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.
These are the 8 factors in Loyalty that Marriott believes matter most; points earning does not feature in this version of the recognition process.
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