Zeteg

I've mostly been lurking here, but it's obvious that my frustration with the new CEO & the anti-loyalty attitude is shared by pretty much everyone on this board, with a seemingly good number of people canceling cards, moving loyalty programs, switching corporate preferred hotels, and making Marriott a backup chain. I just can't imagine that if elites were a valuable part of hotel revenue, that Marriott would've made so many deleterious decisions.

For those of you know know the industry better: are elites not a material part of hotel success?

Roughing it for my own ~100 nights per year at an average of $200/night (based on Marriott's ambassador assumption) and 15% OTA commission rate, I'd think I was worth at least $3,000 of differential revenue per year (minus perk expenses), even assuming always-full-capacity and no incremental value. If you add on all the people (private and business) I push towards my favorite hotels, corporate hotel choices, and events -- I'd wager it's significantly more. I'm just having a hard time believing that screwing me out of a few thousand extra points for the few redemptions I do every year would make up for that. You could argue that aspirational properties pushed for this, but in reality they already control redemptions through artificially-limited "base room" availability.

I can't figure out if I'm fundamentally misunderstanding something, or whether they hired some analysts and VPs who can't do math.

Centurion

First things first $200 avg a nite is not that much money after inflation anymore. It is really sad.

platbrownguy

Right but the question is whether elites are worth it compared to the alternative world in which there weren't elites. I guess theoretically the hotel would prefer non-status direct bookings to elite member direct bookings, and I suppose prefers all those to commissioned OTA bookings. I think what OP is getting at is whether the elite benefits impose such a PITA to properties that they'd actually prefer to just have commissioned OTA bookings where the guests don't have any expectations or entitlements.

MSPeconomist

Part of the reason for frequent guest programs (including airline FF programs) is to lower the price elasticity of a group of customers: they will book a hotel in your family even if other chains are offering lower prices for the same quality or higher quality for the same price, etc. If we look at the set of elite guests, my guess is they're more likely to stay at higher quality properties in more expensive locations, etc. and probably spend more on property in certain (profitable) categories such as F&B (but not breakfast as it's generally comped for elites), laundry and dry cleaning, car service, etc. because hotel elites are likely to be high income professionals traveling for business. Room occupancy is low (most are traveling alone for business) and these guests are less likely to cause disturbances or damage the property. They're desirable guests on average compared to the average nonelite guest.

OTOH elite guests do cost the hotel some real money (breakfast, although much lower than the menu prices), free/enhanced wifi, etc. Upgrades involve giving the elite a nicer room that would otherwise be empty, so the cost is minimal (housekeeping time and cleaning supplies for a somewhat larger area and rarely an extra bath). The question is how many more rooms are booked or whether somewhat higher rates for standard are acceptable versus whether the elite would have booked a more expensive room if upgrades weren't a published benefit. Similarly, late checkout guarantees can make elites more likely to book a room at a Marriott hotel, even if it's somewhat more expensive than an equivalent competitor, but what fraction of those elites would have otherwisepaid extra for the elite checkout and what is the cost of this benefit in terms of housekeeping overtime etc.

In the current Bonvoy mess and lack of brand standards, I'm concerned that the bad hotels--those that don't provide published elite benefits and those that otherwise don't meet brand standards or behave in an ethical way--will free-ride on the good hotels that behave properly.

TravelinSperry

I assume the elites cost even more than that to the hotels. Aren't the hotels only reimbursed a subset of the rates charged when redeeming points?

I have an award stay where I made a date mod at the property and the online Marriott system didn't update. So the front desk agent sent me their internal/local confirmation email so I could be sure the dates were correct. It showed revenue night at $153 p/nt. Again, this being an award reservation (where I am paying $0), I asked the agent if these rates would apply to me - and he said to ignore them, it's just "internal accounting" and I wouldn't be charged that rate. I assume this what the hotel is being paid for the room since I used points (which was 20% of the room rate during my stay). If so, the hotel "lost" quite the amount in revenue.

1mileman

typically award stays, the hotel basically gets back around the operating costs of the room but if they were to upgrade you to a suite or better, theoretically they would lose money based on the cost of cleaning a room. Be mindful though if the occupancy reaches a certain % then the hotel gets the average daily rate for the day from Marriott. This is why the points for award stays varies between hotels/categories. The room operating costs at a JW is much higher than say a Fairfield, etc.

craigthemif

Elites matter to hotels.

Because in a world where elite status doesn't exist, you stop having people staying at your hotel purely out of brand loyalty. (a large % of the population already doesn't care whether they stay at a Marriott, a Hilton or a well-reviewed independent)

Once that happens, your $200 per night average room rate becomes $175. And that's before the commissions you start paying to OTAs...

kaizen7

Agree with this.

The elite benefits them self can tip the balance when someone selecting which hotel to book.
Bonvoy elites who can get early / late checkout will be more inclined to book to a Marriott hotels than competitor.
The upgrade promise (when available) also can tip the balance further, although on some regions, upgrade seems to be similar to unicorn.

In term of cost to the hotel, I believe servicing elites did cost a bit more.

However elites are most likely loyal to the brands but might not loyal to the individual hotel.
Say, an elite with 100 nights under his/her bed, might stay 2 nights each at 50 different Marriott's branded hotels

schriste

deleted

Adelphos

As someone with some knowledge of the industry…

High paying customers that can be acquired and serviced by hotels in a cost effective way are the most valuable. These may not may not be loyalty elites. Elites can be valuable if they pay high rates and consistently choose hotels over competitors, but they can also be more expensive to service, both at the hotel level (free breakfasts, late checkout preventing a room from being sold, other benefits) and at the corporate level (redeemed points). If elites become too expensive to service, it becomes a self defeating program. This is part of what got Starwood into trouble - their rewards program was seen as too generous to elites for the return, which lowered demand for their brands among hotel owners.

From a Marriott standpoint, they want engaged loyalty members, and elites to matter. But like any business, they also have to manage their costs. Marriott has decided that their broad scale gives them an advantage in retaining elites, so they don’t necessarily have to invest in some of the high tough stuff Starwood used to do and Hyatt does. My bet is that Marriott is correct in their calculation.

Adelphos

If I understand what you are saying, you say generate an additional $3,000 in revenue for Marriott because the hotel room would have been filled by a guest without a Marriott loyalty account, and that guest booked via Expedia. That’s not correct - A few things to address here

1) Marriott’s revenues are not impacted by OTA fees. Hotel pay OTA fees. In your example, Marriott makes the exact same amount of money - roughly 5% of the $20,000 in revenues, so $1,000 in fees based on a standard brand contract

2) The hotel would generally prefer that an elite books the hotel room through Marriott rather than an OTA, because they don’t have to pay that OTA fee. However, if the elite’s incremental benefits exceed 15% of the cost of the room, they may be worse off.

3) The biggest value of loyalty programs / elites is if they bring incremental / additional demand to a hotel - substituting zero revenue for whatever the room rate is if the hotel is full. To this end, the customers hotel companies and hotels themselves probably like the best are brand loyal customers that aren’t all that demanding (mid tier elites, folks that are engaged in the loyalty program but may not make a high level status, etc).

You can see how hotels think about elites by looking at Hilton’s strategy in recent years. Hilton lets people buy top tier status for $450, and they have the most valuable mid tier status in the Industry, and sell that for $95. A lot of these people may not have stayed in Hilton hotels before - so Hilton is betting they generate incremental revenue by doing this. However, elite benefits aren’t really that strong in a per night basis. Hilton is using the loyalty program to generate more stays, but doing it in a way that can be cost effective for them and owners. Hilton has grown tremendously in recent years based a lot on this strategy

MSPeconomist

Before I look at it, who's the author of this?

schriste

Don't know, recall reading about the topic a few years ago and tried to google up an example. It is only a 30 second read. Probably best to just forget it as not really relevant. I'll delete the post

TravelerMSY

Yes and no. Elites are valuable collectively to the chain but not necessarily to any individual property. And many of those elites stay at really low corporate rates and expect a lot of free stuff. They’d obviously rather have 50 randos at close to full price rather than some 50 nights at a deep IBM or government rate. I suspect they’re trapped offering it for competitive reasons.

The interests of the customer, national brand, and individual franchisees aren’t always aligned here.

SHLTP

Sometimes but more often than not no as many revenue heads have told me... Elites at high end hotels often have huge demands or preferences (like me) to which hotels cater. That is very costly.

In my case, I might be a wash as I direct my companies to stay at certain hotels or chains and might have them organize large events and let them use me as a reference or ad. But if it were just my spending alone then it'd be a problem.

For example, I stayed over 50 nights this year on points at St. Regis and Park Hyatts. I was upgraded to specialty suites 90% of the time, suites the rest. On points. That alone cost properties a lot in opportunity cost.

Then think free breakfast for my while family which runs $30 to $50 USD a person. Total typically 100-150 USD a day.

They then know I like berries and Greek yogurt. Most properties arranged both for me everyday, sometimes several times a day. They give free dishes many meals.

If a park Hyatt or STR is $200 to $500 USD a night, they essentially lose money on me.

I try to eat at least 1 lunch or dinner everyday st the hotel or spend a comparable amount on something else so they know I'm a spender.

I also tip a reasonable amount. I gave $200 USD at my last stay to spread to while team.

This is why Rosewood, 4 Seasons, basically don't have loyalty program and why Starwood and Hyatt face similar challenges ecomically. I worry Hyatt will end up like SPG...

Marriott is cost cutting to elites for a reason. They can't cut benefits so easily like not giving suites or lounge access or else get everyone mad so instead make everyone an elite and roll out crappier food in CL and limot number of standard suites and devalue points.

Loyalty programs work for HH, HP, Courtyard, RI and those types where elite benefits are minimal. Road warriors often have corporate pay at cheaper ones and use points at expensive properties on points on a vacation. For that type of elite the calculus works wonders.

Marriott has destroyed its elite program, people complain but most keep staying (not me on paid stays) so investors should look st Marriott