Mar­riott buys Star­wood for $13 bil­lion

Ac­qui­si­tion cre­ates world’s largest ho­tel chain

Daily Local News (West Chester, PA) - - BUSINESS - By Scott Mayerowitz AP Busi­ness Writer

NEW YORK » Sev­eral of the best­known names in travel are now united in one ho­tel com­pany.

Mar­riott In­ter­na­tional closed Fri­day morn­ing on its $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 5,800 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 Thurs­day.

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

Start­ing Fri­day, mem­bers of Star­wood and Mar­riott’s two loy­alty pro­grams will be able to link their ac­counts to­gether. Gold elite mem­bers in one pro­gram 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. U.S. 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 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 trav­el­ers 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 singing 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.

Then there are the 30 brands. Some have per­formed bet­ter than oth­ers

but Soren­son said 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 pro­grams. 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 pro­gram 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 pro­grams ac­tu­ally be­ing com­bined.”

THE AS­SO­CI­ATED PRESS

Two men stand out­side the newly built Mar­riott Mar­quis ho­tel in Wash­ing­ton in 2015. Mar­riott In­ter­na­tional closed early Fri­day on its ac­qui­si­tion of Star­wood Ho­tels & Re­sorts World­wide.

THE AS­SO­CI­ATED PRESS

The logo for the W Ho­tel, owned by Star­wood Ho­tels & Re­sorts World­wide, is seen in New York’s Times Square. Mar­riott In­ter­na­tional closed early Fri­day on its ac­qui­si­tion of Star­wood Ho­tels & Re­sorts World­wide, bring­ing to­gether its Mar­riott, Court­yard and RitzCarl­ton brands with Star­wood’s Sher­a­ton, Westin, W and St. Regis prop­er­ties.

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