Marriott members are going to make out like bandits in the acquisition of Starwood. And there are more Marriott customers than Starwood ones. Marriott members get a whole slate of high end properties at which to use their points that they didn’t have before. And their elite benefits may get better but certainly won’t get worse. Starwood customers on the whole have been less enthusiastic.
St. Regis Bali
Late last month Travel Skills attended an influencer forum put on by Marriott Rewards in Los Angeles. Chris reports that 15 “writers/bloggers/influencers” attended a meeting with Marriott’s Vice President of Loyalty and several other executives.
The meeting was held at the JW Marriott at LA Live in downtown Los Angeles. Upon arrival, the group attended a nice networking dinner at Wolfgang Puck’s glitzy WP24 restaurant on the top floor of the neighboring Ritz-Carlton. The following morning, the forum ran for about 3-4 hours and included lunch on the hotel’s pool deck, in unusual 85-degree winter heat.
I didn’t attend the event, but I did have a chance to sit down with Marriott folks at the beginning of the week. For avoidance of doubt I covered my own travel expenses though I did have a salad and free water in their company cafeteria.
I met with Marriott’s CEO Arne Sorenson and also with Marriott’s Vice President of Loyalty Thom Kozik in Marriott’s Bethesda, Maryland corporate offices. Mostly they had questions for me, there wasn’t a lot of information shared with me because
- The Starwood acquisition hasn’t closed yet. So it’s still early.
- They don’t yet have full access to the books and internal metrics of Starwood Preferred Guest.
- There are restrictions on what they can say and do in advance of the shareholder vote on the deal.
Marriott Seattle Airport Atrium
As a result I don’t have a lot to report on the future of the combined company. However I certainly shared with them the major anxiety issues from a Starwood customer standpoint.
- Elite benefits: Upgrades, Late Checkout; 24 hour checkin; how lifetime Gold and Platinum status will be honored; breakfast at resorts, courtyard, and Ritz-Carlton properties.
- Transition: the value of points Starwood points if converted to Marriott Rewards, advance notice of changes
- General members: the value of points transfers to airlines; the value proposition of the Starwood co-brand American Express product; the kind of customer service, problem resolution, and assistance via social that Starwood is generally better at.
That said, it was one thing for Kozik to make time, but to have over half an hour of Sorenson’s time suggests he has a real interest in engaging the question of loyalty. I’m not important enough of a skeptic for him to spend time meeting with me for my edification. That he could just leave to staff.
Sorenson thinks loyalty will be more important going forward, not less important. He insists Marriott explicitly considered the loyalty of Starwood’s customers in valuing the deal. I asked him about a quote from the Wall Street Journal where he said “Loyalty in business really comes down to two things: quality and value.”
I pointed that I read that as transactional, a reason to pick a product in a given instance, but that loyalty – recognizing and rewarding customers over time – gets customers to make decisions beyond the single instance, to choose your brand even when you aren’t the best package of quality and value on that purchase decision. Sorenson says this sort of loyalty is subsumed by the equation as he described it.
I’m not sure that’s right, and his argument didn’t make much sense to me that loyalty is more rather than less important for a large chain in our conversation. I’ve said for some time that you can pretty much walk out of an airport and stumble into a Marriott or an IHG property, but it took effort to be loyal to Starwood or to Hyatt. So they had to work harder at it and invest more.
However a fair counter to my narrative may come from an unlikely place. This week Doug Parker made an argument at JP Morgan’s aviation conference. He says consolidation means they have to invest more in a better product. Before consolidation there were gaps in each airline’s network. Now ‘there are three global hub and spoke carriers that can take you anywhere in the world’ so you don’t get business just because you have the route in large measure. So Parker says ‘we have to have a better product’. (I wish he said ‘we have to have a better loyalty program’.)
Marriott gets bigger, gains a more global presence. And they’re slugging it out with IHG, Hilton, and even increasingly Accor across the world since Starwood had more of a worldwide footprint than Marriott. So they have to be better, when they aren’t differentiated on footprint.
My sense is that Marriott was genuinely surprised by the reaction of Starwood members to the acquisition — that they didn’t realize how fiercely loyal so many of Starwood’s customers are. And they quickly saw value in that.
I hadn’t met Thom Khozik before. I certainly knew Ed French, who left Marriott Rewards for Ritz-Carlton. French was a past President of American AAdvantage. Kozik came from technology, outside of loyalty. His perspective doesn’t start as a hotelier, on hotel guests, but on every interaction they have with customers.
For instance, Marriott Rewards should be rewarding guests and valuing customers not just on their spend when checked into a hotel, but also when they dine on-site while they aren’t registered guests. Hyatt and Starwood both already do this of course, it isn’t revolutionary. He did share he didn’t think guests should have to rely on dealing with the front desk to ensure benefits like late checkout.
Starwood members have been concerned. Sorenson seemed genuinely curious when he asked me why I’m skeptical when he says that Marriott values the loyalty of Starwood members and wouldn’t want to do anything to jeopardize that.
I do remain skeptical that Marriott will transform itself in a way that will make Starwood elites happy to become Marriott elites, because the Marriott program comes out of the Marriott culture and that’s the corporation that will survive. I’m hopeful they get creative. They certainly say they want to. Whether or not they ultimately do, they come across as committed.
Perhaps they retain three programs at least for awhile — Marriott Rewards, Ritz-Carlton Rewards, and Starwood Preferred Guest. Or they could do as Randy Petersen suggested to me, combine all three programs into a brand new program the way that Starwood Preferred Guest itself was created with the combination of Westin Premier and Sheraton Club International.
Regardless it’s going to be an interesting next couple of years.