Mar­riott buys Star­wood Ho­tels for $12.2 bil­lion

Mar­riott In­ter­na­tional buys ri­val Star­wood for $12.2bn

Kuwait Times - - FRONT PAGE -

NEW YORK: Mar­riott In­ter­na­tional is buy­ing ri­val ho­tel chain Star­wood for $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, de­sign­fo­cused 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.

More lever­age

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.

Back in April, Star­wood an­nounced its board was ex­plor­ing strate­gic op­tions for the ho­tel com­pany. The Stam­ford, 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 lo­cated on the side of the high­way, near air­ports or in sub­ur­ban of­fice parks. There was spec­u­la­tion in the mar­kets about a po­ten­tial deal with Hol­i­day Inn owner In­ter­con­ti­nen­tal Ho­tels Group and more re­cently Hy­att Ho­tels Corp. But in the end, it was Mar­riott who pre­vailed.

Star­wood’s strong in­ter­na­tional pres­ence will aid Mar­riott. In the past few years, Star­wood has made a strong push to grow in China, In­dia, the United Arab Emi­rates as well as more-es­tab­lished Euro­pean des­ti­na­tions. Mar­riott, in turn, has a well-es­tab­lished net­work of ho­tels in­clud­ing deep cov­er­age of small towns and cities with its Fair­field Inn, Court­yard and Res­i­dence Inn brands.

The deal comes at a time of record ho­tel oc­cu­pancy and rates. Dur­ing the first nine months of this year, guests filled 67.3 per­cent of the avail­able rooms in the US, ac­cord­ing to re­search firm STR. That’s the high­est level since STR started col­lect­ing data in 1987. Guests paid an av­er­age of $120.35 a night so far this year. The prior record, ad­justed for in­fla­tion, was $119.70 in 2008. Mar­riott, based in Bethesda, Mary­land, has been ag­gres­sively grow­ing. In April, it ac­quired Cana­dian chain Delta Ho­tels and Re­sorts, help­ing it be­come the largest ho­tel com­pany in Canada.

The boards of both com­pa­nies ap­proved the ac­qui­si­tion unan­i­mously, which now must be ap­proved by in­vestors in both ho­tel chains. Arne Soren­son will be pres­i­dent and CEO of the com­bined com­pany and the head­quar­ters will be in Bethesda. Mar­riott’s board of direc­tors fol­low­ing the clos­ing will in­crease from 11 to 14 mem­bers, with the ex­pected ad­di­tion of three mem­bers Star­wood’s board.

Mar­riott said it expects to de­liver at least $200 mil­lion in an­nual sav­ings in the sec­ond full year af­ter clos­ing. Last month, Star­wood an­nounced the sale of its time­share unit to In­ter­val Leisure Group, with its share­hold­ers re­tain­ing a 55-per­cent stake in the com­pany. That deal is ex­pected to close be­fore the Mar­riott ac­qui­si­tion, with Star­wood share­hold­ers re­ceiv­ing ad­di­tional com­pen­sa­tion for their stake in the time­share busi­ness.

NEW YORK: The logo for the W Ho­tel, owned by Star­wood Ho­tels & Re­sorts World­wide, is seen in New York’s Times Square. Mar­riott In­ter­na­tional (inset) an­nounced yes­ter­day, it is buy­ing ri­val ho­tel chain Star­wood for $12.2 bil­lion in a deal that will se­cure its po­si­tion as the world’s largest hote­lier.—AP

Arne Soren­son, Pres­i­dent and CEO of Mar­riott In­ter­na­tional Inc.

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.