In recent months, hotel industry chatter and scuttlebutt swirled around the idea that Hilton is within striking distance of overtaking Marriott in terms of loyalty program size.
There’s plenty of debate around whether that might actually happen, but Marriott executives Wednesday made a point during the company’s first-quarter earnings call to note (without naming names) that even if it did happen, bigger doesn’t always equal better.
“Without question on the long list of loyalty metrics we look at, we have enthusiasm about having the industry’s largest platform. But from my perspective, it goes much deeper than that,” Marriott CEO Anthony Capuano said in response to an analyst question over the potential for Bonvoy to eventually lose its top position in terms of membership count. “Size is important, of course, [but] engagement to me is a much more important facet of the program.”
The better-not-bigger logic is a tactic Delta Air Lines deployed in advertising back in 2010 after losing its status as the world’s largest airline to United Airlines following the carrier’s merger with Continental Airlines. It appears Marriott leadership is deploying a similar tactic ahead of any potential shift in the loyalty program ecosystem.
“A number is a number, but it can actually not be a true guide for the power of a program,” said Leeny Oberg, Marriott’s chief financial officer and executive vice president of development.
Marriott Bonvoy now has roughly 203 million members compared to nearly 190 million members with Hilton Honors, and the gap between the two programs in terms of membership count has consistently narrowed for several quarters. But Marriott is also seen as having a program where members spend more at the property level.
This kind of logic was touted amid MGM Resorts moving to partner with Marriott at select U.S. resorts after having a loyalty partnership with Hyatt for years. The company has also worked to propel the Bonvoy program forward into a variety of unique experiences and offerings, from the Homes & Villas vacation rental platform to The Ritz-Carlton Yacht Collection and even opportunities to deploy points to go see Taylor Swift’s “The Eras Tour.”
Even with its membership count lead narrowing, don’t write off Marriott quite yet. The MGM partnership is structured where MGM Rewards members can link accounts and join Bonvoy in the process — adding a new on ramp for Bonvoy. The company also teased yet another new brand that could bring in a new wave of customers and members (but more on that in a bit).
Hilton leaders, however, also seem to recognize Marriott’s strategy of going after travelers willing to shell out for shock-and-awe experiences and unique travel types. Over the last few months, the company wooed over Small Luxury Hotels of the World from Hyatt. There are also a partnership with outdoor lodging brand AutoCamp and the acquisition of Graduate Hotels and NoMad, which should fuel its presence in the lifestyle and luxury lifestyle hotel categories.
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Hilton and Marriott might be duking it out, but competition also means plenty of new options and outreach to woo new customers. That’s good news for travelers.
But Marriott also has plenty of good news on its own, too.
Marriott reported a $564 million profit for the first three months of this year compared to Hilton’s $268 million. Marriott also added roughly 46,000 net new hotel rooms to its system — 37,000 of which came from the MGM Resorts partnership — compared to Hilton’s 14,200.
Marriott teases another new brand
It wouldn’t be a hotel earnings call without some brand news, and Marriott — already home to more than 30 brands — is apparently at work on yet another brand.
Capuano said a “conversion-friendly” midscale brand targeting the U.S. and Canada region is in the works at Marriott. Conversions are when owners of existing hotels take on a new brand affiliation and “convert” through renovations to the new look. These deals have grown in popularity amid an unfavorable financing environment for new-construction hotels. Conversions represented 30% of the new hotel deals Marriott signed in the first three months of this year.
“The reality is, given the climate for new construction debt in the U.S., having a platform that can easily pivot between both new-build and conversion opportunities … The timing seems ideal to launch something in that space,” Capuano said.
The push into more affordable hotel territory has been on the rise across Marriott and Hilton over the last 18 months: Marriott launched the extended-stay StudioRes brand and Four Points Express by Sheraton, which is expected to focus growth primarily in Europe, the Middle East and Africa. The company also acquired City Express, an affordable hotel chain that is expected to grow largely in Latin America.
Meanwhile, Hilton launched the premium economy Spark brand, which is expected to eventually be the company’s biggest brand in terms of hotel count. The company also debuted a new extended-stay brand, LivSmart Studios. Even Hyatt, where leaders usually tout a focus on brands with higher nightly rates, launched an extended-stay brand.
But even this shift has a play on loyalty: The idea is that going after customers who don’t want to pay as much per night for a hotel room unlocks a new stream of business and potential loyalty members.
There’s at least a significant number of younger travelers who might enter Bonvoy as midscale brand customers but stay with the program their whole lives and eventually be people who don’t bat an eye at spending a hefty nightly rate for a St. Regis or Ritz-Carlton.
“When you think where supply is growing and where it’s not, we definitely believe that there is some great opportunity for us to add new Bonvoy members, choices for them across the spectrum and, frankly, also meet owner and franchisees demand for Marriott product that allows for conversions in markets that over time may have moved and changed,” Oberg said.
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