When Marriott completes its takeover of Starwood, sometime in 2016, it’s a safe bet to assume that the hotel chains’ loyalty programmes will be merged into one. Since Marriott is doing the buying and is at least four times larger than Starwood, we can assume that Marriott Rewards (MR) will be the surviving entity. In these situations, anything can happen. An entirely new programme might be conceived and made public, or Starwood hotels will simply be allocated to MR award categories and SPG will quietly fade away.
Marriott won’t want to alienate Starwood Preferred Guest members TOO badly, although I don’t suspect MR will be very generous with outstanding SPG point balances. However, they will have to offer a conversion ratio. This could be positive – such as when Iberia Plus converted its points into Avios on a 1:15 basis (when 10 or 12 was probably more equitable) – or it could be highly contentious, such as suggesting that 1 Starpoint is worth the same as 1 MR point.
At the moment, we know nothing definite. SPG issues 2 points per USD spent at its hotels. This increases to 3 points for Gold and Platinum elite status holders (and 4 for those Platinum members who stay 75+ nights per year). MR issues 10 points per USD spent at its hotels. Members with Gold status earn a 25% bonus and Platinum status earns a 50% bonus.
So, the most attractive conversion ratio possible is 1:5 (i.e. 2:10 for basic members or 3:15 for Platinum members based on rewards for hotel spend) but it is quite likely that Marriott will take advantage of the chaos to offer a much lower conversion rate for existing balances, but run attractive promotions to try and retain SPG loyalists going forward. Therefore, 1:2, 1:3 and 1:4 are all possible outcomes, not to mention decimal point options.
I wanted to analyse the situation, since I have a substantial stash of SPG points that I need to decide whether to spend or not pre-merger. I would most likely spend them on a Nights & Flights package, but is there an argument for waiting to see what kind of conversion ratio is proposed before deciding? The main risk from waiting is the nightmare scenario of a SPG devaluation well ahead of the merger terms being announced, so that SPG takes the heat instead of Marriott. But at the same time, I might end up with more than enough Marriott points for a highly attractive Hotel + Air package.
The problem is comparing apples and oranges. There’s no way to know for sure which MR award categories are equivalent to SPG categories. The Marriott version also offers 7 free nights as opposed to 5 free nights with SPG. I could adjust the points required to add two more SPG nights, but full price award nights are rarely the best use of SPG points. Let’s look at a couple of scenarios…
SPG member with 70,000 points
This person can afford one Category 4 Nights & Flights package, getting five free nights and 50,000 miles in the bargain.
As a completely arbitrary guess, let’s assume that five SPG Cat 4 nights are worth seven Category 6 nights. A Category 6 Marriott is definitely not as nice as a Category 4 Westin, but seven nights are also worth more than five…
A MR Category 6 Hotel + Air package with 50,000 miles attached costs 230,000 MR points.
Therefore, if the conversion ratio is better than 1:3.3 (70:230), a SPG member might be advised to wait for conversion before booking a hotel plus miles package.
SPG member with 120,000 points
This person could book two Category 3 Nights & Flights packages, getting ten free nights and 100,000 miles in the bargain.
As a completely arbitrary guess, let’s assume that ten SPG Cat 3 nights are worth seven Category 7 nights. A Category 7 Renaissance is probably nicer than a Category 3 Sheraton, but ten nights is also worth more than seven…
A MR Category 7 Hotel + Air package with 100,000 miles attached costs 310,000 MR points.
Therefore, if the ratio is better than 1:2.6 (120:310) a SPG member might be advised to wait for conversion.
SPG member with 140,000 points
This person could book two Category 4 Nights & Flights packages, getting ten free nights and 100,000 miles in the bargain.
As a completely arbitrary guess, let’s assume that ten SPG Cat 4 nights are worth seven Category 8 nights. A Category 8 JW Marriott is probably nicer than a Category 4 Westin, but ten nights is also worth more than seven…
A MR Category 8 Hotel + Air package with 100,000 miles attached costs 340,000 MR points.
Therefore, if the ratio is better than 1:2.4 (140:340) a SPG member might be advised to wait for conversion.
When analysed from the above perspective, a substantial (100K+) balance of SPG points is required to access the more attractive, high miles, Marriott Rewards Hotel + Air packages. If the conversion ratio turns out to be 1:3 or greater, then waiting for conversion will provide substantial added value.
Perhaps between now and the merger date, I’ll come up with a better analysis. But for now, those with moderate balances of SPG points might be advised to simply spend them now, while those with higher balances of SPG points can perhaps be greedy and wait awhile to see what happens…