Originally Posted by jpdx
So while the 1:3 conversion ratio was a pleasant surprise when it was announced, I wonder if Marriott ended up shooting itself in the foot. They created a redemption category differential (with arbitrage opportunity) that they now have to close -- this will hurt their own loyal members. And SPG loyalists are bound to be upset by the reduction in points earning. Marriott may well have felt compelled to go with the 1:3 ratio in order to overcome fears of Starwood loyalists, but it seems like going forward, the 1:3 ratio will create much greater problems for them than 1:2 or 1:2.5 would have done.
I've posted previously that IMO 1:3 is slightly high and would result in the points redemption costs of legacy SPG properties being too high. At 1:3 there are many examples of SPG properties being priced well above comparable MR properties in the same city. IMO a better ratio would have been 1:2.5, however, as others point out, it's unlikely that MR/SPG would have gone with a non-integer ratio. (although why they couldn't just say 2:5 is beyond me...)
That being said, my guess is that there was an intentional outcome in mind with selecting 3:1. Namely that it tends to allow the average cost of redemptions for the combined company to trend higher. In particular, it gives the legacy MR properties more headroom to raise points costs within their particular market location.
Originally Posted by UA-NYC
The conversion rate was dead on...if you look at many of the reputable bloggers' points values ahead of the announcement, they had MR at .7-.8 and SPG at 2.2-2.4, so a 1:3 rate is pretty dead on.
When the new 15 tier award chart (my prediction
) is announced, you will see some massive inflation w/many of the big city Category 9 JWMs moving up, as that's where there was some great arbitrage (i.e., spending 15K SPG points for the nice London Marriott properties vs. 20K-25K for the SPG ones).
I'll disagree on what the bloggers say about conversion rate. I don't redeem MR points for less than 1 cent per point, and it's not difficult to find such redemptions. I also think SPG points are worth around 2.5 cents. There are, of course, examples where folks got more bang for their points (Both with MR and SPG - I have many of my own), but I'm not trying to open up the whole debate again. YMMV.
I agree with your second point that when the programs fully merge there's going to be a lot of upward motion of points costs of the legacy MR properties.