Starwood Preferred Guest (SPG)

Starwood Preferred Guest (SPG) was the former loyalty program of Starwood Hotels & Resorts, which included brands like Sheraton, Westin, St. Regis, and W Hotels. Widely regarded as one of the most innovative and rewarding loyalty programs in the travel industry, SPG was celebrated for its member-friendly policies, generous point values, and exceptional elite status benefits. It cultivated a fiercely loyal customer base that often chose Starwood properties specifically to earn and redeem SPG points. However, the program is now defunct. Following the acquisition of Starwood by Marriott International in 2016, SPG was merged with Marriott's own loyalty program. After a transitional period, the combined program was rebranded in 2019 as Marriott Bonvoy. Despite its disappearance, SPG remains a legendary case study in building brand loyalty and serves as a benchmark against which other travel rewards programs are often measured.

While you can no longer earn SPG points, understanding its success offers timeless lessons for investors, particularly those following a value investing philosophy. The story of SPG is a masterclass in how a company can build a powerful, non-physical asset that drives enormous long-term value.

A strong loyalty program is a classic example of an economic moat—a durable competitive advantage that protects a company from rivals. SPG was a fortress for Starwood.

• Customer Stickiness: The program created powerful switching costs. Members with high point balances or elite status were highly incentivized to stick with Starwood brands rather than switch to a competitor, even for a lower price. This “stickiness” created a reliable stream of revenue.
• Pricing Power: Because of this loyalty, Starwood could often command higher room rates than competitors that lacked a comparable program. This ability to influence prices without losing business is known as pricing power, a key trait of a high-quality business.
• Brand Identity: SPG became synonymous with aspirational travel and premium rewards. This powerful brand identity is an intangible asset that, while not listed on a balance sheet, was incredibly valuable.

For investors, the lesson is to look beyond the financial statements. When analyzing a consumer-facing company, ask: How deep is its relationship with its customers? Does it have fans or just transactional buyers? A program like SPG is a sign of a deep, defensible moat.

When Marriott acquired Starwood, it wasn't just buying buildings and brand names; it was buying the millions of high-value, loyal customers attached to the SPG program. The program's value was a critical component of the acquisition's logic. For a period after the merger, the two programs co-existed, and members could link their accounts and transfer points. The official rate was 1 SPG point = 3 Marriott Rewards points. This created fascinating dynamics for savvy travelers and illustrates a key market concept:

• The Arbitrage Play: Before the programs fully combined, SPG points were often considered more valuable than a 3:1 ratio would suggest, especially when transferred to airline partners. This created a form of arbitrage, where members could move points between the programs to cherry-pick the best redemption options, extracting maximum value. For example, a hotel stay might have been a better deal using Marriott points, while a flight upgrade was a better deal by first converting Marriott points to SPG and then transferring them to an airline.

This period highlights how investors and consumers who understand the underlying value of assets (in this case, loyalty points) can capitalize on pricing inefficiencies during corporate actions like mergers.

The legacy of SPG is a powerful reminder that a company’s true value often lies in its intangible assets. A strong brand, a loyal customer base, and a wide economic moat are the hallmarks of a wonderful business that can compound wealth for shareholders over the long term. When evaluating your next investment, especially in the airline, hotel, or retail sectors, dig deep into its customer loyalty initiatives. A program that turns customers into advocates is worth its weight in gold.