December 8, 2015

Marriott-Starwood to tackle online traveling sites and home-sharing

Marriott International has merged with Starwood.

With increasing use of online travel sites like Expedia and home-sharing companies such as Airbnb and HomeAway, Marriott International and Starwood decided to join forces. It shocked analysts, investors and businesses, such as American Express which could be the major loser in the deal considering it has a co-branded card partnership with Starwood. Marriott already has a deal with JPMorgan Chase.

The deal was struck for a number of reasons. First, it provides Marriott much better leverage in negotiations with online travel sites. A recent example of the company struggling to gain leverage with sites was when it negotiated its deal with TripAdvisor. Many analysts saw the deal as a way for Marriott to better position itself when it eventually sat down in contract negotiations with Expedia.

Compared to Starwood, Marriott has also historically struggled to retain customers. Marriott's CEO Arne Sorenson believes the best way to increase customer loyalty and convince people to book directly through the hotel was by merging with Starwood. The latter has always had strong customer loyalty because of a strong co-branded credit card offering through American Express. It's been consistently ranked as a top travel and business credit card.

"We want to grow our own pipelines," Sorenson said in an interview. "And it became clearer and clearer that the best way to do that was with the size of those rewards programs."

One of the most difficult issues to overcome is trying to merge Marriott's and Starwood's reward programs because both involve different credit card companies.

"We need to work through those relationships," Sorenson said. "I'd like to see them ultimately merged. We have to figure out the technology piece too."

If you're looking to complete a merger or acquisition in the tech industry, contact experienced professionals, such as an M&A advisor, to help guide you.