Loyal customers part of the price for Starwood Hotels

Amy Scott Mar 28, 2016
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An employee of a Marriott hotel in midtown Manhattan moves guests bags on March 21, 2016 in New York City.; Spencer Platt/Getty Images

Loyal customers part of the price for Starwood Hotels

Amy Scott Mar 28, 2016
An employee of a Marriott hotel in midtown Manhattan moves guests bags on March 21, 2016 in New York City.; Spencer Platt/Getty Images
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A bidding war for Starwood Hotels and Resorts continued to heat up Monday, with China’s Anbang Insurance Group raising its offer for the chain to almost $14 billion. That beat a previous offer from rival hotel chain Marriott International.

It’s not just Starwood’s nearly 1,300 hotels and resorts the two suitors want, which include Sheraton, Westin and W hotels, among other brands. Starwood’s lucrative customer-loyalty program boast 21 million members, who rack up points for every dollar they spend and earn extra perks along the way.

“They are in a sense the Holy Grail for these companies,” said travel industry analyst Henry Harteveldt with Atmosphere Research Group.

Members of loyalty programs are more likely to book with the chain, even if they have to pay more, he said. They also spend more once they check in, “whether it’s parking, meals, entertainment, at the bar.”

That kind of loyalty is worth a lot to a company. A few years ago Starwood’s then-CEO Frits van Paasschen said the top two percent of the chain’s guests generated 30 percent of its profit.

In return for their business, frequent customers get early check-in and late check-out, free WiFi, suite upgrades, and – at the most elite level – a personal “ambassador” to accommodate their every whim.

“The reason why, is Starwood is so much smaller than Marriott or Hilton,” said Joe Brancatelli, editor of Joe Sent Me, a website for business travelers. “Starwood, like Hyatt, which is also smaller, must give a richer program.”

With almost three times as many hotels around the world, Marriott offers more choice, but its points don’t go as far. Some Starwood customers worry if Marriott wins the bidding war, it will scale back their rewards.

In a video message about the proposed merger, Marriott CEO Arne Sorenson tried to reassure those customers.

“Our members should take comfort in the fact that we know, without a doubt, these loyalty programs are the most powerful tool we have for developing strong relationships with our guests,” he said. “To state the obvious, devaluing points or member benefits is not the way to preserve and strengthen these programs.”

Still, if Marriott wins Starwood, it says it will eventually combine the loyalty programs. If Anbang makes a deal, analysts say it’s more likely to keep Starwood’s program intact.

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