Why Amex Is Hoping Against The Starwood-Marriott Merger

For reasons outside every involved party's control, the potential purchase of Starwood Hotels & Resorts by a Chinese investment group has become a side issue in the political conversation. However, now that Marriott International has emerged as a likely buyer, the optics — and concerned parties — have shifted.

In a research note obtained by Barron's, Barclays Analyst Mark DeVries outlined the ways in which American Express would likely be extremely put off by the purchase of Starwood by Marriott. Amex and Starwood have offered a co-branded credit card for some time that allows guests to earn points on purchases unrelated to hotel activities, but DeVries explained that if Marriott absorbs the hotel and resort network, it will just as likely cancel the agreement with Amex and simply extend its existing branded credit card to its new pool of customers.

"The Marriott rewards scheme better incentivizes revenue-generating spend for the hotel chain (bookings, etc.) relative to non-revenue-generating credit card spend (outside hotel properties)," DeVries noted. "Additionally, we find that Starwood’s [preferred guest] program is more costly to fund than Marriott Rewards. Each of these factors, in conjunction with the fact that running parallel offerings is unwieldy and expensive, leads us to believe that a consolidation of rewards programs would be an inevitable outcome of a Marriott/Starwood merger."

DeVries conceded that if Anbang Insurance Group, the consortium of Chinese investors, manage to pull a last-minute upset with the Starwood deal, Amex would likely keep its branded card program in place. However, in Barclays' opinion, that seems like an outside shot at best, which means there are probably a handful of executives at the credit card company scrambling over the projected damages — a 4.5 percent decline in earnings, as well as similar dips to its stock prices as a result of negative news coverage.



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