To strengthen its position in the travel and entertainment market, American Express Co. has unveiled a second cobranding program with a hotel chain.
The deal involves a former bank card partner, ITT Sheraton Corp. In 1994 the $4 billion chain of 420 hotels discontinued a cobranded Visa card issued by MBNA Corp.
The ITT Sheraton ClubMiles Card from American Express is a revolving product under its Optima brand. The New York charge card giant unveiled a similar card with Hilton Hotels in September.
"We get the best of both worlds with these cards," said Mary Miller, senior vice president of cobranding at American Express Travel Related Services Co. "We extend our franchise to new card members, and we cement our strong position in the lodging arena amongst our card members."
An ITT Sheraton spokeswoman said it has been working with American Express for a year to come up with a no-fee card that it can tie to its frequent-guest program. It has 1.2 million members, including 800,000 at the gold level. ClubMile card holders are automatically enrolled in the program.
In the bank card arena, only a few issuers have partners in the same industry, said Michael Auriemma, president of Auriemma Consulting Group, Westbury, N.Y. He cited as examples Household International, with two regional bell cards, and Associates Corp., issuing a number of cobranded petroleum cards.
"Which one is American Express going to push, Hilton or Sheraton?," Mr. Auriemma asked. "If they have a good marketing idea, who will they choose?"
However, American Express spokesman Marcos Rada said Amex has relationships with many companies and always maintains a wall between them with dedicated marketing teams for each company.
The ITT Sheraton spokeswoman said the ClubMiles card, based on its frequent-guest program, stacks up well against its three major competitors. She said ClubMiles card holders can earn points faster under its rebate structure than they could on the Hilton Optima card or from Marriott's Honored Guests Visa from First Chicago NBD Corp.
The ClubMiles card carries a 8.9% rate for six months, which rises to prime plus 9.9%, or 18.15% at today's rates. The rate for cash advances and card members the company deems "not in good standing" is prime plus 12.9%.
For general purchases, every dollar charged to the ClubMiles card earns one ClubMile. For every dollar charged at participating ITT Sheraton locations, card holders earn an additional point. Card holders at the gold level receive three additional points. ClubMiles are deposited in the card member's ITT Sheraton Club International account.
Under the bonus program, card holders receive 1,000 ClubMiles for their first charge with the card, they are upgraded to gold membership in the frequent guest program for one year, and receive one upgrade to a Club- level room upon enrollment.
In addition, card holders receive a certificate each year for 50% off regular room rates at participating Sheraton hotels and resorts.
Balance transfers will not be eligible for ClubMiles.
ClubMiles can be redeemed for free hotel stays and room upgrades, car rentals, free flights, and airline ticket upgrades.
American Express said it will market the card via direct mail to its card holder base and to the 45 million guests who stay at Sheraton each year - with special attention to frequent-guest program members.
ITT Sheraton will continue to participate in the American Express Membership Rewards program. However, charges made with the ITT Sheraton Clubmiles card cannot earn points under Membership Rewards. The chain also has marketing relationships with Diners Club and MasterCard.
Ms. Miller said that because Membership Rewards is designed primarily for charge card users, the two programs complement each other.
"Frankly, we also have to recognize the most important thing for us is to get the right product in the consumer's hand," said Ms. Miller. "If a consumer who's carrying a charge card today decided he only wanted to carry one card and it was the Sheraton card, then so be it. We keep him in the franchise, and we meet his needs."
Ms. Miller said the Hilton Optima did "significantly better than our expectations," producing double the number of cards in the first six months than American Express had expected.
"What they are trying to do is restake their stronghold in the travel and entertainment business," said Michele Turkel, president of Spectrum International Consulting Corp., Scarsdale, N.Y.
Mr. Auriemma said a number of companies in the travel and entertainment industry are waiting in the wings to sign up with American Express for cobranding programs.u