Big Hotel Firms Combine -- WSJ
September 24 2016 - 3:03AM
Dow Jones News
By Craig Karmin
Marriott International Inc. completed its acquisition of
Starwood Hotels & Resorts Worldwide Inc. on Friday, beginning
the complex integration process by linking the guest-loyalty
programs and pledging to keep all 30 lodging brands.
The $13 billion merger creates the world's largest hotel company
with more than 1.1 million rooms and about 5,700 hotels in more
than 110 countries.
"We think there are real advantages to size," Marriott Chief
Executive Arne Sorenson said in an interview.
Marriott estimates the merger will yield annual cost savings of
$250 million. The Bethesda, Md., lodging company is betting that
its large size will allow it to negotiate better terms with online
travel agents like Expedia Inc. and to convince more travelers to
book directly on its website.
The merger combines Marriott brands, including Ritz Carlton,
Courtyard and Residence Inn, with W Hotels, Westin, Sheraton and
other Starwood brands.
But that size also offers challenges, such as finding ways to
differentiate among the 30 brands -- some of which compete against
each other -- and merging the two distinct corporate cultures.
Hotel owners tend to view Starwood as the more free-wheeling
company in terms of hotel design, marketing and culture. Marriott
has a reputation for a more conservative approach and a focus on
operations, though it has been trying to change that image recently
with more brands aimed at younger travelers.
Meanwhile, many members of Starwood's best-in-class loyalty
program have worried that the merger would water down their perks,
which include suite upgrades, personal concierge and complimentary
champagne.
Marriott said the two loyalty programs would remain distinct for
now and participants would be able to transfer points between the
two programs, which together comprise 85 million members.
Each would match the other program's gold, platinum and other
status. But three Marriott points convert into a single Starwood
point, a sign that Marriott values the Starwood loyalty program
more highly.
Marriott also has agreed to add three Starwood directors,
including its chairman, real-estate executive Bruce Duncan, to the
Marriott board.
Mr. Sorenson said that other parts of the integration process,
such as combining technology platforms and deciding what offices to
close, could take one or more years.
"There's a lot to do," he said.
Stamford, Ct.-based Starwood said in April last year that it was
exploring strategic alternatives, a move that opened the door for a
sale. Marriott and Starwood announced their plans to merge in
November, but an unsolicited offer from China's Anbang Insurance
Group Co. earlier this year sparked a tense bidding war. That
contest ended in March, when Anbang abruptly withdrew its $14
billion offer with little explanation.
Mr. Sorenson said he thought his rivals would also look to
expand their companies through acquisition, but would be pressed to
scale up as quickly as Marriott has.
"Companies like Starwood come up for sale only every few
decades," he said.
Write to Craig Karmin at craig.karmin@wsj.com
(END) Dow Jones Newswires
September 24, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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