Marriott’s owners say Bonvoy’s billion dollar machine shortchanges them on award nights. However the fight ends, your points are likely to pay for it.
A Billion Dollar Fight Over Free Nights
The Wall Street Journal and Yahoo! reported last month that a coalition of 51 ownership groups, together representing roughly 1,000 Marriott hotels, is demanding a bigger share of the money flowing through the Bonvoy loyalty program. The trigger was a number Marriott itself disclosed: fee revenue from its co-branded credit cards is expected to jump 35% this year to nearly $1 billion.
Owners may have been surprised to see just how profitable the company’s affinity card has become. Learning that Bonvoy has become a billion dollar profit engine while their reimbursement for award nights remained modest changed the temperature of the conversation. The owners now want compensation for loyalty stays at least on par with what they collect from online travel agencies like Expedia, plus more visibility into the program’s books.
The Reimbursement Math Owners Hate
That causes a structural problem. When you redeem points for a free night, Marriott reimburses the hotel’s owner at a rate that is usually far below the room’s market rate, especially when the hotel is not near full. Meanwhile, Marriott collects card fees, points-sale revenue, and program fees at the top of the funnel. The corporate entity keeps the margin, and the owner hosts the guest.
Marriott has responded by increasing owner compensation for award stays on high-demand nights and by sharing some Bonvoy financial information with owners for the first time. Both moves are telling. The first concedes the old rates were too thin on exactly the nights owners resent giving up rooms. The second concedes that owners were negotiating blind.
This is the same story playing out across hotel loyalty right now. More cardholders means more points printed, more points printed means more redemptions, and more redemptions mean someone has to absorb the cost of all those free nights. Hilton solved it this year by raising award prices and saying nothing. Marriott’s owners are trying to solve it by sending the bill back to corporate.
But the power of distribution is why Marriott owners sought and stay in the Bonvoy program. Operating an incredible hotel in an ideal location may seem like it should be enough of an edge to sell a large volume of rooms, but the truth is that hoteliers need incredible channels to showcase their properties. The two operate in a symbiotic relationship, though the give and take may have been lopsided in the case of Bonvoy and hotel owners.
What It Means For Your Points
Regardless of the outcome of this public tug of war, the money has to come from somewhere, and members should not expect it to come out of Marriott’s margin. If owners secure OTA-level reimbursement, the cleanest lever Marriott has is award pricing. Dynamic award rates can drift upward without an announcement, a chart change, or a press release, exactly the pattern we have seen elsewhere in the industry. Higher reimbursement on high-demand nights also gives the program every incentive to price peak dates aggressively.
There is precedent for the outcome. Points have been losing value faster than cash across programs this year, and reimbursement pressure is one of the quiet mechanisms behind it. In our family we no longer let Bonvoy points accumulate. We earn them, we redeem them for the next trip on the calendar, and we treat any balance beyond that as exposure rather than savings. That is also what I tell clients at the agency: points are a currency you spend, not one you hold.
Make no mistake, the discrepancy between OTA-level prices and Bonvoy redemption reimbursement is vast. If hoteliers get their way it won’t just nuke prices, it would bury the program. The program has to stay competitive against peers and its redemption rates are already significantly higher and more inflationary than others (though Hilton is giving them a run for their money.) There’s a delicate balance. If prices jump 200-300% to meet the hotelier demands, engagement with the program will drop. If Marriott doesn’t increase reimbursement to hotels, some may leave or start to play games with benefits and availability. I significantly doubt a drop in either margin or card revenue will be received well by investors; something will have to give.
Conclusion
The owner revolt is not a scandal so much as an overdue reckoning over who funds hotel loyalty. Owners are right that hosting award guests at below-market rates while corporate books a billion in card fees is a lopsided trade. The company is right that Marriott Bonvoy fills rooms owners would otherwise struggle to sell. Added transparency pushes the program toward honest, published reimbursement economics rather than another round of invisible award inflation but some price adjustments and offset will affect Marriott Bonvoy point holders. In the meantime, the practical advice does not change: if you are sitting on a large Bonvoy balance, the safest place for those points is a confirmed reservation.
What do you think?
For those interested, the fancy facility featured in the article’s photo is the JW Marriott Marco Island Beach Resort in Florida. This 5* resort is widely considered an excellent accomodation, especially renowned for its prime 3-mile stretch of private Gulf-front beach, extensive family-friendly amenities, and 12 on-site dining options.
For those interested, remember that with points valued at roughly 0.8 cents each, the best way to leverage a large Marriott Bonvoy balance is to book 5-night award stays (getting the 5th night free) at luxury properties (such as luxury resorts in the Maldives, or top-tier European properties), or transfer them to airline partners to avoid the risk of devaluation. It is important to search availability using flexible dates directly on the Marriott Bonvoy Website and toggle the “Use Points/Awards” option and to note that Marriott Bonvoy points will expire if your account remains completely inactive for 24 months.
If Marriott cannot establish this profit-sharing balance, it seems inevitable that hotel owners will either reflag properties to competitors like Hilton or Hyatt, or restrict Bonvoy benefits such as elite member breakfasts and room upgrades to reduce costs… To the attention of Marriott International management!
I’ll say it again: For Marriott, hotel owners are the customers; guests are the product.
@1990 – 100% true but they will have to tread lightly in their adjustments.
Maybe the following perspective can be added to the subject… As the company’s core product is the hospitality experience, encompassing standardized room stays, personalized service, and travel benefits, for Marriott, the customers and guests are the consumers of the product, not the product itself.
They signed the contract, now they don’t like it. Too bad. Consider that at the next negotiation.
As expected, whether the said hotel owners renew their contract depends on Marriott’s willingness to share revenue and improve Marriott Bonvoy terms.
Where will these disgruntled property owners go? Hyatt isn’t big enough to accommodate them. To Hilton or IHG by the hundreds? Other chains don’t have the branding nor maintain brand standards.
I work with 7 Marriott properties within our business, and what’s interesting is the same owner of 5 have now departed MARSHA (Marriott’s res system) for their own indepdent system. This way they can revenue manage things better and have more control over their own inventory. I wonder if this also will allow the company to limit Marriott Bonvoy redemptions as well.
I confess that I find this situation a lot more amusing than I should: Hotel owners colluded with Marriott to royally screw over engaged loyalty members but now those selfsame hotel owners are crying crocodile tears of self pity that Marriott has acted in an unjust fashion with them. Did they truly think that an incredibly disreputable company would treat them honorably after clearly showing that they couldn’t be trusted?
Properties already play games with nights and redemptions. Resort or destination fees. Etcetera.
Holding rooms out of service for redemption but keeping them in inventory for selling. Ignoring program rules repeatedly but corporate wont enforce them in the fear if them leaving.
I don’t really have a lot of sympathy for them, maybe if they stop trying to get around the rules for Marriott Bonvoy. Marriott corp is even worse, not enforcing the rules for for franchise hotels. No matter what we end up getting the short end of the stick so … No sympathy for either.
I was always a proud Marriott customer. Even bought into Marriott Vacation Club. I had 2 deeded weeks. They wanted me to give that back and for me to buy Vacation Club points. They don’t want anyone to have deeded week anymore. I asked how many points they’d give me to turn it in and I was told they don’t do that. They want you just to give it back and then pay for more points. Of course the more points you have, the more important you are to them. Those of us that have been with Marriott for years and can only afford so much, Well we are not needed. We aren’t rich enough. In the mean time in 2011 I bought some points. I was told that if you hold on to them a few years, Marriott would buy them back. I bought additional points mid 2010’s. I was told the same thing. Now that I would like to sell them back, I’ve been told that don’t do that. They will take them off my hands and I have to pay for that. They are no longer an honorable company. JW is spinning in his grave seeing how customers are treated. They are too big. I can’t even sell them to someone else unless Marriott approves it. They won’t buy them back and pretty much won’t let you sell them to another Marriott member. Time to change loyalties,