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Caesars Entertainment and Starwood Hotels Ink Partnership Deal

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This morning, Caesars Entertainment (NASDAQ: CZR  ) and Starwood Hotels (NYSE: HOT  ) announced a partnership in which the two will essentially combine their loyalty programs. The agreement allows guests staying at a property managed by one company to also earn points for the other and redeem points earned at the other.

For example, if you stay at a Starwood hotel in New York City for work and earn points, the following week you could redeem those points at Caesars Palace in Las Vegas or a rewards member could work it the other way around.

Additionally, Starwood will now be able to offer the new and exciting concerts and experiences in Las Vegas because of this partnership. Currently, a two-night stay at the Planet Hollywood Hotel with two tickets to the Britney Spears concert and a meet-and-greet with the singer is being offered to Starwood Preferred Guest members who have enough points.

From a business standpoint, this partnership makes sense for both companies, as each will get something it otherwise would have had to spend billions of dollars on to get. Starwood gets the ability to offer its rewards members the chance to redeem points at casino properties all around the country and, more importantly, on the Las Vegas Strip. While Starwood does currently have locations in Las Vegas and close to Las Vegas Boulevard, it would have cost more than the company would likely have wanted to spend to buy a property on the coveted street. Furthermore, Starwood is in the business of managing hotels, not running casinos so it makes more sense to partner with someone as opposed to starting a new venture. And lastly, Starwood gets the opportunity to offer experiences such as the Britney Spears concert and meet-and-greet, which may otherwise not be available to them.

As for Caesars, the company instantly gets millions of new rewards members plugged into its network. Those members, who otherwise may have stayed at an MGM Resorts (NYSE: MGM  ) property in Las Vegas or around the country, will now have an incentive to stay at a Caesars property. Furthermore, Caesars now has millions of new rewards members that it can market to, which could help the company push hotel rooms both in Las Vegas and around the country during times when hotel occupancy is expected to be low.  

Lastly, while this certainly seems like a no-brainer idea, Caesars and Starwood are late to the match-making party. MGM Resorts and Hyatt (NYSE: H  ) announced an extremely similar deal back on June 5 of this year. And even more than that, MGM and Southwest Airlines (NYSE: LUV  ) also inked a deal on June 3, 2013, to reward travelers going to Sin City. Since these programs at MGM are relatively new, it is still unknown exactly how these deals have affected the casino operator or its partners. But these deals are relatively inexpensive ways for all companies involved to build loyalty with their customers and allow them to provide additional services.  

Investors of any of the companies involved in these deals should keep an eye on how their rewards programs perform in the future and should watch whether redemptions experience any dramatic changes. From an investing standpoint, I personally can't see why the Starwood-Caesars partnership wouldn't benefit both in the long run. And who knows, perhaps that relationship will eventually become even stronger and blossom into more than just a rewards program relationship.

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