gave them money early, and so that money isn’t coming in now. They’ve “effectively repa[id] one third of the $920 million received in 2020” so far and Marriott “continue[s] to anticipate modestly negative cashflows from loyalty” because of these deals.

In May 2020 Marriott hit up their credit card partners for nearly a billion dollars

  • $350 million from American Express primarily for pre-purchase of points

  • $570 million from Chase which involves “$500 million of prepayment of certain future revenues” along with $70 million early payment of their card agreement signing bonus.

Eliminating award charts should help Marriott accomplish two things: lower costs for owners (owners keep complaining about costs even though Bonvoy is less expensive for owners than how the program was previously structured) while reducing costs to the program, both on the backs of members. This works out, of course, unless and until consumers feel they’re getting a raw deal and look elsewhere. But Hilton and IHG don’t offer better deals, so the bet seems to be there’s no viable global chain for customers to move to.

As Mark Ross-Smith often says, this shows that the CFO has won and is driving the loyalty program.

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, 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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  1. >But Hilton and IHG don’t offer better deals, so the bet seems to be there’s no viable global chain for customers to move to.

    AA is going the same way: Reward people who use the co-branded credit card. Take for granted the butts in beds or seats. The points program becomes little more than advance sale at discounted prices via a bank. Points earned by using the product become a small fraction of the total.

    This business model can work as long as cash customers don’t find another supplier. Furthermore the points can be devalued without limit simply by boosting card earnings to multiple points per dollar spent. We just need to avoid holding large point balances.

  2. In reply to @nsx, I’d say this is why hotel loyalty is digging its own grave. Credit cards readily provide 10% cash back (or actually better given points rates for UR, C1, etc) for bookings where they earn the commission. All people lose is the “perks”, which for many is something, but for many more is nothing. Gary has a great piece about this going back, with the effective rebate % offered via these programs. None were at 10% for base members before, few are really there for elites now. I’ll take the cash back/CC points over “free breakfast” any day.

  3. “But Hilton and IHG don’t offer better deals, so the bet seems to be there’s no viable global chain for customers to move to.”

    This may be true, but free agency is always an option. I don’t plan to be one of the members that Bonvoy uses to turn its cash flow positive.

  4. @Gilbert: How do you get the 10% back? Booking through the Chase portal?

    When I’m not chasing status or redeeming hotel points I would normally book through Hotwire. I miss Priceline’s Name Your Own Price, which was very gameable.

  5. One reason why Marriott’s cash flow is in the negative is because they might not have been using “YouTube for business,” in terms of uploading consistent YouTube videos to promote their business. Video marketing is by fat the transformation business solution for driving instant online foot traffic to any business and getting more sales.

  6. >But Hilton and IHG don’t offer better deals, so the bet seems to be there’s no viable global chain for customers to move to.

    It’s early days yet, so too soon to give up on Marriott. But if they do make loyalty unrewarding there’s no reason to move to a global chain.
    At the low to middle end, Choice and IHG will do fine. In the high end go to individual hotels or small high end chains. If you have the Chase Sapphire or the AmEx Platinum you can get better benefits than elite status offers without being on the hamster wheel.

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