On Monday we learned that Marriott will be buying Starwood in 2016. Under the assumption that Marriott’s rewards program will be the surviving program after the merger, I made a plea to Marriott: Hey Marriott: Here’s how to keep SPG loyalists loyal. I suggested that Marriott should convert SPG points to Marriott points at a favorable rate (1 to 4), match elite status at a favorable level (i.e. give SPG elites better status after the merger), and incorporate the best aspects of Starwood’s loyalty program (suite upgrades, no property exceptions for elite benefits, real “no blackout date” policy), and drastically improve the Marriott Rewards credit card. Of course, as I said in the post, I don’t believe that Marriott will do these things, but I do think that they should.
What should we do with our SPG points?
A number of readers have asked me if they should proactively convert their SPG points to airline miles before the merger. SPG is the only hotel loyalty program that offers extremely favorable exchange rates to airline miles. Generally, the exchange is 1 to 1, but if you exchange 20,000 points at a time, you get a 25% bonus. In other words, 20,000 SPG points becomes 25,000 miles. As a result, many people see mileage conversions as the best use of SPG points.
What will Marriott do?
The fear people have is that, after the merger, SPG points will be converted to Marriott points and will therefore lose value. To be clear: we don’t know what Marriott will do. I do believe that they’ll fold the SPG program into Marriott Rewards, but they could choose other options: they could keep the programs separate (unlikely, in my opinion), or they could adopt the SPG program and fold in Marriott Rewards (extremely unlikely, in my opinion).
Assuming Marriott does fold SPG into it’s own Marriott Rewards program, there’s still a huge question of how they will do it. It is clear to everyone that SPG points are worth considerably more than Marriott points. Just the fact that SPG awards only 2 points per dollar for stays, while Marriott awards 10 points per dollar, shows that SPG points are valued 5 times as highly as Marriott points. Or, you could look at mid-tier properties that cost around 10,000 points for a free night with SPG while similar properties cost 30,000 to 40,000 points with Marriott. In this example, Starwood points are worth 3 to 4 times as much as Marriott points.
At the low end, SPG free nights start at 3,000 points per night (2,000 on weekends), whereas Marriott free nights start at 7,500 points per night (6,000 for PointSavers). This suggests that SPG points are worth 2.5 to 3 times as much as Marriott.
If we only look at the high end of the award charts, the SPG to Marriott ratio doesn’t look as great. SPG awards top out at 35,000 points per night. Marriott awards top out at 45,000 points per night. That said, this view hides the fact that Ritz Carlton properties can be booked with Marriott Rewards points, but with a different award chart. Since SPG has very high end hotels in its collection, I think that comparing to Ritz makes more sense than comparing to top tier Marriott hotels. Ritz Carlton awards top out at 70,000 points. So, at the top end, all else being equal, SPG points are worth 2 times as much as Marriott.
One can use the above analyses to estimate the comparative value of SPG points to Marriott Rewards points at anywhere from 2 to 1 to 5 to 1. That doesn’t tell us what conversion rate Marriott will apply, but it gives us a general ballpark. Here are some of Marriott’s options and my quick analysis of each. In parentheses you’ll find my guess as to the probability of each option:
- Convert 1 to 1 (10%): If Marriott does this, they’ll completely piss off every SPG member that exists. Are they that evil?
- Convert 2 to 3 (50%): This would be almost as unacceptable as 1 to 1, but I’m betting that Marriott will be this evil.
- Convert 1 to 2 (30%): This is the smallest conversion ratio that can be justified with numbers. I would still be pissed off.
- Convert 1 to 3 (8%): Now we’re in a range that some SPG loyalists will be able to live with.
- Convert 1 to 4 (1.9%): This is what Marriott should do, but they won’t.
- Convert 1 to 5 (0.1%): This would be great, but there’s no way Marriott will do this.
Of course there are many other possible conversion ratios. Marriott might even opt out of straight conversions and offer some number of free nights for sets of points, or something like that. However, I do think that a straight up conversion is the most likely path.
Break even point for mileage conversions
Like SPG, Marriott allows members to convert points to miles, but at a less favorable rate. Straight up conversion rates to mileage programs vary by the number of points you convert. The best ratio is at and near the top end: 70,000 Marriott points convert to 25,000 miles for a number of airlines (including Alaska, AA, Southwest, etc.). Since SPG requires only 20,000 points to get 25,000 miles, we would need to get 3.5 Marriott points per SPG point in order to break even. Conversions to United from Marriott are slightly more favorable, whereas conversions to many foreign carrier programs are less favorable.
Marriott’s Travel Packages add a wrinkle to this analysis. Marriott’s travel packages let you convert Marriott points to airline miles at a ratio of 270,000 points to 120,000 miles (or to 132,000 United miles). That’s a ratio of 2.25 to 1 (or ~2 to 1 United). Plus, you get a 7 night stay in a category 5 hotel. To get 120,000 miles (125,000 miles, actually) from SPG, you would need to transfer 100,000 points. So, in this case, 270,000 Marriott points are approximately equivalent to 100,000 SPG points. With SPG, you get 5,000 more miles, but with Marriott you get a 7 night stay. If we ignore the differences, we can say that we would need 2.7 Marriott points per SPG point in order to break even. Depending upon how much you value the 7 night stay, though, the ratio could be significantly lower. Keep in mind, too, that you can always supplement the Travel Package with additional points to move up to a higher category hotel (since there are very few desirable category 5 Marriott hotels).
In summary, if you have less than 100,000 SPG points that you want to transfer to airline miles, Marriott would have to convert SPG points 1 to 3.5 (or more) to Marriott points to keep you “whole”. If you have 100,000 or more SPG points that you want to transfer to miles, a 1 to 3 ratio would be more than enough to keep you whole.
Note that SPG offers something very similar to Marriott Travel Packages: Nights & Flights. I hope to compare the two in a future post.
Plenty of time to decide
The press release for the merger stated: “Assuming receipt of the necessary approvals, the parties expect the transaction to close in mid-2016.” So, if all goes as expected, the sale will go through sometime in 2016. After that, there will almost certainly be a period of time before the loyalty programs merge. My bet is on early 2017.
We can hope that Marriott will release details of the combined loyalty program before they go live. If so, we should have time then to decide whether to dump our SPG points or hold on to them if/when they convert to Marriott Rewards.
Summarized recommendations
If you have near term use for your SPG points, then by all means use them. If you don’t have an immediate need for the points (or for converted miles), then hold onto the points until you do need them or until we learn more.
If we learn that Marriott plans to convert SPG points to Marriott points, and if we learn the conversion ratio in advance, then:
- If the ratio is less than 1 to 3: Use or convert your SPG points before the conversion.
- If the ratio is 1 to 3: Carefully consider Marriott Vacation packages as an alternative to converting SPG points to miles. If that works for you, then keep your points. If not, convert them.
- If the ratio is better than 1 to 3: Keep the points.
What if we don’t know the conversion ratio in advance? My bet is that Marriott will convert points at a horrible 2 to 3 ratio. In fact, if they don’t announce the conversion ratio in advance, I think that a 2 to 3, or even a 1 to 1, conversion ratio will be even more likely than I predicted above. So, if they don’t announce the conversion ratio, it means bad things are coming… dump and run.
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[…] valuable than Marriott Rewards points, but the exact ratio is debatable. One could argue that the transfer ratio of SPG to Marriott should be 1 to 1, or 1 to 5, or anything in between. I’ll go out on a limb and say that I think that a 1 to 2 ratio is likely. If Marriott allows […]
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Big institutions would rather Starwood sell to China. They get 4 dollars more per share for clients. SPG point holders will most likely lose everything. Hotels couldn’t care any less about loyalty programs because it is a small percentage of revenue. People need to wise up and book their stay where they can save 4 dollars per night and forget about loyalty programs. I am an SPG member with 250K points. My lesson will be learned about joining ANY memberships after this merger.
Very disappointed that its Marriott buying them and not Hyatt. I am a HUGE Hyatt fan. I have yet to stay in a Marriott that didn’t piss me off. With that being said, my job encourages us to stay with Marriott because that’s our only option in that area. My hope is once they go thru with this, they will do an overhaul and improve their properties to be more in line with Hyatt and Hilton. Since this post was from 2015… has there been any updates since?
No meaningful updates. I think we’ll be well into 2017 before we learn anything useful about the merger.
[…] Convert SPG points to miles? How to play the Marriott merger […]
So what’s the next best spend hotel card for everyday spend? I’m considering either the Chase Hyatt or IHG. I’m leaning towards the Hyatt for some reason. I may just start putting regular spend on my CSP than my SPG now since those points can transfer to Hyatt. What does everyone else have planned?
The Chase UR cards: Sapphire Preferred (for its 2X categories), and Freedom for its 5X categories, and Ink for its 2X and 5X categories are probably the best cards for everyday spend where the rewards can be used effectively for hotels. Specifically, transfers to Hyatt usually offer excellent value.
The only hotel branded cards worth considering putting everyday spend on, in my opinion, are:
1. The Hilton Surpass Amex for its 6X categories
2. The Citi Hilton Reserve for its free night after $10K spend
(and either of the above for Diamond status after $40K spend)
3. The Club Carlson card: 5X everywhere + free US night after $10K spend per year (but only if you like staying at club carlson hotels)
4. A case could be made for the Wyndham card (2X everywhere), but only if you’re likely to have plenty of opportunity to stay in the relatively few high end Wyndham properties (all Wyndham properties cost 15K points per night)
Maybe Marriott will keep the SPG program. Minus all the perks. Then eventually SPG will die as a result.
You’ve got to be kidding me if you think SPG will convert at a level as high as 4 or 5 to 1. I seriously doubt it! As a matter of fact, I hope they don’t. As a 2015 SPG Platinum AND Lifetime Marriott Rewards Platinum member (2015 Platinum Premier -“Top 3% of members”) who literally travels the entire planet, Marriott properties completely annihilate SPG with regards to service, amenities, bars, restaurants, decor, especially executive lounges and by WAY far, comfort. I don’t want all those extra people in my lounges. it’s already crowded enough. I wish they’d forbid kids or anyone under 18. I’d say SPG members should feel lucky to get 1 for 1. For them to have all those SPG points shows they chose Marriotts competition! Why should they be rewarded? Mine were accrued by necessity for accommodation availability ONLY. Go stay in Hiltons or Hyatts. US Domestic Sheratons are really quite marginal. The only reason I ever stayed at SPG was (Marriott were unavailable) in China, India, Indonesia, or elsewhere in other international locales. Le Meridien, W, St. Regis and Westins are pretty good but EVERYTHING domestic with SPG with exception of St. Regis is really crap. The Four Points, Element and Aloft products are like trailer parks… UGH. Good riddance SPG.
Sorry. I can’t NOT say it.
Knucklehead.
I think one option could be a phased approach so that at January 1, 2017 that all stays begin earning Marriott points. However, SPG members keep the point balance and spend it down. In 2017, you can continue to use airline transfers as they were but you can’t use for Marriott/SPG stays unless you wanted to convert to Marriott points at a 3:1 ratio. In 2018, then you can convert to Marriott at a 2:1 ratio. Then in 2019, a 1:1 ratio. Then by the end of 2020 the conversion would be complete.
*Correction: by the end of 2019 it would be complete.
[…] a devaluation”, and 1:4 or 1:5 would make me feel better. I thought Frequent Miler had a great analysis of the subject the other day. On the flip side, at least I just won 10,000 Starpoints this morning […]
Greg, what makes you think Marriott will be SO evil as to convert 2:3? That is way undervaluing SPG.
Just a guess. I hope I’m wrong.
It will be interesting to see what Marriottwood does with the Gold/Platinum levels and benefits. Right now, SPG Gold can be gotten with an Amex Platinum.
Should we be proactively be trying to obtain Platinum status with one of the programs, hoping that it will carry over to Marriotwood?
If you’re able to reach a lifetime status in one program I think it’s worth it, as those qualification terms are most likely to change, but the combined program is extremely likely to honor lifetime status forever.
Just wanted to point a typo:
“Here are some of Marriott’s options and my quick analysis of each. In parentheses you’ll find my guess as to the probably of each option:”
I think you meant to type “probability” not “probably”.
Thanks! Fixed.
I don’t think your estimation make sense at all. Unless Marriott only want the properties instead of customers from SPG. The most possible conversion rate is 3.5 to 4. If they dare announce a number lower than 3, at least 70% of current active SPG point along with their owner WILL be gone.