Loyalty’s Future: SPG + Marriott

An Outlook on the Unification of the Two Most Impactful Loyalty Programs in the Hospitality Industry

“It’s been one year since the deal closed and today over 50 percent of Design Hotels™ properties have joined the SPG partnership.” With this comment, David Flueck kicked off a much-anticipated panel concerning SPG’s future under Marriott. He noted the incredible power that comes with bringing these two loyalty programs and their large databases together. Key performance figures show that SPG has contributed over 158,000 paid room nights and over 39,000 award nights since its launch with Design Hotels™. Total revenue for 2017 is expected to be over 42MM EUR, up significantly from 2016. SPG guests are not only drawn to Design Hotels™, they are coming back: 35% of SPG bookers have had a return stay. The overall takeaway here is that strong momentum is being built around Design Hotels’™ participating properties, filling them with higher qualified SPG members and presenting a much more aspirational platform than OTAs.

Of course there are also challenges when dealing with such a vast scale. “How do you make big seem small?” Flueck asked. “Our goal is to give loyalty program members a better way to experience the world. One way we do that is through Moments. Our members love these unique opportunities.” Indeed, Serdar Kutucu noted that Moments is something that has provided tremendous exposure to the SPG/Marriott communities for a number of Design Hotels™ participating properties, which is just one reason the company has been working so hard to explore all avenues that can benefit its members. “Working closely with our partners at Starwood/Marriott, we have invested two years in launching this partnership,” said Kutucu, “creating synergies without diluting the brand and character of the hotels.”

Flueck did note that the full effects of the new partnership will take time to unfold. Still, he sees ways to increase the overall SPG revenue contribution to the Design Hotels™ partner hotels. “Through SPG, we are continuing to create awareness for Design Hotels™,” he said. “We include Design Hotels™ throughout our marketing; on Mobile Web, e-statements, and special offers. We also have a dedicated landing page for members to subscribe to updates/news about Design Hotels™, and we regularly deploy stand-alone emails.”

“There is a new generation of hospitality on the landscape, where loyalty is built through content and culture,” Kutucu noted. “We believe this approach will grow on a global scale since the demand for traveling and being with likeminded people is growing, just as it is with membership clubs and similar models. For Design Hotels™ the core focus will always be to engage the consumer through culture, education, and the desire to belong to a lifestyle traveler’s community. The qualitative growth of our hotel portfolio is obviously key to this. Further, this selective growth and the company’s strong brand strategy is amplified through its connection to the Starwood/Marriott loyalty program since the program helps with recognition, value, and personalized services for the hotel stay, resulting in a more complete offer for guests. We know, for example, that more than 20% of our global community is part of the SPG program. So the ultimate goal is to continue to target guests through the future loyalty program of Marriott and focus these members on our participating hotels by combining the distinct nature of our brand efforts with specific customer insights.” Rounding out Design Hotels’™ strategy and ambition with real-world numbers from today, Kutucu echoed Flueck, noting that more than “half of the Design Hotels™ portfolio is now available via SPG.com. Over 150 hotels are participating in the SPG distribution and loyalty partnership and we are further growing this number with new hotels joining every week. We are well on target to reach our revenue goals this year as we are expecting to drive approximately $42MM EUR in top line revenue to participating hotels through the end of the year.”

One of the key questions held by Design Hotels’™ properties concerned the overall perception of the brand and its hotels in the SPG community. Brian Povinelli stressed that Design Hotels™ was looked on quite favorably. “We know there is great interest in Design Hotels™ as 74% of stays are coming from Elite Members (30% Gold + 44% Platinum). These are our most loyal and savvy customers and the fact that they are choosing Design Hotels™ shows that their perception of the brand is strong. We have also seen that Elite member spend has grown 180%, so we are getting more stays and, as Flueck noted, “35% are return stayers.” Kutucu added that from his perspective Design Hotels’™ hoteliers find the collaboration to be a very good one. “Most of the participating hotels are very happy about the results,” he said. “Some smaller properties with limited resources had challenges in adapting to the initial program requirements, however we are just 1½ years into the partnership and continue to improve Design Hotels™ positioning, creating better understanding for guests and for participating hotels. One area Marriott is working on is a new model of compensation.” “I know one of the challenges is how SPG compensates for award nights,” Flueck said. “Currently, it pays a portion of ADR for award nights when properties aren’t full and full ADR when properties are above 95% occupancy, but independent hotels often have lower occupancy. Thus, we are going to move to a sliding scale, so that we start to pay a percentage of ADR for properties once they get into the mid-80s% of occupancy. I think this will benefit many of the Design Hotels™ participating properties.”

In conclusion, the panel cited the many initiatives taken since Arena 2016 to improve the program for Design Hotels™ and SPG, including the incorporation of additional options for content presentation into the SPG Property Page display, as well as a refinement of the language clarifying the benefit offerings at Design Hotels™ properties so as to set clear expectations for arriving guests. Additionally, significant investment is being made in CRM so as to better know and act upon member preferences, their passion points, and trip purpose (business vs. leisure, special occasion, etc.).