Sheraton-Visa Deal Could Sink Amex Alliance

ITT Sheraton Corp. has signed a promotional deal with Visa U.S.A. that may spell the end of the hotel company's relationship with American Express Co.

The announcement last week of a long-term, multimillion-dollar marketing alliance with Visa calls Sheraton's loyalties into question.

The Sheraton chain of more than 450 hotels and resorts has worked closely with American Express since 1996, when the companies introduced the ITT Sheraton ClubMiles card. An American Express Optima product, it provides revolving credit lines and lets cardholders earn points toward hotel discounts.

Sheraton said it will be fully committed to the joint Visa campaign, which includes print and Internet advertising, point of sale materials, sweepstakes, and special offers for Visa cardholders.

"It doesn't necessarily mean we will discontinue the arrangement with American Express, but we will focus on the Visa program," said Hoyt H. Harper, ITT Sheraton's vice president and director of marketing programs and partner marketing.

American Express declined to comment.

Visa executives said they are working toward a more complete relationship with Sheraton that could include converting the American Express-branded products to Visa. This would encompass everything from gift checks for Sheraton employees to the company's purchasing and cobranded cards.

"The Visa name will be promoted throughout all the properties, to employees and to all their customers," said John Bradley, Visa's vice president of market development and acceptance.

Sheraton, a Boston-based subsidiary of Starwood Hotels and Resorts Worldwide Inc., "recognizes that a number of guests use American Express," Mr. Harper said, and does not view the new relationship with Visa as a conflict. He said Visa is active in the lodging and travel industry, and Sheraton wanted to take advantage of a joint marketing opportunity.

Visa and American Express have taken different paths in the hotel industry. Visa has favored multifaceted, long-term promotional deals, like the one with Sheraton and another, signed in 1996, with Marriott Hotels. American Express has looked to cobranding relationships, like the Sheraton one and another with Hilton Hotels.

"In the lodging industry, we want to reinforce our positioning as the preferred card," said Bruce McElhinney, Visa U.S.A. senior vice president of market development and acceptance. "With any of the long-term agreements we have with merchants, the idea is to encompass as many facets as we can."

Given that Sheraton has deals with archrivals, it will have to walk a fine line to keep both partners satisfied, observers said.

"It creates a potential conflict," said Stanley W. Anderson, president of Anderson & Associates, Arvada, Colo.

He said hotel guests with Sheraton-American Express cards might be confused when they see promotions geared toward Visa. Hotel employees might also feel awkward pitching Visa over American Express, he said.

"Visa is going after the huge share of the corporate card market that American Express controls," said Mr. Anderson. "Previously they have gone after the brand, now they are going after the individual card programs."

Frances M. Dale, president of Sterling, Va.-based Entandem Inc., said Visa might be able to chip away at the commercial card leader. "You are not going to see American Express drop by a million cards and Visa increase by a million," she said. "But if you keep adding on programs of this size, eventually it will impact market share."

Visa and Sheraton are inaugurating their alliance with a promotion at the hotel chain's eight resorts in Hawaii. Until yearend Visa cardholders staying four nights can get a fifth night free, plus dining credits from $25 to $50. Other benefits include room upgrades and late checkout times.

The companies are also working to cross-sell products to various demographic groups. For instance, plans call for advertising Sheraton's Luxury Collection resorts to Visa gold and platinum cardholders.

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