Mar­riott buys Star­wood, be­com­ing world’s largest ho­tel chain

Jamaica Gleaner - - BUSINESS - – AP

SEV­ERAL OF the best-known names in travel are now united in one ho­tel com­pany. Mar­riott In­ter­na­tional closed Fri­day morn­ing on its US$13 bil­lion ac­qui­si­tion of Star­wood Ho­tels & Re­sorts World­wide, bring­ing to­gether its Mar­riott, Court­yard and Ritz Carl­ton brands with Star­wood’s Sher­a­ton, Westin, W, and St Regis prop­er­ties.

In to­tal, 30 ho­tel brands now fall un­der the Mar­riott um­brella to cre­ate the largest ho­tel chain in the world with more than 5,700 prop­er­ties and 1.1 mil­lion rooms in more than 110 coun­tries. That’s more than 1 out of ev­ery 15 ho­tel rooms around the globe.

Mar­riott now eclipses Hil­ton World­wide’s 773,000 rooms and the 766,000 that are part of the In­ter­Con­ti­nen­tal Ho­tels Group fam­ily, ac­cord­ing to STR, a firm that tracks ho­tel data.

“We’ve got an abil­ity to of­fer just that much more choice. A choice in lo­ca­tions, a choice in the kind of ho­tel, a choice in the amount a cus­tomer needs to spend,” Mar­riott CEO Arne Soren­son told The As­so­ci­ated Press in an in­ter­view.

LOY­ALTY PRO­GRAMME

Star­wood’s guest loy­alty pro­gramme – Star­wood Pre­ferred Guest – was also a “cen­tral, strate­gic ra­tio­nale for the trans­ac­tion,” Soren­son said. The pro­gramme’s mem­bers are deeply loyal to it, have gen­er­ally higher in­comes and tend to spend many nights on the road.

“The most im­por­tant piece of this is the loy­alty pro­gramme,” Soren­son said. The more choice that guests have, the stronger that pro­gramme is.

Start­ing Fri­day, mem­bers of Star­wood and Mar­riott’s two loy­alty pro­grams will be able to link their ac­counts to­gether. Gold elite mem­bers in one pro­gramme will get gold sta­tus in the other. Plat­inum elite mem­bers will get plat­inum in the other. Mar­riott sil­ver mem­bers will see Star­wood’s low­est cat­e­gory, Pre­ferred Plus.

Each Star­wood point will be worth three Mar­riott Re­wards points.

Star­wood put it­self up for sale in April 2015. The Stam­ford, Con­necti­cut, com­pany had strug­gled to grow as fast as its ri­vals, par­tic­u­larly in “lim­ited ser­vice ho­tels,” which are smaller prop­er­ties which don’t have restau­rants or ban­quet halls. They are of­ten lo­cated on the side of the high­way, near air­ports, or in sub­ur­ban of­fice parks.

To get Star­wood, Mar­riott had to out­bid China’s An­bang In­surance Group. United States and Euro­pean anti-trust reg­u­la­tors were quick to ap­prove the sale, but the Chi­nese gov­ern­ment hes­i­tated, de­lay­ing the sale by months.

“We may have been a lit­tle too op­ti­mistic about how fast we could get this thing closed,” Soren­son said on Thurs­day.

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 pur­chase gives Mar­riott more lever­age with cor­po­rate travel de­part­ments who of­ten look for one giant chain to house all of their em­ploy­ees. It also gives Mar­riott more power over Ex­pe­dia and Price­line, the two giant on­line travel agen­cies that sell rooms on be­half of ho­tel com­pa­nies in ex­change for a com­mis­sion. The ho­tel in­dus­try has spent the last year try­ing to get trav­ellers to book di­rectly with them in­stead of the travel agen­cies to avoid pay­ing those fees. There are still many de­tails to work out. Mar­riott has thrived as an “as­set light” com­pany, own­ing a hand­ful of ho­tels. Star­wood has been sell­ing off prop­er­ties, while sign­ing long-term man­age­ment agree­ments for those same ho­tels. As of June 30, it still owned 23 prop­er­ties. Soren­son said he be­lieves there is a strong mar­ket to con­tinue sell­ing off many of those iconic ho­tels.

“There is al­ways a mar­ket for the St Regis in New York,” he said, adding that other as­sets in the port­fo­lio have com­pa­ra­ble stature. “In great global cities, real es­tate like that al­ways has a value.”

The new com­pany will keep Mar­riott’s Bethesda, Mary­land, head­quar­ters but hasn’t an­nounced if it will keep any pres­ence at Star­wood’s Con­necti­cut or New York of­fices.

SOME BRANDS COULD SUR­VIVE

Then there are the 30 brands. Some have per­formed bet­ter than oth­ers but Soren­son said that all of them will prob­a­bly sur­vive the merger.

“I think so. Ev­ery one of them has ho­tels in them,” he noted.

For now, Star­wood and Mar­riott will keep sep­a­rate loy­alty pro­grammes. Star­wood has a credit card deal with Amer­i­can Ex­press as well as close part­ner­ships with Delta Air Lines and Uber. Mar­riott has a much larger pro­gramme with part­ner­ships with Chase and United Air­lines.

“Noth­ing changes im­me­di­ately. We have to see how those part­ner­ships evolve,” Soren­son said.

Gary Leff, who writes about points and miles at ViewFromTheWing.com, called the three-to-one ex­change rate of Star­wood points to Mar­riott points “just right.”

“It’s one of the many rea­son­able and pos­i­tive steps that Mar­riott has taken along the way as it ac­quires Star­wood,” Leff said. “But there’s a whole lot still to hap­pen be­tween now and the pro­grammes ac­tu­ally be­ing com­bined.”

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