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November 17, 2015

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Deal to power Marriott as globe’s largest hotelier

Source: AP | November 17, 2015, Tuesday | Print Edition

MARRIOTT International is buying rival hotel chain Starwood for US$12.2 billion in a deal that will catapult it to become the world’s largest hotelier by a wide margin.

The stock-and-cash deal, if completed, will add 50 percent more rooms to Marriott’s portfolio and give it more unique, design-focused hotels that appeal to younger travelers.

The new company would have 5,500 properties with more than 1.1 million rooms around the world, uniting Starwood’s brands, which include Sheraton, Westin, W and St Regis, with Marriott’s two dozen brands including Marriott’s Courtyard, Ritz-Carlton and Fairfield Inn.

The deal is supposed to close in the middle of 2016.

The next-largest hotel company is Hilton Worldwide with 4,500 properties and about 735,000 rooms.

“To be successful in today’s marketplace, a wide distribution of brands and hotels across price points is critical,” Starwood CEO Adam Aron said on a call with Wall Street analysts. “It appeals to travelers wherever they may go, leverages marketing and technology spend and strengthens frequent traveler loyalty. Today, size matters.”

Marriott and Starwood — like other hotel chains — own very few individual hotels. Instead they manage or franchise their brands to hundreds of individual owners, often real estate development companies. Those individual hotel owners are responsible for setting nightly room rates. It isn’t uncommon for a developer to own a Marriott, Hilton, Hyatt and Sheraton in the same city.

The merger will give Marriott 30 brands and more leverage with corporate travel departments who often look for one giant chain to house all of their employees. Frequent business travelers will also be closely watching the deal. Starwood has a beloved frequent guest program with partnerships with American Express, Delta Air Lines and Uber. Marriott has a much larger program with partnerships with Chase and United Airlines.

In April, Starwood said its board was exploring strategic options for the company. The Connecticut company has struggled to grow as fast as its rivals, particularly in “limited service hotels,” smaller properties which don’t have restaurants or banquet halls. They are often sited on the side of the highway, near airports or in suburban office parks.

There was market speculation about a potential deal with Holiday Inn owner Intercontinental Hotels Group and more recently Hyatt Hotels Corp.

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