Convert SPG points to miles? How to play the Marriott merger.

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On Monday we learned that Marriott will be buying Starwood in 2016.  Under the assumption that Marriott’s rewards program will be the surviving program after the merger, I made a plea to Marriott: Hey Marriott: Here’s how to keep SPG loyalists loyal.  I suggested that Marriott should convert SPG points to Marriott points at a favorable rate (1 to 4), match elite status at a favorable level (i.e. give SPG elites better status after the merger), and incorporate the best aspects of Starwood’s loyalty program (suite upgrades, no property exceptions for elite benefits, real “no blackout date” policy), and drastically improve the Marriott Rewards credit card.  Of course, as I said in the post, I don’t believe that Marriott will do these things, but I do think that they should.

What should we do with our SPG points?

A number of readers have asked me if they should proactively convert their SPG points to airline miles before the merger.  SPG is the only hotel loyalty program that offers extremely favorable exchange rates to airline miles.  Generally, the exchange is 1 to 1, but if you exchange 20,000 points at a time, you get a 25% bonus.  In other words, 20,000 SPG points becomes 25,000 miles.  As a result, many people see mileage conversions as the best use of SPG points.

What will Marriott do?

The fear people have is that, after the merger, SPG points will be converted to Marriott points and will therefore lose value.  To be clear: we don’t know what Marriott will do.  I do believe that they’ll fold the SPG program into Marriott Rewards, but they could choose other options: they could keep the programs separate (unlikely, in my opinion), or they could adopt the SPG program and fold in Marriott Rewards (extremely unlikely, in my opinion).

Assuming Marriott does fold SPG into it’s own Marriott Rewards program, there’s still a huge question of how they will do it.  It is clear to everyone that SPG points are worth considerably more than Marriott points.  Just the fact that SPG awards only 2 points per dollar for stays, while Marriott awards 10 points per dollar, shows that SPG points are valued 5 times as highly as Marriott points.  Or, you could look at mid-tier properties that cost around 10,000 points for a free night with SPG while similar properties cost 30,000 to 40,000 points with Marriott.  In this example, Starwood points are worth 3 to 4 times as much as Marriott points.

At the low end, SPG free nights start at 3,000 points per night (2,000 on weekends), whereas Marriott free nights start at 7,500 points per night (6,000 for PointSavers).  This suggests that SPG points are worth 2.5 to 3 times as much as Marriott.

If we only look at the high end of the award charts, the SPG to Marriott ratio doesn’t look as great.  SPG awards top out at 35,000 points per night.  Marriott awards top out at 45,000 points per night.  That said, this view hides the fact that Ritz Carlton properties can be booked with Marriott Rewards points, but with a different award chart.  Since SPG has very high end hotels in its collection, I think that comparing to Ritz makes more sense than comparing to top tier Marriott hotels.  Ritz Carlton awards top out at 70,000 points.  So, at the top end, all else being equal, SPG points are worth 2 times as much as Marriott.

SPG award chart weekdays SPG points to miles
SPG weekday award chart
Marriott Award Chart SPG points to miles
Marriott Award Chart
Ritz award chart SPG points to miles
Ritz award chart

One can use the above analyses to estimate the comparative value of SPG points to Marriott Rewards points at anywhere from 2 to 1 to 5 to 1.  That doesn’t tell us what conversion rate Marriott will apply, but it gives us a general ballpark.  Here are some of Marriott’s options and my quick analysis of each.  In parentheses you’ll find my guess as to the probability of each option:

  • Convert 1 to 1 (10%): If Marriott does this, they’ll completely piss off every SPG member that exists.  Are they that evil?
  • Convert 2 to 3 (50%): This would be almost as unacceptable as 1 to 1, but I’m betting that Marriott will be this evil.
  • Convert 1 to 2 (30%): This is the smallest conversion ratio that can be justified with numbers. I would still be pissed off.
  • Convert 1 to 3 (8%): Now we’re in a range that some SPG loyalists will be able to live with.
  • Convert 1 to 4 (1.9%): This is what Marriott should do, but they won’t.
  • Convert 1 to 5 (0.1%): This would be great, but there’s no way Marriott will do this.

Of course there are many other possible conversion ratios.  Marriott might even opt out of straight conversions and offer some number of free nights for sets of points, or something like that.  However, I do think that a straight up conversion is the most likely path.

Break even point for mileage conversions

Like SPG, Marriott allows members to convert points to miles, but at a less favorable rate.  Straight up conversion rates to mileage programs vary by the number of points you convert.  The best ratio is at and near the top end: 70,000 Marriott points convert to 25,000 miles for a number of airlines (including Alaska, AA, Southwest, etc.).  Since SPG requires only 20,000 points to get 25,000 miles, we would need to get 3.5 Marriott points per SPG point in order to break even.  Conversions to United from Marriott are slightly more favorable, whereas conversions to many foreign carrier programs are less favorable.

Marriott’s Travel Packages add a wrinkle to this analysis.  Marriott’s travel packages let you convert Marriott points to airline miles at a ratio of 270,000 points to 120,000 miles (or to 132,000 United miles).  That’s a ratio of 2.25 to 1 (or ~2 to 1 United).  Plus, you get a 7 night stay in a category 5 hotel.  To get 120,000 miles (125,000 miles, actually) from SPG, you would need to transfer 100,000 points.  So, in this case, 270,000 Marriott points are approximately equivalent to 100,000 SPG points.  With SPG, you get 5,000 more miles, but with Marriott you get a 7 night stay.  If we ignore the differences, we can say that we would need 2.7 Marriott points per SPG point in order to break even.  Depending upon how much you value the 7 night stay, though, the ratio could be significantly lower.  Keep in mind, too, that you can always supplement the Travel Package with additional points to move up to a higher category hotel (since there are very few desirable category 5 Marriott hotels).

In summary, if you have less than 100,000 SPG points that you want to transfer to airline miles, Marriott would have to convert SPG points 1 to 3.5 (or more) to Marriott points to keep you “whole”.  If you have 100,000 or more SPG points that you want to transfer to miles, a 1 to 3 ratio would be more than enough to keep you whole.

Note that SPG offers something very similar to Marriott Travel Packages: Nights & Flights. I hope to compare the two in a future post.

Plenty of time to decide

The press release for the merger stated: “Assuming receipt of the necessary approvals, the parties expect the transaction to close in mid-2016.”  So, if all goes as expected, the sale will go through sometime in 2016.  After that, there will almost certainly be a period of time before the loyalty programs merge. My bet is on early 2017.

We can hope that Marriott will release details of the combined loyalty program before they go live.  If so, we should have time then to decide whether to dump our SPG points or hold on to them if/when they convert to Marriott Rewards.

Summarized recommendations

If you have near term use for your SPG points, then by all means use them.  If you don’t have an immediate need for the points (or for converted miles), then hold onto the points until you do need them or until we learn more.

If we learn that Marriott plans to convert SPG points to Marriott points, and if we learn the conversion ratio in advance, then:

  • If the ratio is less than 1 to 3: Use or convert your SPG points before the conversion.
  • If the ratio is 1 to 3: Carefully consider Marriott Vacation packages as an alternative to converting SPG points to miles.  If that works for you, then keep your points. If not, convert them.
  • If the ratio is better than 1 to 3: Keep the points.

What if we don’t know the conversion ratio in advance?  My bet is that Marriott will convert points at a horrible 2 to 3 ratio.  In fact, if they don’t announce the conversion ratio in advance, I think that a 2 to 3, or even a 1 to 1, conversion ratio will be even more likely than I predicted above.  So, if they don’t announce the conversion ratio, it means bad things are coming… dump and run.

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