American Express has reportedly won the exclusive rights to be the credit card provider for Hilton Worldwide, ending a deal in with American Express and Citigroup shared rights to issue credit cards for the hotel operator.
According to a report, the deal kicks off Jan. 1, although the companies didn’t provide any terms of the deal. American Express has been losing ground to Citigroup, which won the bidding war for Costco Wholesale's credit card portfolio. What’s more, American Express wasn’t able to secure a renewal of its partnership with JetBlue Airways back in 2015. On top of that, American Express is facing challenges luring well-heeled customers who are increasingly turning to Citigroup or Chase and its Sapphire card that offers generous rewards points.
“This announcement is clearly positive for American Express as this breaks a string of defections,” Sanjay Sakhrani, a KBW analyst, said in a note to clients covered by the report. “It also potentially signals a peak in the competitive intensity of these deals.”
The report noted the Hilton win removes some of the pain American Express has been feeling from losing the Costco deal, which accounted for around 20 percent of its worldwide loans and 8 percent of card spending. The report noted Citigroup said terms of the Hilton deal didn’t make sense from an economic perspective, given it is a relatively small portfolio. A report in The New York Times in April highlighted some of the troubles American Express is having. According to the paper, for decades, the American Express credit card signaled affluence, success and something to aspire to. But a funny thing happened along the way: Millennials started shunning the flashy, snobby impression associated with the Amex card, favoring the less-assuming Chase Sapphire Reserve card. That preference has gotten Amex worried.