Originally Posted by
schley
Sorry if you guys don't understand, but both sets of people still have to pay for hotel stays, thus represent cash flow NOW! The question was which would you rather have and it is obvious one gave you cash previously that you have a delta of cost v. revenue for your profit, invested gives you a return to use (either capex, operations, or retained earnings). The other gave you jack squat in the past, but will now give you the same cash flow as the LTP.
Frankly I don't think YOU understand...a sound maxim in business is "don't pay for past performance"...you want to pay for future performance. There's a reason why in travel specifically most companies now operate under a "what have you done for me lately" mantra...it's not about what you did in the past.
If you were right, Starwood would be targeting LTPs with special incentives...which they aren't. If you were right, Starwood wouldn't have created multiple new Plat tiers (SPG 50/75/100) with in-kind benefits, to reward in the future (as in the next status year).
Another good example - the UA forum is littered with folks who make MM and then say "thank god I can finally get off the annual status qualifying merry-go-round", and also "now I can fly better Star carriers". They can enjoy their LT status, with some good benefits, but all things being equal, they become less valuable customers than annual UA Golds (who have to keep flying & spending on the airline).
This is Behavioral Economics 101 - once you achieve a LT milestone, you don't need to practice the same behaviors that got you there, as the incentive is now dulled. IMO it is still smart of course to offer some LT benefits - you still want those people consuming your brand/service. BUT as
3544quebec notes, Starwood is more interested in having that ultimate goal out there for the next generation of travelers, to drive future loyalty.