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Was the 1:3 SPG:Marriott conversion rate too generous?

Was the 1:3 SPG:Marriott conversion rate too generous?

 
Old Apr 3, 2018, 10:40 pm
  #1  
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Was the 1:3 SPG:Marriott conversion rate too generous?

Many of us were pleasantly surprised when the1:3 conversion rate was announced. The feared devaluation of our Starpoints had been averted, and in fact, there were lots of arbitrage opportunities, allowing stays at high category Marriott hotels for much less than comparable Starwoods. But I'm beginning to think that the 1:3 conversion was too generous, and we're seeing the effects:

- The upcoming promo of 250 points/nt (after 3rd night, participating properties) is widely seen as pathetic. For Marriott folks, it's 750 points, not amazing, but doesn't look quite as terrible.
- During the recent annual category adjustment, SPG had a normal some-properties-going-up-some-down year, while Marriott had a bloodbath with about 4 properties going up for every property going down. There's still an imbalance between SPG and Marriott hotels, and I can't imagine Starriott will close the arbitrage opportunities by lowering the categories of SPG properties. So we'll probably continue to see brutal increases on Marriott redemption categories.
- We're used to Plat amenities of 500/250 Starpoints, MAGC of 500/250, and BRG reward of 2000. Marriott sorta matched the latter (5000 Marriott points) but in all other areas, we're in for a world of hurt, with potential earnings reductions of 66%.

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.
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Old Apr 4, 2018, 4:08 am
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They mostly fixed that with a devaluation of most of the cat 2 hotels. Also many hotels were supposed to go down to CAT 2 and of course that never happened sigh ... many 100 dollar hotels cost 10k points now which makes no sense.

P.S you are looking at the list so you think the cat changes were normal, but look closely many properties never went down a cat and especially cat 3 and 4 hotels.
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Old Apr 4, 2018, 4:29 am
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The conversion was always going to be a round number, so the choice was between 1:2 and 1:3. I expected 1:3 mainly as a way to retain SPG customers.

If the category changes have any relation to the merger, maybe it says that more SPG customers are staying at Marriott properties than MR customers are staying at Starwood properties.
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Old Apr 4, 2018, 6:27 am
  #4  
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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)

Originally Posted by EricH
If the category changes have any relation to the merger, maybe it says that more SPG customers are staying at Marriott properties than MR customers are staying at Starwood properties.
There's a whole thread for this (and no need to re-hash), but it was shown in a few different ways that it was actually going the opposite direction.
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Old Apr 4, 2018, 6:40 am
  #5  
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1:3 is dead on.

The next stage is making those 45K per night JWM hotels cost 60 or more, all hidden within a merger. For further obfuscation they might choose for the Starpoint chart to survive.
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Old Apr 4, 2018, 7:50 am
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Well, I have been extremely loyal to SPG - too loyal at times that definitely cost me money. I would stay at an SPG property no matter how much more it was. As this merger continues to move forward and I keep my options open it is amazing some of the nice hotels out there pretty much in every destination visited that are equal if not better to a SPG property but much less expensive.

For me, I am still loyal but I believe it is obvious based on my travel schedule (which is primarily leisure now a days) I will be parting from the points addiction in the very near future. The cost / reward ratio just does not/will not add up. I understand from a business perspective/expense it won't make a difference to a lot of people. I simply cannot see Marriott retaining a lot of the past loyal SPG customers from the years. It is something I was hoping I would not do but it has become obvious there is no way this is going to turn out for the "good" for some of us. It is actually kind of sad but it will be adventure of sourcing out new and different properties - something I have not done in many years.

btw...I have to add as to how much it irks me when I visit a property now and see a "Marriott" name/emblem attached to something with the hotel. Weird.........but just does! Feels like they took something away that was close to me.
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Last edited by Bravada04; Apr 4, 2018 at 7:55 am Reason: addition
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Old Apr 4, 2018, 8:22 am
  #7  
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1:3 was perfectly fine. Look at TPG Valuations, various "what are * points worth" on these forums over the last several years, etc - all are right in that ballpark.

SPG has under-earned relative to redemption, and made it up in MAGC, PLT amenity, etc., for many years. Look at any "how many nights to earn a free night' analyses, then see how that changes when these other points are factored in. They just approached it differently. MR had better base earning, SPG made it up with bonuses, elite membership specials, etc.

I fail to see how a 250/nt SPG promo is terrible and 750/nt MR is OK when the 1:3 ratio is a fact.
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Old Apr 4, 2018, 9:22 am
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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.

Last edited by PHLGovFlyer; Apr 4, 2018 at 4:08 pm Reason: Fixed quote structuring.
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Old Apr 4, 2018, 9:46 am
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Sorry about the quote formatting above - my browser is having a mid-life crisis.

Last edited by PHLGovFlyer; Apr 4, 2018 at 9:57 am
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Old Apr 4, 2018, 10:18 am
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Originally Posted by PHLGovFlyer
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Old Apr 4, 2018, 12:46 pm
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There was a thread 2 years ago where somebody discussed with me what would happen in the end. I could not find the right word choice to explain myself, but tried to say that I expected that all the *wood hotels would be re-assigned to one of the existing 9 Marriott (non-RItz) categories! So the insanely high points-prices of *wood Cat 7 & 6 would end as they would cost "only" 45K MR = 15K *wood points!
It may look wishful now ! Maybe those high-end *woods will end up in the Ritz Tiers or equally expensive new MR Categories.
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Old Apr 4, 2018, 4:38 pm
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Marriott generous? lol
Just wait till they merge the program and a SPG category 1 or 2 property are 30k and up a night for a redemption night
And in the meantime they will have a destination fee at every hotel possible that may be somehow considered a desirable destination
If they could they would call it a Resort Fee even at a Courtyard on the interstate
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Old Apr 4, 2018, 6:17 pm
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Originally Posted by 777 global mile hound
Marriott generous? lol
Just wait till they merge the program and a SPG category 1 or 2 property are 30k and up a night for a redemption night
And in the meantime they will have a destination fee at every hotel possible that may be somehow considered a desirable destination
If they could they would call it a Resort Fee even at a Courtyard on the interstate
Yeah. Category 9 NY Marriott East Side. Complete dump. Mandatory $25 "amenity fee" with only apparent use being $25 F&B credit. Cheapest food at the single restaurant? $20 turkey sandwich with auto gratuity pre-tax.
"Can I use it for in-room dining?" .... "we actually don't have room service".

45kpts/nt. Garbage.
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Old Apr 4, 2018, 7:56 pm
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Originally Posted by aCavalierInCoach
Yeah. Category 9 NY Marriott East Side. Complete dump. Mandatory $25 "amenity fee" with only apparent use being $25 F&B credit. Cheapest food at the single restaurant? $20 turkey sandwich with auto gratuity pre-tax.
"Can I use it for in-room dining?" .... "we actually don't have room service".

45kpts/nt. Garbage.
But that same 45K points will get you the JWM or Marriott Park Lane in London...both better bangs for the buck than the SPG options. YMMV.
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Old Apr 5, 2018, 5:31 am
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Spend your points in 2018 before the merger is complete and the top tier hotels go up!
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