Industry CEOs’ opinions on Marriott/Starwood
CEOs from major brands, ownership companies and management companies weighed in on the short- and long-term impacts the announced merger between Marriott International and Starwood Hotels & Resorts Worldwide will have on the overall hotel industry.
LOS ANGELES – The pending merger between Marriott International and Starwood Hotels & Resorts Worldwide was a hot topic at the recent Americas Lodging Investment Summit. While at ALIS, we caught up with CEOs from international brand, ownership and management companies to get their take on how this merger might affect the industry at large, and what it means for the future of brand consolidation.
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CEO, Choice Hotels International
“It spurs more consolidation. There’s nothing new here—you’ve got an oligopoly; there are no sellers, there are only buyers. When anybody comes up (for sale), everybody’s going to look at it. You saw the list—I won’t tell you what letter we were. We look at everybody that comes up—obviously that would have been an interesting exercise for us because we think that we should have been in control even though they’re five or six times larger than us. There’s not going to be another big one like that, but I think there’s going to be other opportunities with other companies.”
President and CEO, Best Western Hotels & Resorts
merger pointed something out that if it wasn’t obvious in the past, it should be now—there’s a tremendous advantage to scale. That’s our competition and we have to pay attention to that. It provides tremendous leverage with (online travel agencies). If a brand or hotel doesn’t have scale, it’s going to end up on the short end in distribution. I expect this (acquisition) activity to continue.”
President and CEO, Apple Hospitality REIT
“For us specifically, given our ownership in the select-service segment with Marriott, we think the transaction will be additive. Starwood has a tremendous loyalty program and a broad consumer base. We think exposing that loyal consumer base to the broader portfolio of select-service hotels that Marriott has will benefit us as owners. If there was any weakness in Starwood, it was on the select-service side, and Marriott has been a leader in that space. I think Marriott has tremendous opportunities to take Element and Aloft, and better those brands in a way to make them attractive acquisitions.
“As for the industry as a whole, it's a continuation of a trend towards consolidation. We think the transaction between Starwood and Marriott is a natural evolution. There will be immediate impact from the transaction, but the full impact will take years to realize, and will be highly dependent on how well Marriott and the existing team will work through the integration process.”
President and CEO, G6 Hospitality
“I think that the combination Marriott and Starwood … will continue to drive what everyone needs to understand. That’s two things. One is size. Size does matter. But it (isn’t) necessarily defined by brands. It’s defined by penetration of who it is you’re going after. I think what will happen in terms specific to the Marriott/Starwood deal or even the (AccorHotels) deal for Fairmont and Raffles
is that it is going to force the players that are kind of betwixt and between to really take a step back and rethink ‘what is the purpose?’
“I come back to the purpose of the entire industry. The strategy of hospitality is not about brands. The strategy of hospitality is, how do you successfully impart an experience to a user so that the user walks away satisfied, happy and eager to return? If you fail at any of those three, it doesn’t matter how many brands you have, you’ve failed.”
President and CEO, Loews Hotels
“From a competitive standpoint we don’t see it as changing the landscape. What it does for the industry, in some cases, I think it probably helps in terms of it puts pressure on other parties who are providing services and products to the hospitality industry. No doubt I can probably skim off the back of some of the bigger companies as we try to cut our deals as well.”
President and CEO, Davidson Hotels & Resorts
“By and large it’s good. Starwood’s a wonderful company, but they’ve been drifting for a few years in terms of having the right leadership running the organization with the right focus on the hotel business. (Starwood) lost their way with the brands that they have, and there’s nobody that runs a better brand than Marriott. There’s a lot of overlap on the checkerboard; the question will become do they have enough discipline (to) be able to work through the legal issues? (Marriott) will sharpen the edges. They’ll make Westin the great leader it was; they’ll figure out what to do what do with Sheraton.
President and CEO, Spire Hospitality
“I’ll answer it the only way I really can. I think (Marriott CEO) Arne Sorenson and the leadership team at Marriott are very smart and have a real vision as to where this industry is headed. (They have made) comments about their ability to better serve the customers and to work better with the third-party intermediaries in the industry, and I have a lot of confidence that what they’ve proposed to be the outcome of this merger—and why it works for them and why it can be beneficial for all of us in the business—is what will happen.”
President and CEO, The Hotel Group
“Probably generally speaking it will create some greater buying power, from OTA negotiations to purchasing of supplies. Marriott has always been really strong on that side. And then you add the buying power of Starwood. Maybe some (brands) will go away or be consolidated or absorbed. I think (the merger) is a good thing generally speaking. … Learning one thing from the airlines is that we’re so decentralized with all the different ownership groups and management companies. And some of them, not us, have no reason for being. They’re just recycled capital.”
CEO, Dream Hotel Group
“I think their brands will have impact, but in terms of the industry, those brands are already out there. (Marriott and Starwood) will try to refine it a bit, and add some economies of scale, but I don’t think they’ll add more brands. To consumers, there will be some impact, like on loyalty programs, but even that is changing greatly.”