Marriott/Starwood owners optimistic about deal
 
Marriott/Starwood owners optimistic about deal
19 NOVEMBER 2015 9:31 AM

Reaction from owners to Marriott International’s planned acquisition of Starwood Hotels & Resorts Worldwide has been largely positive, but questions still loom about property-level impacts. 

REPORT FROM THE U.S.—It could take years to see the full impact of Marriott International’s planned purchase of Starwood Hotels & Resorts Worldwide, but owners of Marriott and Starwood properties say they’re expecting the move to work in their favor.
 
Jatin Desai, chief investment officer for Peachtree Hotel Group, said he’s most excited about the integration of the two companies’ loyalty programs.
 
“We operate in Mississippi where there are no Starwoods at all,” Desai said. “In the past, if you’re a (Starwood Preferred Guest) member looking to book a room in Mississippi, you had to go to a different brand. Now, since we own a lot of Marriotts in Mississippi, they’ll have combined Starwood-Marriott offerings. Starwood didn’t have a huge reach in tertiary markets before.”
 
Bob Habeeb, president and CEO of First Hospitality Group, said he also sees the loyalty implications of the merger as a bright spot.
 
“Assuming they are merged, Marriott Rewards will become the largest hotel loyalty program in the world by a wide margin,” he said. “That should be good for hotels and guests.”
 
Gerry Chase, president and COO of New Castle Hotels & Resorts, said he’s optimistic about what the acquisition means for his company. The Marriott and Starwood properties in the New Castle portfolio have performed well, he said.
 
There might be some markets with some brand overlap to work on, he said, but his company already has similar kinds of competitive overlap within the same market and handles it well.
 
“We’re very comfortable with both systems,” he said. “How they both get realigned and developed during the next couple of years, we’ll see how it affects that outcome. As long as the customer doesn’t lose in the acquisition, I think it’s got to be positive. I can’t think of any way where the customer doesn’t win out of this process.” 
 
Guidance from Marriott/Starwood
Owners unanimously said the announcement Monday took them by surprise, and since then the two companies haven’t provided much in the way of long-term guidance.
 
Nothing is changing at the moment, Habeeb said. The FHG portfolio includes several Marriott-branded properties. In its communications to ownership companies, Marriott has said the transaction would take the better part of a year to conclude, he said.
 
Uncertainty grows quickly when details are sparse about one large company acquiring another, but Habeeb indicated he thinks some things will remain the same while others will improve. He’s not concerned about any changes to current franchise agreements, he said. He believes there will continue to be mutual interest between hotel companies and online travel agencies to work closely together on commission structures. 
 
Chip Rogers, president and CEO of the Asian American Hotel Owners Association, said the history of both companies treating owners well is alleviating some concerns among his membership even though guidance has been sparse so far.
 
“Change always brings concern; however, these brands have been especially responsive to owners, and we are confident this will not change,” Rogers said.
 
Answering questions
Habeeb said the GMs at his Marriott properties are asking questions. They want to know what it all means, he said.
 
Habeeb has been telling his GMs: “If and when the transaction concludes, Marriott will have an even greater collection of brands and worldwide distribution.” 
 
Desai said GMs and hotel employees have asked relatively few questions in the light of the merger news.
 
“Our GMs know who (Marriott and Starwood are) and the powers of each,” Desai said. 
 
But investors and lenders have had plenty of questions, he said.
 
“They’re asking if there will be dilution in markets with oversaturation,” Desai said. “They want to know if properties will be hurt in markets where they’re the only Starwood with a bunch of Marriotts you lose that differentiation.”
 
Desai said those questions are coming particularly in regard to Peachtree’s Sheraton in Jacksonville, Florida, which is a market with several Marriott properties.
 
“My only concern is I hope they’re diligent and thoughtful on how they try to differentiate,” Desai said.
 
In the end, that will be a question for Marriott to answer.
 
“With my owner hat on, I want to make sure if I have an Element in a market with a Residence Inn next to me that it’s differentiated,” Desai said. “I think Marriott can do that. And now Marriott can take that Element brand, grow it from 20 to 100 and open up in markets that are already good Residence Inn markets and can use more extended stay.”
 

2 Comments

  • Haskins November 19, 2015 6:48 AM

    I think that the interesting aspect of this merger will be the marrying of the technology of the two companies. Unless they are going to continue to run their own PMS then I can see a challenge ahead for one or the other to adopt/adapt to the others systems - and costs.

  • Rob van Ginneken November 19, 2015 10:08 PM

    Technology, yes. And corporate culture. They may both be companies that "have been especially responsive to owners" but I am sure their DNA is quite different in many ways.

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