The Strategist

Marriott loss due to data leak amounted to $ 28 million

03/05/2019 - 11:23

Hotel chain Marriott International estimated the initial loss rate as a result of a massive data breach. In particular, the profit and loss report states that a large-scale data breach cost the company $ 28 million last year. However, insurance payments covered most of this amount, that is, about $ 25 million.

M. Arutyunyan
M. Arutyunyan
Recall that on November 30, 2018, Marriott said that hackers managed to crack the Starwood reservation system and steal data from 500 million guests who booked rooms no later than September 10, 2018. The attackers got access to names, addresses, dates of birth, phone numbers, addresses email, passport details, booking details. In some cases, there was even card payment data. In early 2019, the company made a new statement. According to updated information, the violation affected only 383 million customers. 

Arne Sorenson, Marriott CEO and President, stressed that the leak did not affect the RevPAR (revenue per one suit) rate. In addition, the company hasn’t noticed a decline in customer loyalty. Sorensen also reported that investigation into the incident was completed. In particular, American Express did not detect a surge of credit card fraud.

According to some experts, Chinese government organizations could have been responsible for the attack on the Marriott reservation system. However, the purpose of hackers, most likely, was espionage, and not getting benefits.

Marriott incurred serious losses, but as you can see, this incident did not affect investor sentiment, and the company's stock price recovered to about the level it was on the eve of the leak. However, for such organizations violations can cause even greater costs associated with satisfaction - collective claims of customers, as well as strengthening of security systems to prevent risks of data leaks in the future. It is not easy to eliminate damage from leaks even for companies with billions in turnover. A good example here is Equifax: in the first year, the company spent more than $ 240 million eliminating the consequences of smaller violations, which then turned into about 143 million records of personal data of customers."

So far, the costs incurred by the company in the fourth quarter of 2018 were only beginning of the history associated with the consequences of the leak. In addition to possible multi-million dollar collective claims, the company may receive a fine from US regulators. It is also possible that Marriott will be liable in accordance with the requirements of the European regulation of GDPR.


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