American Express Co.'s top executive stressed that cobrand deals are complementary to the company's business after news broke that American Express won an exclusive cobrand relationship with Hilton Inc.
According to a June 1 report from The Wall Street Journal, American Express outbid Citigroup Inc. to become the exclusive issuer of Hilton Honors cards. The Journal cited executives from both companies, who said the new cobranded card arrangement will take effect in January 2018.
During an investor presentation, American Express Chairman and CEO Ken Chenault said the company is a "very disciplined" buyer and wants to work with partners that understand the value of its services, not those who are purely looking to monetize a relationship. The company is diligent in selecting core cobrand relationships and ensuring that they are sustainable and profitable on a long-term basis, he added.
Chenault also pointed out that American Express is not overly dependent on cobranded relationships, which make up about 15% of billings.
"Cobrands are important and they are a complement, but we have options," he said. "That's why we have a very clear approach in how we select our partners and how we negotiate our cobrand deals."
Chenault said the Hilton deal will not impact the Starwood Preferred Guest card. Marriott International Inc. executives said in March that they are in discussions to renegotiate arrangements with American Express over the Starwood card and with JPMorgan Chase & Co., which issues the Marriott Rewards Visa card. The current American Express agreement with Starwood Hotels & Resorts Worldwide Inc., which was acquired by Marriott in September 2016, ends in 2020.
The nature of the cobranded business is having multiple relationships within the hotel or airline category, Chenault said. He pointed out that American Express' Starwood relationship is unique and the payments company plans to continue demonstrating that it is a good partner.
Chenault also reaffirmed American Express' 2017 earnings-per-share outlook of $5.60 to $5.80.