An analysis of the Marriott-Starwood merger
Marriott International is now the largest hotel chain in the world due to a $12 billion acquisition of Starwood International. The merger will create a worldwide lodging entity with more than a million rooms in total. Marriott officials state that the acquisition was made as a result of a desire to win over younger generations and develop new technological marketing strategies.
"Our integration philosophy is straightforward," Marriott Chief Financial Officer Carl Berquist said to Forbes. "We expect to choose the best from each company: systems, designs, operations and talent. Our similar organization structures should help to integrate the work more easily."
Marriott's CEO Arne Sorenson will be leading the new company, stating that the newly combined company will enhance its competitiveness through playing on the combined strengths of both influential chains.
"The transaction will ensure that the combined company will account for more than 5,500 hotels worldwide," Anu Passary at Tech Times explains. "This would give Marriott a stronger presence in the Asian, European and Latin American markets, enabling it to rival startups such as Airbnb, which offers apartment-sharing alternatives."
The hotel industry as a whole is approaching seven-year-old Airbnb warily, Larry Light at CBS News writes. This merger could in part be a defensive move against the company, as a recent study at Boston University found that a 10 percent increase in Airbnb stays lead to a 0.35 percent decrease in overall hotel revenue. As Airbnb is valued at $25.5 billion, it heavily outmatches the Starwood merger.
While many are excited for the new possibilities this merger will open up, others are less than satisfied. Some of this dissent stems from the vast differences in degrees of service offered at each hotel chain. While Marriott caters to businesspeople, Josh Barro at CNBC writes that Starwood offers exclusive and significant perks to its valued members through its Starwood Preferred Guest program.
Some of these benefits include late check-out times and personalized service. Marriott offers its own Marriott Rewards, and its 54 million members are massive in comparison to Starwood's 21 million participants. This size alone makes personalized service challenging.
"Starwood has nearly 1,300 hotels worldwide, with an emphasis on luxurious and distinctive hotels under brands like W, Le Meridien and St. Regis," Barro writes. "Marriott has over 4,200 hotels, with particular strength in the kinds of properties that don't offer a lot of frills. Because Marriott can count on its geographic reach as a selling point no matter where your sales meeting is, there's probably a perfectly adequate Courtyard by Marriott nearby it does not need to be as aggressive about personal service."
Many of Starwood's Preferred Guests expressed concern about whether or not their loyalty status will transfer during the merger and found it a "little bit annoying" that they were not notified ahead of time that this transition would take place, despite the fact that notifying customers would violate the Securities and Exchange Commission rules.
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