Marriott to buy Starwood for $12bn – what do I think?

Marriott surprised us all yesterday by emerging as the winner of the auction to acquire the Starwood hotel group.  Of all the names that had been linked to the transaction, Marriott had not been seen as a serious contender.

The deal creates the biggest hotel group in the world.

From a top-line business viewpoint, you are creating a business model which seems to make little sense.  The combined Marriott / Starwood business will have 30 different hotel brands.  I don’t think you need to be a £1,000 per day management consultant to realise that this is far, far too many.

The initial statement implies that all of Starwood brands (Sheraton, Westin, W, St Regis, aloft, Le Meridien, The Luxury Collection etc) will remain.  The terms of the management contracts that Starwood has with the individual hotel owners would make it very difficult to rebrand in the short term.

All ‘company owned’ Starwood hotels will be sold immediately, albeit with management contracts to be retained where possible.

Culturally, I do not see this as a great fit.  Marriott is the most straight-laced company in the business.  No-one ever woke up in the morning and said “I’m staying at a Marriot tonight, I can’t wait”.  The ludicrously huge photographs of Bill Marriott that hang in the lobby of every hotel in the chain are, frankly, creepy.

Starwood, on the other hand, is about as funky as a hotel business worth $12 billion can be – ie not really cool, but they do try their best.  It is hard to imagine many Starwood employees wanting to work for Marriott – especially not the SPG Europe team, who are the people I know best.

image1 (1)

What about the loyalty programmes?

We don’t know.  The official statement says:

“Leading Loyalty Programs: Today, Marriott Rewards, with 54 million members, and Starwood Preferred Guest, with 21 million members, are among the industry’s most-awarded loyalty programs, driving significant repeat business. They should be even stronger when the companies merge.”

The truth is that Marriott Rewards is about as unexciting as a hotel loyalty programme can be.  I accept that top tier members (75 nights per year) are generally happy.  For everyone else, in terms of promotions, buzz and general interest, it is tumbleweed territory.

Starwood Preferred Guest, on the other hand, is an excellent programme.  Because Starwood was a small business, it realised early on that it could use its loyalty programme to make a real difference.  You usually had to make a bit of an effort to stay at a Starwood hotel so the company wanted to make it worth your while.

What next?

There is no logic in Marriott retaining Starwood Preferred Guest.  However, integration will be slow.  As an example, it is exactly two years since Marriott bought Protea Hotels in South Africa and it was only last week that you could earn and spend Marriott Rewards points across the full chain.

The acquisition of Starwood will not complete until ‘mid 2016’.  I believe that SPG will probably survive until the end of 2017, and your status will transition over at that point into Marriott Rewards status for 2018.

You have the thorny issue of benefits.  Top-tier Starwood members are very well treated in terms of suite upgrades – you won’t be getting that under Marriott Rewards.  Unless the Marriott scheme evolves substantially, there is a real risk that heavy Starwood stayers walk away as they see their benefits disappear.

American Express will also be having some serious issues.  Marriott does not appear to have a good relationship with the company – it pulled out of Membership Rewards many years ago and works with Visa in the US.

The Amex / Starwood relationship exists on a number of levels:

Amex Platinum offers Starwood Gold as a membership benefit

Starwood is a Membership Rewards transfer partner (one of only three hotel transfer partners available in the UK)

Amex offers a Starwood-branded Amex card in the UK and North America

I expect all of this to disappear, to be honest, although not for a couple of years.

The loss of SPG will also be a big blow if you collect airline miles in a programme without a UK credit card and not supported by Amex Membership Rewards.  For many airline schemes, the only way to collect miles in the UK was to get the Starwood Amex.  If you transferred in chunks of 20,000 points, you were getting £1 = 1.25 airline miles in, for example, Air Canada Aeroplan.  The airline transfer ratio from Marriott Rewards is nowhere near as attractive.

You can read more about the deal here in the official announcement.  You will be able to read about the integration of the two programmes on Head for Points as it happens.

(Want to earn more hotel points?  To see our complete list of promotions from the major chains, click here to visit our ‘Hotel Promos’ page or use the link in the menu bar at the top of the page.)

Hilton launches Winter Sale with discounts of up to 35%
‘Credit Cards’ page updated for November – summary of the top deals
About Head for Points

We help business and leisure travellers maximise their Avios, frequent flyer miles and hotel loyalty points. Visit every day for three new articles or sign up for our FREE emails via this page or the box to your right.

Comments

  1. SPG via credit card spend is a good way of earning AA and AS miles which will be missed if it is phased out. Hopefully it will be a while and give me time to find a replacement strategy

  2. Can you see SPG points being devalued in the next couple of years (before being killed off)?

    I may need to rethink my points strategy…

    • It is possible they do this, once Marriott gets control in 8 months, in order to minimise the transfer rate they have to offer. At the moment I reckon it would be 1 SPG to 2 Marriott.

      • My points strategy involves putting all of my spend on Amex SPG for a redemption late 2016.

        I made some calculations earlier this year and SPG won hands down on value of points for a redemption for a week in a quality hotel in Spain.

        I also mopped up a few bonuses to top up my balance from stays and spend.

        Backup plan was to convert to Avios, but now I’m nervous about my whole strategy.

        Realistically I would be booking within the next 8-months but, having been burnt by both Hhonors and Avios devaluations, I’m a bit risk averse.

        PS That Marriott painting made me crack up the first time I saw it, but in retrospect it is a bit creepy!

  3. Time to get the SPG Amex and bank the 20k bonus (2 cards : wife and I) and transfer them to a FF program of choice and will be 25K miles for £150 minus any pro rata refund.

  4. Even a company with a broomstick up its rear end can understand about the broomstick. They are possibly buying transition to a better model, on the cheap. (Everybody thinks it WAS cheap.)

  5. I wonder if the Amex Plat gaining Hilton Gold is actually to offset loosing SPG?

  6. Sebastian says:

    Whilst, I do not stay at SPG very much, it was both a company and a programme that I was intended to ‘graduate’ to once I had a bit of money. Hopefully, they’ll evolve Marriott awards and combine the best parts of SPG and MA together, although i highly doubt it. Let’s just hope that Hyatt is able to stay independent.

    • Best they bury Marriott awards and not don’t contaminate the satisfying product.

      Access to Hyatt collection would have been much more preferable for the hotel and food spending. If I fancy staying at Starwood brands, Hyatt brand complements really well.

  7. Anybody aware of a Marriott Status match? – might be worth applying before they merge.

    Sitting on 15,000 SPG points waiting for a ”SPG moment” to come along that I like!

  8. This is really disappointing (and surprising) news. Marriott ‘s is a terrible programme.

    I’ve been SPG Platinum every year since 1999, but with only 454 nights to date, so not yet Lifetime Platinum.

    I now have the dilemma as to whether to go flat out to get to the magic 500 nights during 2016 in the hope that I can get Lifetime Platinum and that it will be honored in the new merged programme. Of course, they might water it down or renege on it at any point.

    I fear that the end of my relationship with Starwood is around the corner.

    • Lady London says:

      If it’s any consolation lots of people were in that position – just short of Lifetime Gold or even just achieved it – when the BMI program was closed when BMI, or rather BMI’s slots, were sold by Lufthansa to the British Airways company IAG.

      All these changes to the programs this year should remind us to earn AND BURN. As devaluation is the natural way of these programs, as soon as they get worthwhile. Easy to say I know, I try to keep reminding myself, use it or watch the benefit shrivel in my hand.

  9. Would be nice if we could see the 20k bonus return on the spg card at least one more time. Would also be nice if the awol marriott card would return with a free night offer. SPG-airline transfers will be a huge loss. I mistly used them for topping up shortfalls of a few thousand miles here and there. Along with ihg, spg were also probably best for Japan stays so that will be a loss too.

  10. Not sure that the benefits of SPG lower to mid-tier status are that exciting, as you seem to imply. Surely, it is only top-tier members that get the good benefits, otherwise the SPG Gold offered by Amex would be useful.

    • SPG Gold which is equivalent to Silver with Hilton and Marriott, gets decent room upgrades, extra points, early check in and defined late check-out (not guaranteed at convention hotels).

    • I’ve only used SPG Gold status once, Sheraton Schiphol, and very happy to report I was upgraded to an exec room where I got all the accompanying benefits (free wifi, club lounge access). Was a pretty good lounge, the food was ok and they had a huge supply of those caramel waffles (some of which came along to Asia with me).

  11. I’m struggling to see how this makes “little sense”. Starwood are strong in areas where Marriott are weak (as you imply with you’re “they’re different” bit) so the purchase allows them to expand with a more limited overlap.

    And while having 30 brands is clearly unnecessary, I don’t see how it’s a major issue. If you specifically target one of those brands then you’ll continue to know what programme they’re in. If you aren’t targeting specific brands then you can just go to the Marriott website and it will tell you all the hotels in that city. It becomes more complicated for technophobic travellers who plan everything offline or just turn up at a city and choose at random, but are there many of these people?

    • Luxury Collection and St Regis fills a gap for Marriott, as does W (but there is no way that W will survive under a Mormon-led business!). Marriott is how it is because it is, essentially, a family-run and family-controlled business with a heavy Mormon influence, hence the bibles which will shortly be appearing in the bedroom of every W hotel, and indeed every other Starwood hotel. The cultural shift required to running hotels which stock condoms in the mini-bar is probably beyond them.

      You cannot run 30 brands as a developer and franchisor. It makes no sense. How can you try to position Westin, Sheraton, Marriott and Renaissance separately when they are effectively identical?

      You also have to pacify hotel owners – if Marriott Rewards drives a lot of stays, then anyone currently running a Marriott hotel located near an SPG property may see some business drifting away.

      I also expect the Design Hotels JV to be wound up. I doubt many owners of those properties will want to be associated with Marriott which is, basically, the standard bearer for everything those hotels are fighting against.

      • I agree. I wonder if Marriott even really know what they are buying? The cultural differences are massive.

      • Excuse my ignorance, but what’s the issue with W and mormons?11

        • My gut feeling – and I speak as someone with very little practical knowledge of the Church of Jesus Christ and Latter Day Saints (I haven’t even seen the Book of Mormon) – is that it is not totally aligned with the sex, drugs and rock’n’roll ethos that was originally behind W Hotels, albeit now heavily diluted.

  12. SPG offers quite a unique package and we see the Starwood points as valuable.

    While I go out of my way to stay at SPG hotels, spend on food in SPG hotels and maintain Platinum, without the membership package, things will change overnight and 90% of my stays shifted away to the rewards program that delivers the most value.

  13. As for the merger business, I wrote,

    SPG & Mariott sent out an announcement of the merger.

    But the business underpining/economic sense of the deal is shaky. $200 million in synergies are less then premium Marriott is paying for Starwood. Going to be struggle among stakeholders to complete the deal.

    The email today is re-assuring about Starwood points.

    However, it takes one person on executive level to decide to squeeze some cash out of the program and the value is gone/reduced. We already have the differential in miles between Category 6 properties and decent Category 3 as 25K vs 5K per night. If the corporate does not rein hotels in, brand deterioration is also a risk.

  14. For those of us who may be wanting to transfer SPG -> Avios: Convert now? Or sit tight to see what happens? I don’t expect there’ll be another transfer bonus any time soon?

    • Every 9 months, regular as clockwork, BA runs their ‘25% bonus on transfers from hotel programmes’ promo. The problem is that SPG is usually, but not always, excluded.

  15. OT: Do Avios / Iberia accounts go “stale” if they’ve not been used for a year (rendering them useless to redeem flights on without activity)?
    I’m moving across some MR points to BA Avios but thought if I need activity through the Avios and Iberia accounts this would be a good opportunity to kick the deadline back by another year.

    Thanks

    • They do indeed.

      • You just reminded me to check my Iberia a/c and the Vonoseleccion points + bonus have still not posted, that’s rubbish.

        600 points missing & a/c unactivated :(

        More chasing up :(

        Anybody else get theirs?

    • No, except that you cannot book Reward Flight Saver if there has been no activity for 12 months. You pay full tax instead.

  16. Wonder if the good folks at Marriot will want to keep the SPG tie up with Emirates Skywards.

  17. The W San Diego is converting to a Renaissance hotel. Coincidence?