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January 10, 2019 Integration Updates

Q4 Big 4 Platform Integration Update

THE BIG 4 | PLATFORM INTEGRATION

As we begin 2019, we would like to provide an update on the integration-related activities completed in Q4 2018, as well as highlight some of the ongoing initiatives Marriott is pursuing to drive synergies and cost reductions for our owners and franchisees.

LOYALTY

Marriott’s unified loyalty program includes a new Award chart and reimbursement schedule. In 2018, our program was able to close competitive gaps, including moving to full folio earning at all participating brands and offering breakfast as a Platinum choice benefit. In addition, a sliding scale on reimbursement and chargeout rate reductions for a majority of hotels took effect as of August 1, 2018 with the launch of our combined Loyalty Program.

Looking ahead, we are focused on a few critical milestones expected in the first half of 2019. These include:

  • Loyalty Brand Announcement and Launch: We will announce the new program name in the next coming days and will launch the new program in February. Properties have received communications on how to prepare for the deployment.
  • Annual Category Placements: Hotels placed in Category 8 priced at Category 7 will move to their final Category 8 pricing in March.
  • Peak/Off-Peak Award Pricing: This is expected to launch in Summer 2019. More information will be shared with revenue managers, properties and with the owner and franchise community in the coming months.

Once we complete the launch of our new loyalty brand and move to peak/off-peak pricing, we will focus on making enhancements to the program in late 2019 to make the program more seamless and applicable for all travelers.

RESERVATIONS PLATFORM

Over the course of 13 weeks in Q4 2018, we successfully completed the transition of all SPG hotels to the Marriott ecosystem. Recognizing the extraordinary effort put forth by SPG property leaders, we would like to provide an update as well as resources for owners and management companies of SPG hotels as properties begin to stabilize on their new systems.

As of December 11, all SPG hotels have cut over to Marriott’s Reservations, Revenue Management, Sales & Catering, and Property Management systems. To help manage the complexities of this transition, we supported hotels with change crew webinars and coverage in Global and Continent Command Centers.

In Command Center, the top system focuses included EMPOWER Reservations and Lightspeed Support. The high business process focus areas were Reservations Processes, Inventory Balancing, PMS Processes, and Group Housing. The majority of tickets opened via Command Center were resolved within one day; and, to-date, the majority of fixes for EMPOWER Reservations are in place, LightSpeed support has been bolstered. We continue to provide support through Change Crew webinars, which will continue bi-weekly through Q1 2019. Our ongoing focus areas include emphasizing the importance of GM training and accountability and continue to recognize hotels and stabilize SPG hotels post-cutover. Hotels also have access to office hours and dedicated resources on MGS for the business process hot topics.

Additionally, in-market workshops are being held in 2019 to assist hotels with the transition to CI/TY, One Yield v2 (OYv2) and EMPOWER: Reservations & GXP. These workshops, which provide an in-person forum for reinforcing the training and resources available on MGS, were communicated to hotels on January 10. General Managers, Revenue Management, Sales, Events, or Operations/Front Desk leaders at your SPG hotels who would benefit from additional hands-on reinforcement of Marriott systems are encouraged to attend these workshops.

We appreciate your continued support and preparation for the transition to Marriott systems.

ADDITIONAL DEPLOYMENTS + KEY ACCOMPLISHMENTS

Procurement: Marriott Procurement has been focused on identifying contract savings across global, continent, cluster vendors, and several corporate and travel contracts. Estimates for initiatives deployed in 2018 forecast an incremental savings target of approximately $71 million per year to Managed by Marriott hotels within Avendra territories (North America, Central America, and Caribbean Islands) and Marriott Corporate. Hotel P&Ls are expected to reflect these savings.

Since November 2017, 91% of SPG hotels have converted to the PepsiCo beverage program. This swift conversion is critical to realizing the most significant savings possible under the new contract. As a reminder, once hotels convert to Pepsi, they are to comply with the new PepsiCo Beverage Program Global Brand Standard.

Direct Channels: In early 2018, Marriott implemented Supernova, a new holistic rate shopping tool that compares each hotels’ lowest rate displayed on Marriott.com and Starwoodhotels.com versus those found on OTA and metasearch channels. Based on this shopping data, each hotel is assigned a monthly Rate Parity Score designated as Red, Yellow, or Green based on the frequency of days for which the hotel’s rates are undercut on third-party channels. Achieving and maintaining Rate Parity Score Green is now a Brand Standard. 

Hotels have achieved significant gains in Rate Parity scores following the introduction of Supernova. In January 2018, 37% of hotels globally had a Rate Parity Score Green.  As of October 2018, that figure improved to 90%. This progress is having a positive impact on consumer-found Look No Further claims: since June 2018, claim submissions have experienced consistent month over month declines globally for the first time in the last seven years and approved claims are down 16% year over year YTD through September, compared to being up 46% the same time the previous year.

Beginning in August 2018, Marriott Rewards hotels have been assessed Best Rate Guarantee (BRG) non-compliance charges for instances where the hotel’s published room rate violates BRG, and this was expanded to SPG hotels as of January 1, 2019.

Human Resources Systems: Managed by Marriott SPG hotels have transitioned to the majority of Marriott core systems and processes to harmonize compensation and benefits. We deployed initiatives to promote Marriott culture and core values and launched enhancements to the performance management process. In 2019, we will complete our final set of integration initiatives, including the conversion of I-9 forms, and deploy Fieldglass—Marriott’s tool for hiring contract labor.

Programs and Services Fund: The establishment of the Program Services Fund (PSF) continues to support ongoing efforts to harmonize the Marriott system due to integration. Marriott is delivering savings from the integration through the PSF, which took effect on January 1, and the PSF yields a neutral-to-positive economic outcome to owners for a vast majority of hotels. The 2019 Hotel Budget process included changes as a result of implementing the PSF. The Budget process will be the primary vehicle for communication about the PSF with respective Regional Teams and Account Representatives moving forward.

We sincerely appreciate your continued support and engagement throughout the integration. With the Reservations Platform cutovers complete and hotel stabilizing on the new systems, as well as the new loyalty program to launch in the coming weeks with additional enhancements to follow later in the year, we look forward to further delivering on the financial and ease-of-business benefits of our Owner & Franchise Value Proposition throughout 2019.