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January 21, 2015 Owner & Franchise Communications, Rewards

Important Information Regarding Upcoming Changes to Marriott Rewards Reimbursement Policies

Over the past few years, we have communicated several changes to the Marriott Rewards Program to help ensure financial stability while delivering the best-in-class program to members and the lowest-cost, highest-value program to owners. As we move into 2015, I wanted to remind you of existing policies and make you aware of some upcoming Marriott Rewards Program policy changes and controls being put in place to ensure adherence to the program policies.

 

Critical Reminders: Definition of an Occupied Room, 50% Redemption Cap, and 2015 Chargeout Rates

For purposes of calculating occupancy rates, it is imperative to note that all rooms sold must be part of the normal course of business and must be physically occupied by a paying guest.

The Marriott Rewards Program will seek remedial action as appropriate, including, for example, by reducing or taking back reimbursement payments and/or taking disciplinary action for those involved, with respect to hotels that fail to comply with program rules or policies or otherwise seek to evade the overall policies announced, including by adopting other strategies for achieving high occupancy thresholds that serve no significant legitimate business purpose other than to increase the hotel’s compensation from the Marriott Rewards Program for such nights.

In 2014, we announced a cap on the total redemption nights per day that may be reserved at a hotel. This cap will remain at 50% of the total rooms available in a hotel on a given night. The program will continue to audit reservations on the books to determine when the cap needs to be placed. When applicable, revenue management will place the 50% cap on the rate code directly in MARSHA and the hotel in question will be notified by the Marriott Rewards Reimbursement Desk. This cap may not be removed by the property and supersedes the ability to place or change an Inventory Control Date (ICD).

Additionally, the new chargeout rates for 2015 take effect with the January billing cycle.

2015 Changes – Effective May 1, 2015

As you know, we closely monitor and modify the Marriott Rewards Program as needed to protect program integrity and financial stability. We recently reviewed program policies concerning the reimbursement to hotels for Marriott Rewards member stays and we concluded that certain changes are needed in order to address a trend of reimbursement revenues to hotels outpacing the funding received by the program. In particular, the reimbursement policies related to high occupancy are designed to compensate hotels for displacement of higher-paying guests on high-occupancy nights. Over the past few years, as an unintended outcome of our policies, some hotels have booked rooms at heavily discounted rates to reach the 90% and 96% occupancy thresholds. To ensure the original intent of the occupancy thresholds – to compensate hotels for nights where redemptions displace higher paying business and not for nights when occupancy is driven by heavily discounted rates – is upheld, and in order to give your finance and revenue leaders the opportunity to plan accordingly, today we are announcing the following changes to Marriott Rewards Program reimbursement policies, effective May 1, 2015:

  1. Exclude Opaque Nights and Revenue from Daily Calculation: Opaque room nights will be excluded from the calculation of each day’s occupancy. Opaque rooms are rooms booked through a channel that masks the identity of the hotel being reserved until after the booking is completed, such as Priceline (Certified Opaque Partner) or Hotwire (Non-Certified Opaque Channel). Opaque rooms are designated as market code 39. The revenue and room nights from opaque rooms, or market code 39, will also be excluded from the daily ADR1 used in the reimbursement calculation.
  2. Introduce Daily Reimbursement Rate Cap: The daily reimbursement rate will be capped at three times the Annual Total Hotel ADR2 of the prior year.
  3. Exclude Room Nights Sold at Less Than 35% of Prior Year Annual Total Hotel ADR2 from Daily Calculation: Room nights sold at a rate less than 35% of the Annual Total Hotel ADR2 will not count toward that day’s occupancy and will be excluded from the daily ADR1 used in the reimbursement calculation, except:
    1. Group segment rates/rooms
    2. Associate Leisure Rate nights booked more than 7 days from arrival
    3. Contract segment rates/rooms if more than 2,000 in total volume or more than 5% of total hotel capacity for the quarter
  4. Exclude Associate Leisure Rate Booked within 7 days of Arrival from Daily Calculation: Associate Room Rates booked within 7 days from the date in question will not count toward that day’s occupancy and will be excluded from the daily ADR1 used in the reimbursement calculation. For example, rooms booked May 1 – 8 at the Associate Leisure Rate would be treated as booked within 7 days of a May 8 arrival date and would therefore be excluded.
1Daily Undiluted ADR Excludes Market Codes 25, 27, 39, and 62, Market Code 28 when booked within 7 days of arrival, and any rooms and rates qualified at less than 35% of Total Hotel ADR
2Total Hotel ADR Reported for Rolling 12 months as of October

Ongoing Program Analysis

Every year, the program determines Annual Hotel Category placements and volume of allowable Inventory Control Dates (ICDs) based on the prior-year activity. For 2015, these will be announced in February for implementation in March. Additionally, as part of our ongoing analysis, we will continue to examine the program for opportunities to reduce volatility and ensure the long-term financial stability of the program.

 

Ensuring Our Future Success

As you know, our Marriott Rewards Program develops relationships with our most profitable guests to drive revenue and shift share to our hotels, and creates a key advantage over the OTAs. Members deliver 50% of paid room nights each year and over $12B in revenue. Our joint future success with the Marriott Rewards Program and the paid night business it delivers to hotels is dependent on our shared responsibility for adherence to the program’s policies.

If you have any questions, please review the FAQs or reach out to your account executive.

 

We continue to focus on delivering the highest value program at the lowest cost. While this update message focuses on adherence to existing policies and the announcement of new policies, I look forward to providing you with frequent updates over the coming months regarding Marriott Rewards innovation and our continued evolution to win the loyalty of the Next Gen traveler.