Oct292015

Why a Hyatt and Starwood Hotels merger makes sense for loyalty programs

The news posting all over the miles and points blogs yesterday was a CNBC report leaking negotiations about a potential Hyatt buyout of Starwood Hotels. Starwood Hotels is the larger company, but Hyatt Hotels seems to be cash-rich company. I won’t attempt to analyze business details of a Starwood buyout.

So far this year the news broke that Wyndham was in talks about acquiring Starwood, then IHG, then last week China’s Jin Jiang hotel chain was another name surfacing. Yesterday it was Hyatt Hotels.

I did not think much about this story yesterday, despite reading a half-dozen blog posts and a series of news stories on the topic. I did not see anything news, aside from a potential rebranding of an entire chain. There were thousands of words of blog speculation about the impact of a Hyatt-Starwood merger and a lot of hand-wringing comments on blogs, mostly from SPG loyalists.

I regularly hotel industry news of hotel brands getting bought out. For me, hotel brands in the same market segment don’t really stand out as too distinct from each other, regardless of the parent hotel chain.

Is a Westin much different from Hyatt Regency?

How about a Park Hyatt or St. Regis?

Aloft or Hyatt Place?

I like the colors and socializing bar and games environment of the Aloft lobby better and I like Hyatt Place better for rooms. I don’t see those features changing dramatically in a combined Hyatt-Starwood hotel chain.

Many of us are too young to remember the big mergers of hotel chains in the 1990s. These were the days when hotel loyalty programs were still in their infancy. The biggest change in the hotel industry I have seen in the 17 years I’ve been following loyalty programs closely was when Blackstone Group bought Hilton Worldwide in 2007 in the biggest ever hotel industry deal. Blackstone’s 2007 investment in Hilton Hotels was cited as the “most profitable private equity investment on record” by Bloomberg News in May 2015.

There were no significant changes in Hilton brand hotels I noticed after the Blackstone buyout, so much as the changes I noticed with Hilton HHonors loyalty program devaluations. I was Hilton HHonors Diamond for several years and the significant changes to devalue the loyalty program started in 2003, before Blackstone, and continued throughout the decade.

My History with Starwood Preferred Guest

Westin Premier was an elite status I held in 1992 when I frequented the Westin San Francisco Airport monthly for business meetings. Starwood Lodging bought Westin Hotels and Sheraton Hotels in 1997. I joined Starwood Preferred Guest the year it launched in 1999. I joined all the other major hotel loyalty programs too in 1999.

In 2000, I won a prize for 50,000 Starpoints from an internet start-up promotion, so I had experience with SPG redemptions. In 2003, my primary loyalty moved from Hilton Hotels to Starwood Hotels and Hyatt Hotels based on the value of their hotel loyalty programs. The information was stuff I learned from other travelers posting on FlyerTalk forum threads. I status matched from HHonors Diamond to SPG Platinum and Hyatt Gold Passport Diamond elite in 2003.

Arguably, Hyatt Gold Passport was a more generous program with its Faster Free Nights promotions and hotel specific points and miles bonuses often for 2,000 points per stay, but there were simply not enough Hyatt Hotels in the places I traveled to make 25 hotel stays per year a viable option for me. I was unable to maintain Hyatt Gold Passport Diamond status.

Making SPG Platinum with 25 stays each year took effort and I did not have enough need for hotel stays to play the field with Starwood Preferred Guest, and Hyatt Gold Passport, and Hilton HHonors. Starwood Hotels offered frequent points earning opportunities for SPG Platinum members. Although, there was no elite qualifying credit given for award stays a decade ago, generally meaning I had around 10 to 15 award stays per year receiving no stay credit. There were far more SPG category 1 and 2 hotels in those days for low cost award stays.

Marriott Rewards and IHG Priority Club hotels were everywhere too, but I mostly ignored those hotels since I rarely had need to look beyond Hilton and SPG. 

Size matters to be in the Same League with the Big Hotel Chains

I rarely bothered looking beyond the five major hotel chains for my hotel stay needs until after I began writing Loyalty Traveler blog in 2008. I figured it was time to get my ass out of upper upscale hotel suites provided for free with hotel loyalty elite status and find out what hotels and rooms are like for most of the non-elite traveling public staying at the major hotel chain brand properties:

  1. Wyndham Worldwide (7,000+ hotels)
  2. Choice Hotels (6,000+)
  3. InterContinental Hotels Group (5,000 hotels)
  4. Hilton Worldwide (4,400 hotels)
  5. Marriott International (4,300 hotels)
  6. Best Western (4,000+ hotels)
  7. Carlson Rezidor Hotel Group (1,370 hotels)
  8. Starwood Hotels (1,271 hotels on 9-30-2015)
  9. Hyatt Hotels (504 hotels on June 30, 2015)

Starwood Hotels currently ranks #8 and Hyatt Hotels #9 for number of hotels, among the largest nine chains with major hotel loyalty programs operating in the USA. La Quinta could also be included as a tenth chain with a hotel loyalty program.

If Starwood and Hyatt combine hotel chains in 2015, then they would be a hotel chain with around 1,800 hotels worldwide. There are 32,000 hotels in the other seven larger global chains. Count Accor Hotels and that is eight other global chains with about 35,000 hotels competing for loyal frequent guests.

French-based Accor Hotels would still be larger by number of hotels globally than a combined Hyatt-Starwood chain. Accor Hotels has more than 3,000 hotels with more than 2,000 hotels participating in LeClubAccorhotels loyalty program.

Carlson Rezidor Hotel Group started reorganizing in 2010 to become a better organized global hotel chain. Their Club Carlson hotel loyalty program launched in 2011 has been one of the biggest transformation stories in hotel loyalty program development over the past decade.

Why a Hyatt and Starwood Hotels merger makes sense for loyalty programs

Even combined, the number of hotels in Hyatt and Starwood add up to only 5% to 6% of the top ten major western hotel chain brand hotels. The number of hotels in the USA in a combined Hyatt-Starwood hotel chain and loyalty program would still be dwarfed by the all the other major chains with their thousands of USA hotel properties.

Other chains are growing hotel numbers rapidly. A new Hampton Inn and Holiday Inn Express opens somewhere in the world about every two or three days with most of them popping up around the USA.

The hotel loyalty programs will see the major impact of changes, in my opinion, far more noticeable than physical changes to Starwood branded hotels. The hotel loyalty program is a major marketing arm for both Starwood Hotels and Hyatt Hotels. The loyalty programs could operate separately for a period of time, but I don’t see that as a viable future for Starwood Preferred Guest. The merger of Hyatt Gold Passport and Starwood Preferred Guest would see a consolidation of loyalty program work across the larger hotel chain. Elimination of loyalty program staff would appear to be one of the easiest ways to reduce cost expenses soon after a merger.

Is Hyatt better for consumers and frequent guests?

I feel optimistic that it will be better for consumers and frequent guests if Hyatt Gold Passport leads a combined loyalty program. I downgraded Starwood Preferred Guest in my hotel loyalty program preference list over the past few years. In a cost-benefit analysis I use for my hotel spend, SPG has hardly ever come out on top when planning hotel stays in many cities over the past few years.

I dropped Hilton when its loyalty program stopped working for me with my travel style. Earning was generous, but award prices kept rising. I dropped Starwood Preferred Guest a few years ago when the loyalty program stopped working for me. SPG is all about being elite and there are few loyalty program benefits and extremely weak earning on hotel spend if you are not SPG elite.

Hyatt Gold Passport, IHG Rewards Club and Marriott Rewards have been pretty generous over the past few years. And now in 2015, the changes to loyalty programs in midscale dominated Choice and Wyndham hotel chains have greatly improved Choice Privileges and Wyndham Rewards loyalty program value for frequent guests. Best Western Rewards has recently announced changes and improvements for its loyalty program too.

Hotel loyalty competition is moving full steam ahead among the 35,000 hotels in the top ten hotel chains. Starwood Preferred Guest has been the tortoise in this loyalty program race for the past several years, but not even going slow and steady, unless you are in the car pool lane of SPG elites. SPG has been a full stop loyalty experience for guests like me these past few years.

I think a Hyatt Hotels and Starwood Hotels merger with Hyatt taking the reins would be a good move for hotel frequent guests and casual travelers using hotel loyalty programs.

This is all still speculation until we hear word that an actual sale agreement of Starwood Hotels has taken place. Then, the crystal balls will be shining countless predictions on miles and points blogs about what a combined Hyatt-Starwood hotel chain will mean for the hotel loyalty programs.

New York Times – Hyatt Is Said to Be in Talks to Acquire Starwood Hotels (Oct 28, 2015).

About Ric Garrido

Ric Garrido of Monterey, California started Loyalty Traveler in 2006 for traveler education on hotel and air travel, primarily using frequent flyer and frequent guest loyalty programs for bargain travel. Loyalty Traveler joined BoardingArea.com in 2008.

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Comments

  1. “SPG is all about being elite and there are few loyalty program benefits and extremely weak earning on hotel spend if you are not SPG elite.”

    That is exactly why SPG points are so valuable…because they are very hard to get . Since there are fewer SPG points in the market, for those who have them (Business owners with AMEX SPG cards?) the program becomes amazingly rewarding with no black outs, cheaper redemptions and 5th nights free in the middle categories, points nights qualifying for elite status and a long etc.
    I think this is bad news for the SPG program. I dont see anyway it is going to get better, especially with the tons of points available on Hyatt with the Ultimate rewards program.

  2. My SPG stock rose considerably in the past few days thanks to three Chinese companies interested in buying Starwood. The Hyatt purchase story is a diversion for now.

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