Tuesday, November 3, 2015

The possible fallout from Starwood being
acquired by Hyatt or a Chinese suitor. For frequent
Sheraton, W Hotels and Westin guests, the rumored acquisition of Starwood
by Hyatt or one of several Chinese suitorsraises one enormous question: What
will happen to my points? Both Starwood and Hyatt have well-regarded
loyalty programs. In fact, experts agree they are among the two of the top
rewards programs in the business.  Starwood Preferred Guest, for example,
imposes few few capacity controls on rooms. Similarly, Hyatt's program,
called Gold Passport, is know for its generosity. "They're both
great programs," says Jason Steele, a credit card expert at
at CompareCards. com. "It would be a shame to lose one. " But
what if Hyatt acquired Starwood and merged the two programs? No one knows
exactly what would happen next, says the leading expert on loyalty programs,
Tim Winship of Frequentflier. com. "Affected travelers can only hope
that a merger of the two schemes will result in the best-of-the-best features
being retained, rather than a lowest-common denominator outcome," he says,
adding, "Both programs have their strengths and weaknesses. " Short
term outlook If there's a consensus among the points pros, it's that
the rewards will be fine — for the moment. "We would expect no immediate
changes to the programs," says Matthew Goldman, CEO of Credit Card optimizer
Wallaby Financial. "In most loyalty mergers the programs run separately
to start," he adds. "Over time, a single program will have to emerge, but
whether it will follow the rules of Hyatt or Starwood is unclear. "
Goldman, who has lifetime gold status with Starwood, says the points earnings
and value structures between Starwood and Hyatt differ in a meaningful way.
That means a conversion will have to be built. "We would hope to see the
best features from Starwood and Hyatt, such as no blackout dates, stay the
same," he says. If Hyatt buys Starwood Robert Harrow, a credit card
expert at ValuePenguin. com, says a simple conversion between Hyatt and
Starwood would be a worst-case scenario. "The Starpoints —
Starwood's loyalty points — are some of the most valuable rewards points
on the market," he says. "We conservatively estimate their worth to be
$0. 022 per point. " But the companies will need to tread carefully, says
loyalty program researcher Laura Mandala. The conversion formula must be
developed in consultation with other stakeholders. "It's often a
complicated formula in determining points and their value and the most loyal
guests are usually the most adept at tracking and understanding the system,"
she says. "Any changes a hotel company wants to make should be made in
consultation with their most loyal guests. Long term outlook Over the
long term — and assuming this deal goes through — guests will have to pay
close attention to their program rules. "For example, one of the
greatest things about Starwood's programs is that you can transfer your
points to miles with about 30 different airlines," says Steele of
CompareCards. com. "No other hotel program offers that at such a great
ratio. Should these two companies merge and should that great feature be
discontinued, you'll receive advance notice to redeem your rewards over the
next month or few months. If loyalty customers keep track of what's going
on, they'll still have time to utilize their rewards. " A far more
uncertain scenario would involve an acquisition of Starwood by one of its
Chinese suitors. Experts say the points would also remain safe in the short
term, but there's a greater chance of a devaluation similar to what followed
Hilton's 2007 leveraged buyout, which led to some unpopular program
changes. Here's what happened with Hilton Brian Karimzad, director of
the loyalty program site MileCards. com, followed the Hilton devaluation
closely. In 2009, Hilton announce an increase in award prices. "It was at
a time when room rates were plummeting and cash flow was tightening, but it
did so on insight that it had historically given away too much room value to
members who perhaps didn't fully appreciate that value," he says. In
2013, just a few months before filing for an initial public stock offering,
Hilton became even more aggressive in charging more for high-end hotels with
points, nearly doubling their point cost, he recalls. "Hilton made
points relatively easy to earn," he says. "Then it raised prices more
aggressively than other programs. Think of it like a central bank targeting
high inflation with the easy money of low interest rates. " But
Hilton's program also has more than its fair share of critics today. If
Hyatt, or another brand buys Starwood, makes a misstep, it will have plenty of
company. "It would destroy part of the massive value of an acquisition to
anger the most loyal customers," says Goldman, the Wallaby Financial
executive. In a way, thought, a botched program merger would only
underscore a fact about loyalty schemes often overlooked by the experts: that
in the end, the only real winners are the companies offering the so-called
"rewards. " This story originally appeared on Fortune More good
reads from Fortune:
• How seaweed could ruin your next vacation
• Seasonal craft beers you must try this fall
• Why Tesla is losing its luster

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