LAX UA 1K, I think you are half right if this article is correct in how Marriott treats its reward program.

www.forbes.com/free_forbes/2004/0510/066_4.html

A quote from the article, "If a rewards-program member's check comes to $244, then $11 goes to Marriott to feed into the rewards pool, now totaling $784 million. Marriott books it as a liability, one that costs just 2.5% to service."

Assuming that the $244 bill does not include hotel tax and not including elite bonuses, Marriott is charging about $0.0045 for each point to the hotel ($11/2440). At that rate, 35000 points would cost the hotel $157.50. This is much less than the $350 a member would pay for the same amount of points but still greater than the normal $100 cash compensation.

Also, it would appear from this quote that Marriott only pays the hotel $.0025 for each point redeemed for a reward stay. (.025*$244 = $6.10; $6.10/2440 = $0.0025) I interpret the quote to mean that Marriott does not allow hotels to use points received from award stays to cover points earned from paid stays because that would reduce the opportunity for Marriott to earn money on the spread between its purchase and sale price of Marriott points. The article notes the ability of Marriott to demand higher royalty rates than Hilton and Starwood, and Marriott's willingness to drive a hard bargain with hotel owners.