Don't Mess With Our Points
Bloomberg Businessweek Middle East|16 August, 2018

Starwood Superfans Face Their Deepest, Darkest Fear: Marriott Mediocrity

Patrick Clark

For their honeymoon, Alex Diacre and his wife, Sarah, travelled halfway around the world, from New York to the Maldives, a chain of atolls in the Indian Ocean. The breakfast menu at their hotel, the St. Regis, was a journey unto itself.

Each morning they’d find a table looking out over the ocean, sink their feet in the sand, and make the hard choices. Should Sarah try the eggs Benedict, Maldivian style, with soft-shell crab and hollandaise-infused coconut curry, or should she opt for the duck foie gras terrines with fricassee of morel mushrooms and fried quail egg? Would Alex restrict himself to breakfast pastries or indulge in the coffee opera cake with vanilla ice cream? There was lighter fare, too—fancy cereals, local fruits, and fresh pressed juices.

The meal, including buffet, tableside bloody marys, and a la carte offerings, ran about $65 per person after tax and service. At least that’s what it would have cost a paying customer. The Diacres booked their six-night stay with loyalty programme points Alex had earned traveling for his job managing technical support teams for a big software company. Those nights on the road—most of them spent in Alofts, Westins, and other properties overseen by Starwood Hotels— had earned him “lifetime platinum” status, which meant breakfast was free. The perk saved the couple about $800 and set an appropriately decadent tone for their dream vacation. “It was not just about saving money,” says Diacre, who cashed in some 250,000 Starpoints to book the stay at a hotel that often costs $2,000 a night. “But the resort was hellishly expensive.”

If you want to understand the modern hospitality industry, free breakfast is a good place to start—from Maldivian reef-fish omelets to the ham-and-egg croissant nuked in the lobby of your average Courtyard by Marriott. Diacre, 41, travels at least 100 nights in a typical year, and for the most part he chooses Starwood, even when nicer or more convenient lodgings are available. “I remember going to Detroit, and my colleagues were staying five minutes away from the client site,” he says. “I was staying 20 minutes away, and, by the way, with traffic it was more like an hour.” The points were worth the inconvenience.

That type of behaviour was a big reason Marriott International Inc. paid $13.6 billion to acquire Starwood Hotels & Resorts Worldwide LLC in September 2016 in a deal that created a hospitality industry behemoth that today has 1.3 million rooms and 110 million loyalty programme members. The move was lauded by Wall Street, which saw in the merger a chance for Marriott to achieve unprecedented economies of scale. Two years later the company’s stock is up more than 80 percent, outpacing its peers.

Although the acquisition offered clear advantages to Marriott investors from the start, for Starwood Preferred Guests—or SPGers, as Starwood’s most loyal travellers call themselves— there was a catch. When Marriott began exploring the deal, it didn’t offer free breakfast as extensively as Starwood. Nor did it guarantee late checkout—a longtime SPG perk. It was stingier when it came to room upgrades, and it made elite status harder to achieve. SPGers, who’d hoped that Hyatt Corp. or perhaps a Chinese suitor, would acquire the company and leave the perks in place, started freaking out. “Time to start gnashing teeth,” wrote Gary Leff, a prominent travel industry blogger.

Marriott has spent the past two years trying to calm anxious SPGers. It’s made progress, but the real test will come on Aug. 18, when SPG and Marriott Rewards are finally combined into a single programme. (The integration will also pull in a third programme, Ritz-Carlton Rewards.) As that moment approaches, the success of the megamerger still depends on winning over a group of customers who’ve always viewed Marriott members as dupes. Edward Pizzarello, a venture capitalist who spends 100 nights a year in Starwood hotels, puts it this way: “They had Stockholm syndrome.”

Hotel loyalty programmes are built upon a basic proposition: Travellers rack up points on business trips and spend them at play. The more a traveller spends on a given hotel company, the richer the rewards get—just how rich depends on the programme. SPG members gain platinum status after either 25 stays or 50 total nights in a calendar year; the Marriott Rewards program conveys its own version of top-tier status, “platinum elite,” on travellers who spend 75 nights. Status is good for the following year, and members have to keep hitting the annual goals to maintain their level.

The most coveted customers at any hotel are those who travel most, which tends to mean management consultants, bankers, and assorted spreadsheet jockeys. These professional optimisers happen to be the people most disposed toward arbitraging the last bit of personal benefit out of their expense accounts. Hard-core members are known for haunting points blogs and message boards and pulling offelaborate exploits such as the “mattress run,” as the supercommitted call booking an unnecessary hotel stay for the sake of earning rewards or gaining status. That can mean spending a romantic weekend getaway at the airport Sheraton or simply checking in, enjoying the complimentary cocktail, then driving home for the night.

There are other arcane schemes, such as booking unneeded hotel conference rooms, which can sometimes count toward earning status—a sort of “meeting run.” In “hotel hopping,” loyalists split work trips between different hotels, because each check-in counts as a separate stay, allowing them to gain status more quickly.

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