Marriott Raises $920 Million From Chase & American Express

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Marriot has just announced that it has raised $920 million in cash through the agreements it holds with JPMorgan Chase and American Express and, in doing so, follows Hilton in using its credit card partners to raise much needed liquidity during the current crisis.

Marriott is about to receive $570m from Chase and $350m from American Express but while Hilton chase to raise funds by simply selling $1bn of its points to American Express, Marriott’s route to liquidity is marginally more complicated.

Per Marriott:

The $570 million from Chase includes $500 million of prepayment of certain future revenues and $70 million from the early payment of a previously committed signing bonus under the co-brand credit card agreement. The $350 million from American Express is for the pre-purchase of Marriott Bonvoy points and other consideration.

It’s interesting that Marriott has been happy to confirm that American Express has purchased Bonvoy Points in return for the $350m that it is handing over but that it has been considerably more opaque when discussing what exactly Chase will be getting in return for the majority of the $570m that it is handing over to to the hotelier.

I can’t find a detailed stockmarket statement from either Marriott or Chase right now and I’m struggling to think of anything other than Bonvoy points that Chase may be committed to purchasing from Marriott so (I could be very wrong here) I’m going to assume that it is, in fact, Bonvoy Points that Chase has purchased and that Marriott has its own reasons for not announcing that outright. I’ll update this post as an when I find an answer to this.

Quick Thoughts

The best rates at which we have seen Bonvoy Points sold in recent times have all been around the 0.85 cents mark but I doubt Amex or Chase would be paying that much for any points they have purchased…especially as Marriott is clearly in need of cash.

At a guess, I would expect Amex and Chase to have paid no more than 0.5 cents/point under current conditions and that would mean that a lot more Bonvoy Points have just entered circulation.

We know for sure that Amex spent $350m on the points that it has purchased and, at 0.5 cents/point that would equate to an incredible 70 billion Bonvoy Points that it has just added to its existing balance. If Chase’s prepayment is also for Bonvoy points that could be another 100 billion Bonvoy points that are waiting to hit the market taking the total of newly issued points to a mind-blowing 170 billion.

That’s a lot of hotel nights…even at top-tier peak-season pricing!

If you’re hoping to apply for a Marriott credit card in the near future this is probably good news for you as we’ll probably see a few “best ever” welcome offers appearing when the travel world begins to reopen. If, on the other hand, you’re already sitting on a big balance of Bonvoy points this probably isn’t good news at all – even if this deal has only seen 70 billion points created (for Amex) that’s still an incredible amount of points that are now waiting to be handed out to consumers and that many points can only lead to inflation.

Bottom Line

When we heard that Hilton had gone to American Express to raise the cash it needed I wondered if Amex would have any funds left to help out any of its other co-brand partners…and now it looks like I have my answer. American Express clearly has a very deep wallet!

The fact remains that while this may be good news for Marriott and for anyone waiting to pounce on a good credit card welcome offer, for the rest of us this news isn’t so great. Billions of new Marriott points pouring into the market aren’t going to make awards any easier to find and they’re certainly not going to help support the value of the currency – I now fully expect to see further award chart devaluations in the very near future.