What the merger means
By Jason Steele
This week hotel giant Marriott announced plans to acquire Starwood hotels, which includes Westin, Sheraton and several other big name hotels. While it had been known that Starwood was entertaining offers, it came as a surprise to many who had heard rumors that other large hotel chains were making a move to buy the smaller Starwood brand.
Why Hotel Credit Cards are Important to This Deal, and to Travelers
Just like airline programs, all of the major hotel chains offer their own loyalty program, complete with at least one co-branded credit card. The Marriott Rewards program boasts 54 million members and it offers its Marriott Rewards Premier Visa Signature card from Chase. Likewise, Starwood hotels, which has a mere 21 million members in its program, offers both a personal and business version of its Starwood Preferred Guest (SPG) card from American Express.
Yet for travel rewards enthusiasts, the Starwood card has always remained popular. Cardholders relish the chance to earn points in this program that can be redeemed for any unsold standard room, with no blackout dates or capacity controls, and are enthralled by the opportunities to transfer their points to miles with over 30 different airlines, mostly at a 1:1 ratio, with a 5,000 mile bonus for transferring 20,000 points at once.
On the other hand, most credit card experts regard the Marriott Rewards credit card as a useful, but uninspired product. Cardholders earn five points per dollar spent at most Marriott hotels, and double points for purchasing airline tickets, car rentals, and at restaurants, but just one point per dollar spent elsewhere. The problem is that Marriott points are far less valuable than Starwood points, as free night awards at comparable hotels can require at least four times as many points as Starwood does. But to make matters worse, the Marriott program has a very weak award availability policy, which technically has no blackout dates, but allows hotels to impose capacity controls that achieve the same result.
So if you are trying to use points for a free night stay at a popular location, during a holiday, or in a city that’s hosting a special event, you would much rather have points with Starwood than with Marriott.
What’s Going to Happen?
If you can imagine Starwood and Marriott as a happy couple, think of this week’s news as an engagement announcement with a wedding planned for the middle of 2016. And -as with any engagement- there is always a chance the couple will not make it to altar, but this seems unlikely. Until then, travelers and credit card holders should expect business as usual.
But, assuming the merger is completed on schedule, most observers expect that their two loyalty programs will be combined in some way, as has been the case with the frequent flier programs of previous airline mergers.
The likelihood is that the Marriott Rewards card from Chase or the SPG card from Amex will be phased out. Apparently some are willing to bet that the larger Marriott Rewards program will survive, and the Starwood program will be phased out, along with the Amex credit card.
Personally, I hold out some hope that they will stick with the Starwood program, as its strength may have been part of the reason that Marriott chose to seek its acquisition. As a big fan of the Starwood Preferred Guest program, this hope may be a case of wishful thinking.
While one program will certainly disappear, I think that there is some precedent for the new program to keep offering credit cards from both card issuers.
Hilton offers credit cards from both Citi and American Express, and has done so for many years. And at the very least, one would hope that the combined management of these two companies will be smart enough to incorporate the features of the Starwood program (and its credit card) that have made it so popular.
At this early stage, there is no need for fans of either program to panic or to spend too much time speculating how this “marriage” will turn out. By this time next year, we will know for sure how the happy couple is doing, and what their plans are for the future.
Jason Steele is the credit cards reward expert at CompareCards.com.