Marriott CEO: Loyalty programs helped fuel Q2 revenue increase

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Marriott International reported a rise in revenue from direct bookings last quarter, with CEO Arne Sorenson predicting continued growth across its direct channels as the company completes the integration of its Marriott and Starwood booking engines and loyalty programs later this month. 

Marriott acquired Starwood Hotels & Resorts in 2016.

In an Aug. 7 earnings call, Sorenson credited both robust loyalty programs -- which together have more than 100 million members -- with helping to bolster direct bookings. 

The focus on driving direct bookings comes as Marriott strives to reduce high commission costs to OTAs, the intermediary hoteliers most love to hate.

Like Marriott, other industry heavyweights have sought to grow direct bookings. Among the more notable campaigns is Hilton Worldwide's "Stop Clicking Around," launched in 2016. It encouraged potential guests to book at and offered exclusive discounts to members of the Hilton Honors loyalty program. 

Other hoteliers have followed suit, offering discounts and perks to lure new loyalty program members and drum up more direct bookings.

Key changes to Marriott's merged loyalty program

• Guests can book, earn and redeem across Marriott International's portfolio via any of the company's digital, mobile and call-in channels.

• Marriott will award 10 points per dollar spent for stays, with the exception of stays at Residence Inn, TownePlace Suites, Element, Marriott Executive Apartments and ExecuStay, which will each yield 2.5 to 5 points per dollar.

• SPG members' point balances will triple.

• A revamped qualifying tier structure will enable members to achieve Elite status faster, with Starwood Preferred Guest members now able to reach Silver Elite at 10 nights and Marriott Rewards members able to reach Gold Elite at 25 nights and Platinum Elite at 50 nights.

• Points will be easier to use, with nearly 70% of properties getting less expensive or holding steady in terms of points redemption.

• No blackout dates.

• Starting in 2019, off-peak and peak points redemption rates will be introduced.

Direct bookings currently account for about 70% of Marriott's transient travel business, with more than half of those being made through the company's digital platforms, including brand websites and mobile apps. 

On the other hand, OTAs increased their share of Marriott's hotel bookings last year, accounting for approximately 12% of the total in 2017. 

According to J.D. Power's annual North America Hotel Guest Satisfaction Index Study, direct bookings have been fairly stagnant industrywide in recent years. This year's survey, which analyzed responses from some 55,000 guests who stayed at a hotel between May 2017 and May 2018, revealed that roughly 67% of respondents booked hotels through direct channels in 2017 and 2018, compared with 68% in 2015 and 2016.

Jennifer Corwin, associate practice lead for the global travel and hospitality practice at J.D. Power, said, "Based on our awareness of the industry, we would have expected to see an increase in direct booking, given the investments many hoteliers are making in market campaigns and initiatives."

She added that loyalty programs are uniquely positioned to help grow direct bookings. 

"Loyalty program members are approximately half as likely as non-loyalty program members to use an OTA," she said. 

Starting Aug. 18, Marriott will make it significantly easier for guests to search and book across the company's complete post-merger portfolio, with the integration of its direct channels. The move will enable guests to search for any hotel on Marriott websites and mobile apps by brand, tier, distance, price, amenities, transportation and nearby attractions or points of interest. 

"We think going to one set of channel platforms will be a powerful positive for the system," Sorenson said. "Our booking engines are a significant competitive advantage." 

The upcoming merger of the Marriott Rewards and Starwood Preferred Guest (SPG) loyalty programs, however, has been met with more scrutiny. Widely considered the gold standard among hotel loyalty programs, SPG is renowned for its top-level Elite membership benefits in particular. 

A recent Bloomberg Businessweek report detailed the concerns that some SPG members have raised ahead of the merger, with many worried about losing signature perks like free breakfasts and late checkout, among others.

Sorenson sought to soothe those fears on the recent call with investors, pointing out that Marriott Rewards introduced late checkout and other additions well ahead of the merger to "send the message to the SPG loyalists that we were going to protect some of their benefits."

Under the revamped loyalty program, which will also bring Ritz-Carlton Rewards into the fold, guests will be able to earn more points, Marriott said. The merged program will offer 10 points per dollar spent for stays, with the exception of stays at Residence Inn, TownePlace Suites, Element, Marriott Executive Apartments and ExecuStay, which will each yield 2.5 to 5 points per dollar.

In addition, SPG members' point balances will triple, and a revamped qualifying tier will enable members to achieve Elite status faster. The company also said points will be easier to use, with no blackout dates. 

"While it would be too much to say that every single Marriott Rewards or SPG member has stood up and applauded, I think what we've heard from the bulk of the community is, 'You've made a collection of decisions that has caused us to feel very good about that program,'" Sorenson said. "And that's what we've intended, and I think we'll prove it in the way that ultimately it is used by our members."

Marriott reported a 25% jump in earnings for its second quarter. Net income totaled $610 million, up from $489 million in the same period last year, while revenue per available room was up 3.8%.

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