Worried about points value in the new, combined Marriott/Starwood Preferred Guest program? VP Loyalty Thom Kozik’s presentation at the Loyalty 2017 conference in London this week probably won’t ease those concerns. Points are still part of the program and the value proposition, of course, but Kozic believes that they will be de-emphasized as the program evolves in the coming years.
“Points are not the point”
There is way more to loyalty than just earning points. In fact, much of the conversation at the conference has been about how points and loyalty are very different concepts. For Marriott that means a focus on recognition and opportunities far more than reward night redemptions. Kozic called attention to the company’s experiential award options and the opportunities those offer to members. He also acknowledges that the current implementation of that effort is far more about once-in-a-lifetime experiences (e.g. Super Bowl tickets) than everyday travel efforts. That version of experience-based travel is being challenged on many fronts, including the thorn in the side of hotels everywhere, AirBnB and its new experiences efforts. Expect to see more on that front from the new Marriott, both for earning and redemption options, in the near future.
What are points worth?
Another point Kozik spoke to is the challenges the company faced in integrating the two different currencies and establishing conversion rates. He specifically noted that the earning rates at Starwood properties were historically richer than at Marriott, a necessity given the SPG program’s smaller footprint.
.@MarriottIntl VP Loyalty Thom Kozik at #Loyalty2017: SPG stronger earn rates bc smaller footprint. Marriott didn't have that challenge.
— Seth Miller (@WandrMe) February 21, 2017
Update: Since some were pressing the issue, here’s the direct quote I was finally able to transcribe from the recording:
The Starwood program had been architected and engineered precisely well for their distribution footprint. They had a situation with those 1700 hotels that if there was an elite member you needed to make sure they were overcompensated, over-incented to make sure they would drive out of their way to find a Starwood property to earn their points when you had that small a distribution footprint. You can stumble over a Marriott property in one of the 19 different brands we had in the portfolio pre-merger. We had different philosophies about why we structured the pricing and member behavior the way we did. The points transfer became a way to signal what those member intents were.
Reading between the lines on this front is troubling for those focused on points in the loyalty programs. Marriott’s new footprint is even more significant (in properties, geography, and corporate contract negotiation abilities) and that further reduces the need to compete for customers. And Kozik teased that the new, combined program size is much larger than initially expected during the merger process. In the early phases of processing it was expected that the new Marriott Rewards would have 85 million members based on a 16% overlap of customers between the two programs. He revealed in the presentation that the overlap was only 11%, suggesting a nice boost in total program size.
Rather than 16% overlap between MR/SPG member lists more like 11% once combined & de-duped. #Loyalty2017 https://t.co/BqG0VMGDrN
— Seth Miller (@WandrMe) February 21, 2017
How many types of loyalty?
Beyond that view of the overall points value the process of merging the currencies required a review of the different types of points within the portfolio and each member’s account. Points earned from a credit card sign-up bonus tell a very different story from those earned by staying at a hotel, “The number of flavors of points we have would put an ice cream shop to shame.” But don’t expect to see simplification in that aspect of the programs; the multiple earning methods and the associated stories they tell about customers are incredibly valuable as the Marriott Rewards program looks to shift beyond just the heads-in-beds view of hotel loyalty programs.
Kozik firmly believes that there are loyal customers of hotels who do not spend nights in the rooms, based in large part on his own personal experience. Building up a loyalty profile on customers of the restaurants or spa facilities can bring value to both parties, arguably at better margins than overnight guests produce. Those transactions are mostly untracked today.
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Hotels and airlines drinking their kool-aid. Let’s wait until the next economic slowdown hits & see how much companies must compete for customers.
Yea verily, the end is nigh. Anyone surprised shouldn’t be.
This reminds me to high and condos and apartments across New York City and Miami two years ago. We were told the market only goes up and there was endless demand from Chinese and Brazilian investors. Well, we know how that turned out. Everyone is offering incentives to attract customers and fill up empty units.
No disrepect here, but I really did not enjoy reading your article. As a journalism graduate and writer, your writing style is migraine inducing and is so wordy and boring.
I read news articles constantly and I’ve rarely shaken my head while reading and had these thoughts.
Just my opinion of course.
Do you agree with “the earning rates at Starwood properties were historically richer than at Marriott,”?
My own perception is that when earning for hotel stays, Marriott was the more lucrative, at least based on how much spend was required for a free night at a typical large big-city hotel. And that’s not counting MR’s often-generous mega-bonuses.
On the other hand, for rewarding everyday un-bonused credit card spend, SPG was the clear winner.
I completely disagree with this article. As a Marriott gold member I will tell you the rewards do matter. The perks of higher floors, water in the room, are nice but I have half a million points I look forward to using in retirement. This idiot at Marriott who says that’s not important is just wrong. Seems like another shareholder friendly cost cutting ‘idea’ that he thinks will make him shine. Pure poppy cock.
Saving points for retirement is a terrible investment strategy. I would strongly rethink that plan. Especially with a half million on the line. That’s not going to get you a ton of travel and it is likely to get worse and worse in value.
Lifetime Platinum in the SPG program, waiting to see if it’s worth staying with Marriott or switching to another brand. From what I’m reading, it sounds like I should be looking elsewhere.
This seems another one of these ivory tower visionary situations, where no input has been solicited from the actual customer. Maybe it’s just me, but I find it exceedingly unlikely that Marriott loyalty members don’t consider free stays for their loyalty (points) to be among the top eight considerations.
I found it surprising that there is only 11% overlap in the programs’ membership. I agree that it is also surprising that points/rewards are not mentioned (I guess the new program won’t be called Marriott Rewards…). While I agree with Christian that it sounds a bit like the product of a management brainstorming session about what customers want (without actually asking the customers), I also think that points could fit in the “pampering” bucket, i.e. using points for award stays.
@Ron: I hate to clutter up the comments with more irrelevant chatter, but your sentence (“As a journalism graduate and writer, your writing style is migraine inducing and is so wordy and boring. “) incorrectly implies that Seth is a journalism graduate, and your exaggerated “migraine inducing” (sic) description should have been hyphenated. While I’m all for constructive criticism, it is tacky to do it publicly in the comments. Oh, and you misspelled disrespect.
The whole notion of saving points and miles for retirement thing shows up more than you would think. I guess the
logic is that they are difficult to redeem based on lack of availability but one day when you have a lot of time that wont be a problem. Except your points will be worth almost nothing then. It’s pretty sad really, the average rate of depreciation of loyalty programs exceeds inflation. The best time to use your points is usually right now.
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