How Marriott Is Fighting To Save The Golden Goose: Its Loyalty Program
For major hospitality companies, the coronavirus pandemic has imperiled not just their day-to-day business model but also their most important lifelines: the loyalty programs that they have spent tens of billions of dollars building and that set them apart from their upstart home-sharing competitors.
Hotel conglomerates like Marriott International have occupied a precarious position when it comes to keeping the goodwill of their most active customers. With business travel at a crawl, many longtime loyalty members would have lost the elite status that took them years to build.
The executives in charge of Marriott’s Bonvoy loyalty program have had to balance incentivizing guests to use their services while making sure they didn’t revoke members’ status or give away too many free nights of stay at a time when the bottom line for hotels has never been weaker.
“Bonvoy is the backbone of our strategy,” Marriott International Group President for Consumer Operations, Technology and Emerging Businesses Stephanie Linnartz said on the most recent Walker & Dunlop Walker Webcast.
The hope, she said, is to make guests ask themselves "why they would ever join another hotel loyalty program.”
Under Marriott’s rules from years past, it would have been very difficult for anyone to earn or retain their elite status in 2020, Linnartz said. Revenue per available room, a prominent metric in judging hotel performance, fell from its 2019 peak by a shocking 85% across Marriott’s global portfolio of hotel brands in Q2 2020. And though leisure travel has ticked up month by month through 2020, occupancy is still nowhere near 2019 levels, with business and group travel still at record low levels.
As the pandemic set in, Linnartz and her colleagues sprung into action to overhaul the loyalty program. The company offered widespread leniency, extending the elite status that members earned in 2019 through 2022, ensuring that members wouldn’t be kicked off for not using rooms during the pandemic. The free nights of stay that come along with status may hurt more to give away than they would in another year, but Linnartz said they are a small price to pay for continued customer loyalty.
Even as demand for hotel rooms has taken a severe hit, pricing has remained largely consistent, Linnartz said, as slashing pricing was unlikely to drive more demand. Many of Marriott's largest corporate accounts, including Microsoft and consulting giants Deloitte, McKinsey and Accenture, have chosen simply to roll over their 2020 pricing into 2021 rather than renegotiate.
But as much as saving Bonvoy has been about playing defense, Linnartz said that her team has worked to find new ways of getting customers to engage and spend with Marriott brands during the pandemic. The Bonvoy-branded credit card began offering miles for nontravel purchases like gas and groceries. And Marriott has continued to expand nontraditional stay options: Marriott Homes & Villas, the company’s vacation rental platform, has expanded into North America after a successful pilot in Europe, and the company will also grow its fleet of Ritz-Carlton-branded luxury yacht cruises.
After it acquired Starwood Hotels & Resorts in 2016, Marriott became the world’s largest hotel company, with 30 different brands in its portfolio. On the webcast, Walked & Dunlop CEO Willy Walker asked Linnartz whether the pandemic might be a time to take stock of those many brands and build back under fewer banners, but Linnartz expressed confidence that the brands are more likely to grow than merge.
“In this day and age, the more choices we can offer the consumer in terms of size and scale, the more attractive Marriott Bonvoy is,” she said. “It's really the flywheel of being part of our travel platform. I think we have hands-down the best hotel brands in the industry, at all price points. The same guest who might stay at a Ritz-Carlton for certain stay occasions might want to book a room at the Courtyard by Marriott to go to their kid's soccer tournament.”
The synergy of having all those disparate brands under the Marriott umbrella is something that gives Linnartz faith in the future of Marriott’s brands as it faces competition from much younger companies. Walker pointed out that Airbnb’s market capitalization currently sits at around $100B, almost 50% more than the market caps of Marriott International and Hilton combined. Linnartz pointed to the importance not just of brand loyalty but of longevity when it comes to success.
“Airbnb has really built an admirable platform,” Linnartz said. “I think it’s great to see them become a public company. Marriott has been a public company since 1953.”
On Jan. 27, Walker will host Walmart U.S. President and CEO John Furner. Register here for the event.
This article was produced in collaboration between Walker & Dunlop and Studio B. Bisnow news staff was not involved in the production of this content.
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