We’ve seen plenty of rumor and speculation in recent months about what would happen to Starwood Hotels & Resorts since its board of directors decided to look for ways to maximize shareholder value. First there was talk of a merger with InterContinental Hotels Group. Then just last month, Hyatt was said to have its eye on the company.
But now there’s a new suitor, and this time it’s no rumor: Marriott International announced it will pay $12.2 billion — most of it in Marriott stock — to buy Starwood.
The combined entity will be the world’s largest lodging group, with 1.1 million rooms in 5,500 properties worldwide — not to mention the world’s largest hotel loyalty program; Marriott Rewards currently has 54 million members, while Starwood Preferred Guest claims 21 million.
The deal is subject to approval by shareholders at both companies as well as regulatory approvals. And that raises a question: If the U.S. Justice Department’s Antitrust Division has been getting a little tougher on airline mergers — e.g., it wouldn’t approve the American-US Airways deal until the airlines agreed to give up gates and slots at key airports — will it do the same with huge hotel mergers where the combined companies would control a substantial share of rooms in specific markets?
Marriott CEO Arne Sorenson told the Wall Street Journal that Marriott controls about 10 percent of U.S. hotel rooms and Starwood has 3 to 4 percent, and said that in general, the U.S. hotel industry is “highly competitive and dispersed.”
If all the necessary approvals are forthcoming, the companies said they expect to close the transaction in the middle of next year.
“The transaction combines Starwood’s leading lifestyle brands and international footprint with Marriott’s strong presence in the luxury and select-service tiers, as well as the convention and resort segment, creating a more comprehensive portfolio,” the companies said in a statement.
Marriott said it expects to “accelerate the growth of Starwood’s brands” after the transaction goes through, giving the combined company “a broader global footprint.”
Speaking of brands, it remains to be seen what will happen on that score, since the two companies currently have about 30 brands — nice for segmenting your market, but it might be daunting for customers to remember what each brand represents. Could a consolidation of brands be in the works if the merger goes through?
At first glance, we could see W Hotels becoming Renaissance hotels. St Regis and Luxury Collection would become Ritz-Carlton or maybe Bulgari. Most Sheratons or Westins or Le Meridiens could be Marriotts or maybe JW Marriotts. Most Four Points hotels could be Marriott Fairfield Inns. Aloft hotels…hmm maybe Courtyards?
What’s your first reaction to this blockbuster news? Please leave your comments below.
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