With Marriott International's merger with Starwood Hotels & Resorts coming to fruition, the new entity is not only the largest hotel company in the world but also a loyalty juggernaut.
Marriott CEO Arne Sorenson said in a statement that the company plans to keep all 30 of its hotel brands following the $13-billion deal, meaning the company's loyalty program and therefore its potential to track guest preferences and directly interact with them is titanic. Sorenson was quoted in a conference call stating that the concept of loyalty programs, and their overall strength, hinges on their size and the choices afforded to travelers. With 30 brands, which have been cultivated over time to target extremely specific guests in essentially every market, Sorenson also said the hotel's third-party ownership is also their greatest asset.
“Our contracts don’t give us a right to change the brands that are associated with their hotels,” Sorenson said. “They have made deliberate bets with their valuable real estate about which brands they would like to have on their hotels. That’s something that we intend to continue to respect."
If Sorenson is right and loyalty is a numbers war, the new Marriott is in a good place. The company has 5,700 hotels around the world, or more than 1.1 million rooms in 110 countries. Starwood alone has roughly 1,200 hotels in its portfolio. No other company can claim to match this size. In fact, Marriott/Starwood's new loyalty program is potentially so large that it may no longer be competing with other hotel brands for the loyalty space. Instead it is facing down the industry's largest and oft maligned disruptors: Online travel agencies.
Dating back to the end of 2015 and early 2016, hotel brands one by one began a new offensive against OTAs by way of loyalty program incentives. Campaigns began to pop up wholesale incentivizing the act of booking direct as a means of sidestepping OTAs. Loyalty programs have always offered perks such as free Wi-Fi, but hotels are now willing to offer discounted rates in order to pull travelers from online booking heavyweights under the Expedia and Priceline umbrellas. Now, with a ballooning portfolio and never-before-seen presence in the hospitality market, Marriott could be poised to do some damage to the OTA machine.
Marriott has much to gain from this re-positioning. Spending on U.S. hotel rooms reached $150 billion in 2015, up 7.3 percent from the year prior. An estimated 15 percent of total room nights were scooped up by OTAs during that period, and in certain high-traffic markets like Miami Beach OTAs have an even more commanding presence. In the past, no hotel company could be expected to match what OTAs spend on marketing, with Expedia alone dropping an estimated $3.38 billion on marketing its services.
But who needs to spend on marketing when you have access to the emails of every loyalty member of both Marriott and Starwood's programs? Starwood has an estimated 21 million members, and Marrott roughly 56 million -- that's a lot of information. But Expedia consists of several OTAs as well, among them Hotels.com, Hotwire.com and Travelocity. For all the attention Marriott's deal is getting, Cyril Ranque, president of Expedia's lodging partner services, said that hotels will continue to compete only against each other.
"We're not seeing these efforts as changing consumer behavior much," he said.
Marriott and Starwood have other logistical hurdles to overcome before they can begin competing on a larger scale like some many are speculating. Sorenson penned a letter addressing the deal and its effect on loyalty programs as the merger was finalized, and no changes are expected to occur in the short term.
In the meantime, there are small hangups that still have members asking questions. Marriott Rewards has a deal with two Chase Visa rewards cards, and also works with airlines for the United MileagePlus and Delta SkyMiles programs. Meanwhile, Starwood's program caters primarily to business travelers and is linked to Delta and Emirates Emirates Skywards. The Starwood Preferred Guest program also has a credit card associated with American Express, and Starwood points can be spent at retail locations such as Starbucks and iTunes. Sorenson's letter suggests that the programs will be borrowing each other's strengths, with the goal of leaving no one behind.
"We expect to run parallel loyalty programs while we engage in the complicated work of integration," Sorenson's statement read. But This is merely a state of limbo, with a combined program in the works for 2018. "We intend to draw upon the very best of both Marriott Rewards and Starwood Preferred Guest to provide even more value to our members."
While 2018 may seem far off, combining these two programs is going to take time. Which is why Tom Marder, Marriott International's VP of corporate relations, told HOTEL MANAGEMENT that Marriott is keeping its eye on the prize, not on the clock.
"Rather than being guided by a deadline to merge the programs, we will be guided by getting it right," Marder said. "With Friday’s close, we are just beginning to roll up our sleeves and get down to the serious business of bringing the programs together. So far, it has been incredibly positive to see how big a hit linking your accounts on day one for reciprocal benefits has been with our members. We will continue to listen to members and our owners and franchisees as we move forward as quickly as possible on the process. As the plans develop, we will certainly give all our members, owners and partners as much advance notice as possible."