AABA Altaba Inc

By Aisha Al-Muslim, Dustin Volz and Kimberly Chin 

Marriott International Inc. on Friday disclosed one of the biggest data breaches in history, a hack in the reservation system for its Starwood properties that may have exposed the personal information of up to 500 million guests.

News of the attack -- rivaled only by the theft of information in 2013 and 2014 from internet company Yahoo -- roiled customers of the world's largest hotel company and lowered its stock price.

In addition to the size of the Marriott exposure, security analysts say the range of customer data potentially compromised -- such as passport numbers, travel details and payment-card data -- make the breach even more sensitive. Numerous regulators in the U.S. and abroad said they are monitoring the situation.

"We fell short of what our guests deserve and what we expect of ourselves. We are doing everything we can to support our guests, and using lessons learned to be better moving forward," Marriott Chief Executive Arne Sorenson said.

Marriott, which has more than 6,700 properties world-wide under 30 hotel brands, declined to make company executives available for interviews Friday.

The breach affected only Starwood hotel properties, which Marriott bought in 2016. Marriott has hit snags in integrating that business.

Brands within the Starwood Hotels & Resorts Worldwide unit account for about a third of the company's total collection. They include Sheraton, W Hotels, Westin, Le Méridien, Four Points by Sheraton, Aloft, St. Regis, Element, The Luxury Collection, Tribute Portfolio, and Design Hotels.

Marriott, whose other brands include the Ritz-Carlton and Renaissance, has been unifying its reservation system, and so by year-end the Starwood system will no longer exist, a company spokeswoman said.

Marriott, which is based in Bethesda, Md., said an internal security tool alerted it to a potential breach on Sept. 8. After an investigation, the company found that the Starwood guest database may have been compromised since 2014. The database contained information for guests who made reservations on or before Sept. 10 at Starwood hotels globally.

Marriott warned that for roughly two-thirds -- or 327 million -- of the guests potentially affected, an unauthorized party may have gained access to names, passport numbers and travel details. The company said that in some cases payment-card numbers are typically encrypted, though it couldn't rule out that card information was stolen.

The company found the hacker had copied the information and encrypted it for extraction before attempting to steal it, though it wasn't until Nov. 19 that Marriott was able to determine what information may have been accessed.

Marriott said it has been working with law enforcement and regulatory authorities regarding the breach.

A Federal Bureau of Investigation spokeswoman said the agency is tracking the situation, and the New York attorney general's office also has opened a probe.

Marriott will face scrutiny from regulators, particularly in Europe where the European Union's General Data Protection Regulation privacy law took effect in May, said Travis LeBlanc, a partner with Boies Schiller Flexner LLLP. Although the Starwood breach predates GDPR, Mr. LeBlanc said because the unauthorized activity continued after the law went into effect, the incident would likely be subject to it.

Britain's Information Commissioner's Office, which can fine companies for failing to protect customers' personal data, also is investigating. This year, the office fined major companies including Facebook Inc. and Uber Technologies Inc. for mishandling data.

Shares of Marriott fell 5.6% Friday and are down more than 9% over the past 12 months.

The Marriott hack joins a list of breaches to hit the hospitality industry in recent years. Security analysts say the industry is a ripe target for criminal actors because of the wealth of financial and other information flowing through payment and reservation systems. It also is a highly fragmented business, in which large companies such as Marriott and Hilton Worldwide Holdings Inc. largely license their brands to property owners who manage the hotels.

In 2015, Starwood said hackers had stolen payment-card information during a data breach that lasted nearly eight months at 54 locations. Hilton, InterContinental Hotels Group and the Trump Hotel Collection also have reported data breaches in recent years.

Based on the number of individuals potentially affected, only Yahoo's breach in 2013 -- impacting three billion people, or nearly the entirety of Yahoo's user base -- may be bigger, security analysts said. The hack of Yahoo in 2014 involved roughly 500 million people.

Hackers often root through computer networks for years without detection. That can make investigating a breach more difficult, as companies often don't retain the full history of systems and network-traffic logs, said Blake Darche, co-founder and chief security officer at the cybersecurity company Area 1 Security.

The size and duration of the Marriott hack also could indicate involvement of a foreign government, but former U.S. intelligence officials cautioned it was too soon to make any conclusions.

The passport information----a data set that is least commonly compromised in commercial breaches----could be especially valuable to spy agencies looking to compile detailed dossiers on international business travelers and government officials.

"There is a risk that these passport numbers can be paired with other useful identifiers," such as social security numbers, home addresses and email password-security answers, said David Weinstein, vice president of threat research at the security firm Claroty and a former official at U.S. Cyber Command. Mr. Weinstein said he wasn't aware of any previous theft of such a large number of passport numbers.

Marriott said it would begin Friday to notify affected guests whose email addresses were in the Starwood database. It has set up a website and call center to answer questions about the breach. The company is also providing guests free enrollment for a year in WebWatcher, a service that monitors internet sites where personal information is shared.

"We are devoting the resources necessary to phase out Starwood systems and accelerate the ongoing security enhancements to our network," Mr. Sorenson said.

The data breach adds to problems Marriott has encountered in its integration of Starwood, which it bought for $13.6 billion in 2016. Travelers have reported problems with hotel stays being credited to loyalty accounts and have complained about customer service not helping when issued were identified.

Marriott merged Starwood's loyalty program with its own Marriott Rewards in mid-August. The program now counts more than 120 million members.

Kaitlyn Seredoka, who has been a Starwood rewards member for two years, said she would likely try to cancel her account. The 31-year-old Oshawa, Ontario, resident said she hadn't been directly contacted about her information being compromised but planned to reach out to the call center after work Friday.

"I'm upset," said Ms. Seredoka, a catering-company manager who says she books stays with Starwood about twice a year. "I give my information assuming it's going to be kept confidential. I don't even know what info they have aside from my cellphone number."

The brand and reputational damage Marriott could face from the breach also places a spotlight on the company's examination of Starwood before the takeover deal, said Jeff Pollard, an analyst for Forrester Research Inc.

"With all the M&A occurring, it highlights the importance of robust cybersecurity due diligence during the acquisition process," Mr. Pollard said.

In a Friday regulatory filing, Marriott said that it couldn't yet estimate the financial impact of the data breach. The company, which carries cyber insurance, said it is working with its insurance carriers to assess coverage and it will disclose costs later.

"The company does not believe this incident will impact its long-term financial health," Marriott said in the filing.

Marriott earlier this month trimmed its full-year forecast on a key revenue metric because of weaker demand in North America, its biggest market.

--Robert McMillan, Anne Steele and Stu Woo contributed to this article.

Write to Aisha Al-Muslim at aisha.al-muslim@wsj.com, Dustin Volz at dustin.volz@wsj.com and Kimberly Chin at kimberly.chin@wsj.com

(END) Dow Jones Newswires

November 30, 2018 18:46 ET (23:46 GMT)

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