For many years, Marriott has been a heavy proponent of value-based food and beverage programs. Their limited time awards at hotels makes sense: Marriott’s hotel owners make a lot of money off of the breakfast and dining room sales, and they face stiff competition from other hotel brands to win new customers. Now, however, a new hotel loyalty plan is threatening Marriott’s business model. Bonvoy, Marriott’s new loyalty program, is offering hotel owners a one-night free stay in exchange for a $20 breakfast or other fee, which is a lot of value for low-cost properties.
For years Marriott International has been trying to woo business travelers back to the hotel industry – no easy task, but with their latest move, the global lodging chain hopes to get a step closer to their goal. On Thursday, the company announced a new loyalty program, called Bonvoy, which will allow Marriott Rewards members to earn points on hotel stays, airline tickets, car rentals, cruises and cruises on their partners. The move is a response to a shift in the travel industry, as the cost of a hotel room (particularly at luxury properties) has outpaced room rates, particularly in gateway cities like New York, San Francisco, and other popular stops for business travelers.
If you’ve been in the hotel industry for any length of time, you know that in order for a hotel to succeed, a majority of its revenue must come from its rooms—and as we all know, rooms are made up of the cost of occupancy (COO), the cost of the property (CP), and the revenue per room (RPR). So, how can you have a successful hotel? You must be able to effectively manage the COO, CP, and RPR.
Marriott CEO: It’s All About Hotel Owner Costs With Bonvoy and Breakfast
on July 20, 2021 by Gary Leff
In an interview with Scott Mayerowitz of The Points Guy, Marriott’s new CEO acknowledges that Bonvoy isn’t as generous as Starwood Preferred Guest. He dismisses hotel service requests as consumers with a “short memory.” He also explains the lack of service and lavish perks as a result of the hotel owner’s desire to keep expenses down.
That, along with the CEO’s recent remarks that prospective hotel workers can earn too much money working for Amazon, informs us where he sits and provides us a prism through which to interpret the company’s future.
The Marriott CEO claims that guests have “short-term memory” and want services back.
Because of their ‘short-term memory,’ Marriott customers demand hotel services, while hotel owners have a ‘long memory.’ In addition, Marriott must be “more attentive” to its owners.
“I recently spent two days with my executive team discussing a number of these problems. This phenomenon has been characterized as “the tension that occurs between our visitors’ short memories and our owners’ long memories.”
…“And you want things to be the way it was because of our short memory. You want the restaurant to be open at the same hours it was before. You want the spa to be fully operational, with all treatment rooms and technicians available. At the pool, you want full service. You desire cleaning on a daily basis. All of those items are on your wish list. In some ways, this is a positive thing since it indicates our customers are eager to return.”
“On the other hand, our owners and franchisees have suffered a disproportionate burden as a result of the pandemic’s impact,” Capuano said.
“Their income has plummeted by billions of dollars. They stare at you like you have three heads when they make suggestions about going back to “normal,” and they remark, “You’ve got to be more sensitive to the high climb we have in front of us.”
Marriott’s former CEO, the late Arne Sorenson, stated that the Bonvoy program was created to help hotel owners save money.
It’s important to remember that Marriott does not own the properties. Owners pay Marriott, not customers, in the form of a portion of sales, management fees, and licensing. Marriott’s clients are hotel owners, and the product Marriott provides to those customers is hotel visitors.
Bonvoy, according to Marriott’s CEO, isn’t as valuable as Starwood’s program.
According to the CEO, Marriott Bonvoy isn’t as generous as Starwood Preferred Guest.
The merger of Marriott Rewards and SPG was a huge undertaking. It’s also very fascinating. ‘My gosh, what have you done to our program?’ say SPG acolytes. The presentation was extremely accommodating to the audience. It was less conducive to business owners.”
…“We think that the breadth of options, whether it be brands or location, is a bit of a mitigating element for some of those SPG stalwarts who may have lost a little of the program’s richness,” Capuano said.
Capuano, in my opinion, misdiagnoses the problem here. In principle, Bonvoy is a highly generous program, but the greatest perks are more difficult to get than with Starwood Preferred Guest (since 24 hour check-in is a 100 night benefit, and 100-night status has a spend requirement now too).
The issue isn’t with the program’s rules or structure. The issue is execution; hotels often break the program’s restrictions. And Marriott customer support is notorious for providing inaccurate information. The website often fails to function (for example, the prize availability calendar) and is devoid of functionality (like gifting an award to someone else).
Although reward charts have been significantly devalued, Bonvoy is in many ways more generous than Marriott Rewards before it. To be true, the Marriott co-brand credit cards don’t pay out as much as the Starwood Amex did in the past. But it’s not that Starwood Preferred Guest is terrible for owners; it’s simply the conceptual model Capuano appears to apply across the board, given that owners are his clients. He overlooks the fact that Bonvoy’s issue is one of execution, not pricing structure.
More From the Wing’s Perspective
Even though the Marriott Bonvoy program is a huge success over the past three years, it still needs a little work. Now, the CEO of the hotel chain has revealed that a big reason that many of Marriott’s hotels still lose money is because they can’t offer their guests the best food or accommodations. When you consider that the average cost to operate a hotel is $1.5 million a year, then it becomes clear why so many hotels are still on the losing end of the Bonvoy program.. Read more about what is the cfo journal and let us know what you think.
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