Rich Get Richer – Hotel Edition
Recently the large hotel chain Marriott acquired the smaller group of hotels known as Starwood. Before this merger, each chain specialized to its niche of travelers. Marriott catered to frequent travelers looking for a go-to hotel in one of its many locations. Starwood had a group of travelers who traveled to the chain’s destination locations for the perks of their unique loyalty programs.
With these two specific types of travelers, it is easy to see how the rich-get-richer will benefit some and not others. Hotel loyalty programs take advantage of filling their empty rooms with people who value them for free – while potentially benefiting from giving away these “free” rooms to customers who will most likely buy a few drinks from the bar or order room service at raised prices. However, there are only so many empty rooms in each hotel. At some point, only the most loyal travelers, meaning those who spend the most in the first place, will receive the loyalty rewards. With so many frequent travelers to the Marriott’s many locations, these customers will likely ruin Starwood’s loyalty program for previously preferred customers and reap all of its benefits.
This relates to what we have been learning in Networks about the rich-get-richer effect. In Chapter 18 regarding Popularity, we learned about the Power Law and how it affects those who are already popular in helping them become more popular. In applying this logic to Marriott and Starwood, we can see that those who are already traveling a lot and using rewards programs will be able to obtain the finite number of free rooms and rewards given by these hotel brands. The customers have to not only be loyal, but more loyal than other customers. This could also lead us to wonder if Marriott’s wide population of customers will eventually have the negative effect of lowering Starwood’s popularity as more travelers choose Marriott in its wide variety of locations. In this case the Power Law also applies: we can think of the return on investment as proportional to the size of the investment, which would mean that the size of the investment grows exponentially. Marriott’s reach, in this case, can grow exponentially while Starwood shrinks in the background.
Sources:
http://www.vox.com/2015/11/19/9760798/spg-merger-marriott