More Marriott Devaluations Soon?! Chase Outbids Capital One at MIA

Marriott might be increasing point prices, there's a ton of Delta award space if you want a summer in Europe, and there's a battle happening for airport lounges. This and more in today's roundup. Big favor thumbs up to help with the algorithm, share this with someone that might benefit, especially for award space. Starting off, we might see a devaluation for Marriott. You might not know this, but a lot of Marriott hotels aren't actually owned by Marriott. They operate off a franchise model similar to Subway or McDonald's. Marriott itself owns less than 1% of the hotels, and 99% of the 9,300 hotels or franchises are managed under agreements. This is why sometimes hotels change flags. Walia Beach Resort in Maui is a great example of this. The resort itself and everything opened in 1976, and when they opened, they were actually intercontinental. And 25 years later, they switched brands and re-flagged as a Marriott. The other way also happens. So for example, Marriott's becoming Hilton's and oftentimes Hyatt's. With all of that said, some Marriott owners aren't happy. 51 owners, representing nearly 1,000 hotels, are demanding that Marriott revise their rules for their program, so they get a bigger slice of the pie. The core issue being revenue from co-branded cards, which jumped up by 35% this year to nearly $1 billion. The owners originally thought the program was just breaking even, and now the hotels feel like they're getting ripped off. Looking at the 5-year for Marriott's stock price, there is some credence there. Marriott, Hilton, IHG, and Hilton are up about 150-182% in the last 5 years compared to Spy, so S&P, which is only up 75%, so arguably twice as good. The key point being that the corporate side of the hotels are doing great. On the franchisee end, they're arguing that they're the ones bearing the cost of the rooms when people are using credit card points. Hence why they want a slice of the credit card agreement pie. At a minimum, they want the compensation for loyalty program stays to be on par with what they receive from third-party online travel agencies like Expedia. I don't think that's going to happen because Expedia takes 20%, so for an 850 stay, they might be paying $170 to Expedia, and then $680 flows to the hotel. When you redeem points for hotels, oftentimes it's a fraction of that, unless it's very full. The employee MMP rate is a good proxy. So for example, last minute for the W Motives might be $845 on the front end, and then for the MMP employee rate, it might be $169. Generally, this number is servicing plus the opportunity cost of giving up a room. In the summer, it tends to be pretty low since it's monsoon season, so $169 is probably actually servicing. If you do want to go, I'd personally aim for late October, since it's easier to patch together a points day using certificates and intro bonuses. On one hand, there's great value for us if you know what you're doing. On the other hand, the hotels are getting the short end of the stick. At the same time, hotels did know this going in, so it shouldn't be a surprise. Historically, and this is true of the other brands as well, they never got market rate compensation, and that's just not how it works. The main draw of points is to either fill dead inventory, or drive traffic and brand recognition. I do get that it is a bit of a weird spot. If you're a hotel owner, you see Marriott making more money, but it's not flowing to you, and it feels like a scam. On the other hand, a lot of hotels have started to nickel and dime people, and they've been doing this stuff for years, and they just don't really care about the customer experience. Breakfast is another good example of this, and even parking in rural areas can be problematic now. If Marriott does give them a bigger slice of the pie, do they stop cutting corners? Maybe unfair, but I just don't think they do that, because they're gonna min-max, that's what makes sense for them. Especially when there's no consequences for not following brand guidelines. But yeah, curious what you think the outcome will be, and what you think is fair. My hope is that they don't end up paying the hotel's market rate, because that would mean a massive devaluation to the program, to the point that the points probably won't make any sense. If you're looking for a new intro bonus, consider the Chase Sapphire Preferred card. The limited time offer is pretty solid. You're getting 100,000 bonus points after 5,000 spent on purchases in the first 3 months from account opening. 100k bonus points is worth a minimum of $1,000 in cashback, or as a statement credit, and my target is $0.02 per point to $2,000 value by transferring out to partners to redeem for business and first class flights. There is a $95 annual fee, but they did just update the card to improve the hotel credit, which helps a lot of people break even. There also are new multipliers, which can help long term if you are trying to earn more points. If you want to run the numbers, we do have a calculator on the site, and it should pop up if you search AskSebiCSP, worth it. On a side note, if you want to learn more about this card, or pretty much any other card out there, and you want to support the channel, we have links on the website, AskSebi.com, and also down below in the description box. Make sure the links are competitive and that the cards make sense for you, but otherwise it's a huge way to support the channel, so thank you in advance. If your natural spend isn't high enough, make sure not to force it. Overspending doesn't really make sense. I consider estimated tax payments, especially if you have dividend income, or if you're not a W-2 employee. Another option is just business spend, especially for the intro bonus component. One tool I like is today's sponsor, Millio. If you're a business, you can manage paying, and getting paid, through Millio. Millio allows you to pay your vendors with ACH, credit cards, and other options, and vendors can get paid however they want. This means that you can pay by card, even for vendors that don't accept cards. They do charge a fee for credit cards, but it can still make a ton of sense for intro bonuses, where you get value beyond the fee. Another good use case is free night awards that are tied to spend. Let's say a Hilton Anywhere night that you get for 15k spend. It does depend on your situation, but if you're into aspirational travel, then the math tends to work out really well. Topping off for elite status, whether United, Delta, or Hyatt, being another great option. The numbers do have to make sense, but a good option to have in your toolkit, ready to go. Try it yourself, go to the link here or down below, sign up for free, and schedule your first payment today. Speaking of intro bonuses, Delta just dumped a bunch of award space for the summer. We're seeing some Asia, but mostly Europe. Great opportunity though if you are looking to travel. As someone that has a lot of Delta miles, the annoying part about them is that they're usually pretty mediocre, unless there's a big dump. Lots of ways to look for space, whether directly or using tools. For Asia, you're mostly looking to leave from either Mexico or Minneapolis to Incheon for 120k for business class. You also could do 50k for economy, or 86k for premium economy, but I feel like 120k for business is going to be the move. A lot of these do have a ton of space, so here are 9 seats, which is awesome, and it's on the A350. It's not first class, but it is a solid business, especially from a US carrier. If I had to pick from a big 3, it would be Delta 1 and the A350. Less good, but if you want to do a 2-in-1 trip, Honolulu to Haneda, Tokyo is 130k, but definitely less of a deal. Okay, what about Europe? If you want to reposition, then there are a bunch of options in the 105k range. For example, down in Panama City to fly to Amsterdam, and it's going to be using Delta Miles to book KLM, and it's 105k and 53 bucks. Another option is Panama City to Paris with Air France and same pricing here. If you are looking for that 2-in-1 trip, Costa Rica, Mexico City, and Monterey are options as well. If you'd rather not reposition or make it a shorter reposition, then the US has a ton of picks. These are going to be from Atlanta, Boston, Cincinnati, Detroit, JFK, New York, Indianapolis, Seattle, and also Salt Lake City. Basically all the Delta hubs. Most of these do have a pretty insane amount of space, and I'd just recommend taking a look or using an engine and seeing what pops up. For example, this is when it starts for Atlanta, end of June, and you have Munich, Dublin, Zurich, Frankfurt, Brussels, and Rome. It's all 115k for business. Going to the back, end of August, you have Barcelona, Naples, Venice, and London. What we're looking for is at 115k, but there are going to be some dates that are 150k, which I'm guessing are just the ones that have ran out of 115k once. Main idea being that Delta has this much room that they're trying to get rid of, and they're moving this batch at 115k. After this one, it gets more expensive. For Boston, you have Dublin, Barcelona, Rome, Lisbon, Paris, and Milan. Same ending date range mid-August, so lots of options. I'm just going to speed run the rest, but feel free to pause and again, check your dates. For Cincinnati, it's only Paris, but not bad at all if you're from there. For Detroit, you have Dublin, Munich, Paris, Rome, and Frankfurt. For JFK, you have a ton and a lot of interesting ones, including Berlin and Prague. I don't think we've seen those two yet. They also have Zurich, which we also saw with Atlanta, but isn't really prominent in the other ones. One of the other benefits of starting from JFK is that you can visit the Delta One Lounge in JFK. This is a business class only lounge, and it's pretty solid. I'd put it into the top three of Delta lounges in the US. The LA one's still my favorite, and Seattle has a pretty good vibe. New York is busy, but great restaurant team. For MSP, it's pretty vanilla. Dublin, Paris, Rome, and London. Same thing with Seattle. London, Paris, Rome, and that's it. For Salt Lake, it's just Paris and London. I do need to dig into this bit more to figure out where I want to go, but I'm probably repositioning in either New York, Boston, or Atlanta. Yeah, pretty open to any destinations if you have any suggestions. Also, while you might want to have points and miles ready to go. If you don't have any delta miles, they do have pretty good offers on most of the cards right now, so the ones with annual fees. It might be a bit late if you haven't applied yet, since you have to hit the minimum spend, but good to always have in your back pocket. Finishing off, Chase has a new lounge coming to Miami. If you're into business drama, this is a pretty interesting story. Last year, Miami-Dade County submitted an RFP, Request for Proposal, for a new lounge. They were looking for a lounge that was available for passengers to access via memberships or day passes and not exclusive for a specific airline. Features including food and beverage, made-to-order items, premium liquor, and passenger amenities. It's a full-service lounge. It's going to be on the E7. Size-wise, it's a bit under 14,000 square feet. For context, the Chase Sapphire lounge in LaGuardia is 19,000 square feet, and the one in Boston is a bit smaller, at 11,600 square feet. I wouldn't call the Miami one big, but it's not small either. It's kind of in the middle. The expectation for the lounge was a very competitive contract. This would be lounge number 11 in Miami, and there's already three from American, two from Turkish, and one from BA, Delta, LATAM, and TAP, and also the second bank lounge for the airport. The other one I'm still not allowed to mention on YouTube, per their team. That lounge is in Terminal D, and it was originally 8,000 square feet, but in 2019, they did expand it by 4,000 square feet to get it to 12,300. Pretty close size-wise, and it just depends on if you're flying from D or E. Also, I guess what the lines look like, and ironically, having a second bank lounge should help a lot here. Also, I knew that lounges were expensive, but I didn't know how expensive. The estimated cost to be paid to the county over 15 years is $93.8 million. This includes $3.46 million annually in privilege fees, and then 40% of other charges, including guest fees, food and beverage, alcoholic beverages, advertising promotion, and also merchandising. Let's do some quick math. $93.8 million total estimated revenue, divided by 15 years, is $6.25 million revenue per year. $6.25 minus $3.46 for the privilege fee is $2.79 million in additional payments for those other things. Additional payments being 40%, so $2.79 divided by 40 times 100 is $6.98, about $7 million. I'd guess that $7 million is what's expected to be spent on advertising, to promote, and everything else, since I'm not sure how much merchandise sales they're going to have, and I don't know how many people are paying to enter the lounge. Kinda curious what you think about these economics. The winner also has to pay for the capital investment to build out the actual lounge, and pay for an elevator and everything needed to make it look nice. The elevator isn't cheap, but compared to everything else, pretty affordable at $100k per floor. For the build out per the Nashville Post, we're looking at $1k to $1.5k per square foot. 14,000 square feet times 1,000 would be $14 million, and times 1,500 would be $21 million. The all-in number here is easily north of $100 million over 15 years. Okay, so if we unnecessarily build out a financial model for this, because I was curious myself, the worst case, assuming that it's a high build out, and the 40% is on marketing and ads, that's almost $220 million in costs for the lounge. The best case is if the 40% is on something revenue generating, let's say entry fees, and let's assume a very generous gross profit, they might be looking at a net cost of $24 million to $31 million, which I don't think that's actually the case, but curious what you think. Most people I see going in are going in with a card, they're not paying for additional guests, or buying merch. Okay, so the lounge is expensive, and the worst case being $220 million. It might also be an overpayment. So again, Chase was paying $3.46 million per year and 40% fees, and if we look at the proposers, that matches with AD Partnerships, so we know who is who. The other two being PPL Holdings and TAV American Operations. PPL Holdings is Plaza Premium, which are solid lounges, and I wouldn't be bad either. TAV is interesting. TAV is a member of Group ADP, and that was formerly Airport de Paris. They've also built out X-Time lounges, and Prime Class. Specifically in the US, they have Prime Class, JFK, and Turkish Dulles. So it sounds like a Priority Pass lounge on the surface. They also are apparently the operators for Capital One lounges. In fact, they've been working together since 2020. So Chase beat out Plaza Premium, but also Capital One. Taking a look at the deals, Plaza offered $120K annually, and 13-25% of gross revenue. So drastically lower than AD Partnerships, which is Chase, for both numbers. For Priority Pass lounges, even though the sticker price might be $30 something, that's what's being paid to Priority Pass Corporate, and then they pay the lounge $23-28 per visitor. We can run the numbers, but I'm assuming that it's not crazy high, unless they get crazy volume. For TAV, which is probably Capital One, they were looking to pay 13-26%, so 1% higher than Plaza, but only $100K per year. Let me know if I'm crazy, but it does feel a little bit like Chase aggressively upbid everyone to win this. On the surface, it looks like they're trying to block Capital One, but I don't think that's the case. Looking at Miami Airport's history of lounges, yes, there is a recent wave of Avianca and BA, but on average, you're looking at a new lounge every two years or so. That means that not going for it now might cost them that opportunity. Depending on metric, Miami is one of the top ten wealthiest cities in the US. There's also been a flood of wealth from cities like New York, especially in the past year or so. Looking more historic, so 2014-2024, Miami has the largest growth of millionaires, second to only the Bay Area. Looking at millionaire count broadly, it does feel like these are battleground cities. New York is New York, Bay Area I'm a bit surprised by. Chicago is a bit of a mess, and there is a lot of airport politics from my understanding. Houston seems obvious and a good target, and same with Seattle. For Boston and now Miami, we are going to see new competitors, probably in 2029, once the lounges finish. I would think of this less as an overpayment to be Capital One, especially because Capital One's footprint isn't even that big, relatively speaking, and is also non-existent on the west coast. This feels like a necessary play to fight number one, and I'm all for it. Chase is currently at ten lounges, if you count the Etihad lounge in JFK. But it still pales pretty aggressively to the 20 from number one, especially if you consider the side bar style options. Also, we did have a chance to stop by here for five minutes on our flight out, and it's amazing, would strongly recommend it. I'd probably like it better than the main lounge. Way better food, very good service, and just a fun time. It's also ignoring the international battleground, where Chase has just one in Hong Kong, so there's still a long way to go. Out of curiosity though, do you think Chase will ever catch up, or do you think it'll never happen? Is it just Sisyphus pushing the boulder, and it's a long-term, futile process? Again, if you want to learn about cards, we have links on the website, asksebi.com, and also down below in the description box. And if you're curious, all legal affiliate disclosures can also be found below in the description box. If you made it to this point, leave a boulder or rock emoji in the comments down below, and I'll try to heart it and also respond. Three questions. Number one, what do you think will happen to the whole Marriott situation, and whether our points will be devalued? Number two, are you booking anything for Delta 1, and what should I consider? And number three, what's your view on this whole lounge battle? Let me know and everyone else know in the comments down below. Big favorite thumbs up, share this, but otherwise hope you liked it. See you next time.