The Benefits of Marriott's New Partnership
Online travel agencies changed the way people book travel, giving the individual more control over the process, and eventually leading to a price war and lower margins for hotels (OTAs demand a 25%-35% commission). Since then, hoteliers have been trying to figure out a way to regain a foothold in the industry, and Marriott (NYS: MAR) may have finally found a way in.
Last week, the company announced a partnership between its rewards program, Marriott Rewards, and Ctrip.com (NAS: CTRP) . Through this partnership, Chinese travelers will not only earn Marriott points when they stay at any international Marriott location, but also Ctrip points.
It's the first of its kind in the travel industry, and should help boost activity within Ctrip's loyalty program. It's a bigger deal for Marriott and its 38 million rewards members, though, offering two different types of benefits.
First, it gives it more credibility with Chinese travelers who see that a trusted company like Ctrip.com is essentially endorsing it. This is important because Marriott considers China to be its top market outside of North America, with a new Chinese hotel slated to open each month from now until 2013.
Second, and most important, it gives members an incentive beyond cost to stay at Marriott hotels. That could be an important edge for the hotelier in such a competitive industry.
Is this plan B?
In January, Marriott and other popular hotel brands tried another angle to combat the OTAs. The companies launched their own online travel site, Roomkey.com, which flopped.
Changing shoppers' already established habits is possible but extremely difficult, and travelers couldn't really find a benefit to booking through Roomkey.com rather than Expedia or Travelocity, which they were already familiar with.
The hotel companies argued that Roomkey.com offered the benefit of using your loyalty points, but that didn't prove enough of an incentive to change travelers' booking habits. Popular OTAs showed the same steady streams of traffic since Roomkey.com's launch earlier this year. Roomkey.com has also kept a steady flow of incoming traffic -- unfortunately, it doesn't even get a third as many users as industry leader Expedia.com, and it hasn't shown much growth.
Would you rather spend or earn?
That's the beauty of Marriott Rewards' partnership with Ctrip.com -- rather than offering a new way to spend your loyalty points, the companies are offering a way for travelers to gain more points without having to change their habits very much.
It should be an easy transition that Chinese travelers welcome with open arms. And if it works, it will probably become a popular trend in the industry.
The hotel industry is an international one. For American companies, penetrating new markets can been difficult, though, as companies learn about new demographics by trial and error. Marriott has always been great at this, and this new partnership only works to strengthen that. To check out three more American companies set to dominate the world, click here. Or to find out about another company with an outsized opportunity in China specifically, check out our new premium research report on Apple.
At the time this article was published Fool contributor Amanda Buchanan holds no position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Ctrip.com International and Apple. Motley Fool newsletter services have recommended buying shares of Ctrip.com International and Apple, as well as creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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