MSPeconomist

Speculation is better than bad news.

stimpy

It could be said that all this speculation itself is bad news. But I think we won't be able to accurately judge bad news until well into the future.

PHLGovFlyer

I agree that the legacy SPG properties will likely be slotted into the legacy MR award chart, but I don't think this will result in a large restructuring of the overall relative points values of the combined properties. If you look across the SPG and MR programs you can generally see how the points costs of the various properties align reasonably well with relative room rates. This consistency is very likely to continue in the combined program. IOW, your favorite Sheraton is not going to suddenly cost 3 times as much as comparable SPG or MR properties with the merger.

I've charted out potential categorizations for conversion ratios of 2:1, 2.5:1, and 3:1 showing the legacy SPG categories/points with potential future MR categories/points below:

For 2:1
For 2.5:1
For 3:1
*The current MR chart only goes to tier 5 at 70,000 points per night, so with higher conversion ratios there would need to be levels added to the MR chart to accommodate the higher SPG Category properties.

You can see that there is a bit of category and points rounding that occurs with these examples to slot the legacy SPG properties into the MR points scale at 5000 point increments. IMO that doesn't fundamentally alter the relative balance of redemption value between the two programs (it's in the margins). I also think that for simplicity the combined company should eliminate the tier structure for RC properties and simply go to straight categories in multiples of 5000 points.

Looking at the examples above, with a 2:1 or 2.5:1 conversion ratio the legacy category 1-2 SPG properties would become category 1 or 2 MR properties which are very good values. Where problems begin to occur is at 3:1 or higher conversion ratios where the legacy SPG category 1-2 properties fall into relatively higher MR categories, and the legacy SPG category 6-7 properties become extremely expensive (especially compared to future points earnings potential).

In terms of low category properties that are among the nicer/full service MR brands (JW, Ren, Autograph, Marriott) there are 69 MR category 2 hotels:

https://www.marriott.com/hotel-searc...s.renaissance/

As with SPG, the nicer low category MR properties tend to be in Egypt, China, India, Malaysia, etc.

I strongly doubt they'll give elites a larger conversion ratio.

A 4:1 conversion ratio will likely cause the points per night cost of SPG properties to increase by roughly that same 4:1 ratio. That would make them extremely expensive compared to future points earnings potential in the combined program (IOW, be careful what you wish for).

Also, comparing the current earnings rates for the two programs doesn't give you a good basis for what the conversion ratio should be:
1. There's a wide variation in the amount of points earned per $ spent with either program depending on status bonus, promotions, welcome gifts, length of stay, etc.
2. The earnings rate per $ spent has nothing to do with the actual value of your points. The value of your points is primarily in terms of hotel night redemption value, not in terms of how easy or difficult it is to earn them. If SPG suddenly became generous and doubled everyone's points earnings/$ would the value of your banked SPG points be cut in half? No.

bhrubin

^^^

Zorak

if a Chinese regulator steps outside and sees their shadow...

uxb

No worries. I figured I'd inject some facts back into this thread.

Essentially, it's maddening. People on the Marriott side are being told it will go forward. People on the SPG side are essentially saying the same, but it appears there's a sliver of caution.

6 more months of review!

MSPeconomist

Sounds good to me.

r415

Both your examples assume that the redemption rate for SPG properties is going to be converted at the same rate as the SPG points. This is very unlikely. Whether right away or the following year, Marriott will almost certainly assign higher values to the converted properties of any real worth (perhaps sparing some crappy Cat 2 properties that nobody really would use points at).

Financially, if you did assume they converted at the same rate, it probably makes a lot of sense for Marriott to pick a ratio above 3:1, as it would allow them to lower their total balance sheet liability, since there are a lot more outstanding legacy MR points. But I don't think redemptions will convert at the same rate as legacy SPG points, so this point is kind of moot.

Given that you earn five times as many legacy MR points per dollar spent (ignoring credit card and elite bonuses), any conversion ratio below 5:1 is basically a slap in the face, with Marriott telling SPG customers that their dollars spend is not valued as much as a Marriott customers' dollars spend. IMHO, this is not a great way to retain your premium high-spending SPG customers.

arkyrab

The thread could be renamed "...latest news and speculation..."😊

MD/DC Flyer

Seems like we are having the same discussion in circles.

You cannot look only on the earn side of things, you have to consider the burn side of things - because this where the value is determined.

In my imaginary hotel chain you can earn 1000 points per dollar spent, but redemption in category 1 hotel will cost you 10 billion points. Would you still say that my hotel chain value your dollar better than SPG (or any other current chain for that matter), just because I assign a bigger numerical value per dollar for my "currency"?

PHLGovFlyer

I think it's very likely they will convert at the same ratio. If they convert legacy SPG accounts at a lower ratio than they convert SPG property points costs they'd outrage the SPG customer base. If they convert accounts at a higher ratio they'd be needlessly adding liability to their books. I don't see any rationale for either increasing or decreasing the spending power of legacy SPG accounts at legacy SPG properties. Of course they could devalue points at some time in the future, but hotel loyalty programs have been doing this since they began.

Actually, using a higher conversion ratio increases their liability. Converting legacy SPG points to MR points at a high ratio creates a high amount of MR points and thus a high liability.

You're assuming that the rate at which you earn points has something to do with the value of those points when it comes to redeeming them. It doesn't. The real value of a dollar spent at MR versus SPG is based on what you can do with the points earned. Legacy MR properties generally cost roughly 2 to 3 times as many MR points as comparable legacy SPG properties cost in SPG points. So while you earn 5 times as many points per $ at MR properties (ignoring bonuses, promos, welcome gift, etc.), the value of those points is not 5 times higher than what you earn per $ spent at legacy SPG properties.

bosman

The key variable is that, given different redemption rates, 1 MR point does not equal 1 SPG point, thus you can't use the earnings comparison for your conversion rate.

To illustrate, let's call MR "nickels" and SPG points "dimes". With MR you earn 10 nickels per $ spent and with SPG you earn 2 dimes per $ spent (excluding bonuses etc etc). So those who insist that anything less than 5:1 is "a slap in the face", you expect your 2 dimes to convert into 10 dimes? That would be a slap in the face of MR loyalists.

So you can see how the different purchasing power of the 2 currencies has to be part of the conversion calculation.

BonnieO

The problem with your nickels and dimes analysis is that MR doesn't earn 10 nickels and SPG earn 2 dimes. On the conversion angle MR earns 10 dimes and SPG earns 2 dimes. How would that be a slap in the face of MR loyalist if SPG were to receive a fair conversion.

I've stayed at both programs. Generally, I'm a SPG plat 100 loyalist, my husband a HH Diamond. I travel to San Diego on a regular basis and do about 80 nights in one hotel on and off throughout the year. The hotel I stay at is a Sheraton Cat 3 (7K redemption) and it is two blocks from my SD office. There is a Marriott within a 1/2 mile and I've stayed at there as well (35K redemption). Neither of the hotels is significantly better or worse than the other one. The SPG is just more convenient.

When the program closes the deal I don't see MR not raising my hotel to 35K redemption just like the Marriott.

I'm seriously going to miss my SPG

By the time the deal closes I will probably qualify for MR Gold For Life. I already have significantly over 400 nights in SPG and 50 nights at MR. There is no significant difference between MR gold and plat.

I may have to give Hyatt a try even if it means I have to rent a car. I won't give my hard earned dollars to a program that in my opinion does not care about the SPG elites. If they do a fair conversion I will stay at the hotel I am so comfortable with. If not, hopefully they will change over to a Hyatt. There isn't one in the area.

Bonnie

SkiAdcock

Arne's in China signing a franchise deal that will add 1,400 more rooms owned by China partners. Saw this in a press release (excerpt):

“China is a highly important market. Our signing of these agreements reflects our goal to meet the needs of both international and domestic visitors by introducing hotels carrying Marriott’s brands in close partnership with Chinese hotel management and ownership companies,” said Mr. Arne Sorenson, President & Chief Executive Officer of Marriott International, on his visit to Shanghai for the signing with Chinese partners.

“China is our largest market outside the U.S., and we are very confident in its continued growth, especially in view of the rising disposable incomes of the middle class and development of the consumer-led economy.”

“These agreements represent an important component of Marriott International’s model for growth around the world – to work with local partners who have the right local expertise, knowledge and skills, and who share our own values and culture. This is particularly true in China, where the majority of our hotels are owned by Chinese partners.” added Mr. Sorenson."

Cheers.

365RoadWarrior

I was one of the original lifetime Plats. I'm pondering whether to let my 2016 nights drop below 50 for the first time since 1999. I'm not feeling like it matters at this point. (I will have a dozen or so Marriott nights.) Anyone have any reason to push me one way or another from my tipping point? I know we're all mostly speculating these days.