Exclusive Views: Marriott is taking over Starwood hotel in an 'All-American' deal involving Stock and cash to the Starwood shareholders, a huge strategic move in the slow evolving lodging market: 

This move came as a surprise to many lodging analysts and experts (me Included - I admit; I never saw it coming) I thought that eventually Starwood will be taken over by one of the Chinese suiters or Hyatt Hotels.

Yesterday morning, before the US market opened, the CEO of Marriott Arne Sorenson appeared on CNBC’s Squawk box and provided the first answers about the mega deal.

What made this deal possible? According to Mr. Sorenson - A 15% downturn in the value of Starwood’s stocks as well as the most recent sale by Starwood hotels of its timeshare business.

The strategy of taking over smaller hotel groups is an integral part of Marriott’s growth philosophy as we all recently saw with the buying of the large African Hotel operator PROTEA Hotels, the Spanish hotel group AC Hotels and Delta Hotels in Canada.

According to Mr. Sorenson what made Starwood so attractive to Marriott was Starwood’s presence in emerging markets. Mr. Sorensen said: “Starwood is more global than Marriott is and we think it is a good thing we will have more sources around the world. When you look at growth in developing markets like China and India, I think we will see in the long term that contribution is fabulous”

My viewpoint: Marriott knows that it is very difficult to grow organically with their own very strict development philosophy and high development standards & guidelines.

From my own past dealings in the past with Marriott development teams in Europe, I know how difficult these guys can be.

Marriott’s solution to the relatively limited organic growth pipeline is simply buying into other companies’ pipeline. In this case �" Starwood hotels which has a good, strong pipeline of hotels in India as well as in China.

Loyalty: Mr. Sorenson focused on the two chain’s loyalty programs.

“The global place is powerful. The value we can get by pulling together Marriott Rewards and Starwood Preferred Guest for example, these are the two leading loyalty programs in our industry. Put them together and spend that much more on technology and marketing.”

Mr. Sorenson added: “Our philosophy is to merge these companies as quickly as we can and run one company. But, we will keep the brands.”

“To say all, is little too soon for that. Generally, I think we will have these brands. They are really good, strong powerful brands with great distribution. We want to take them, we want to strengthen them and we want them to faster than they’ve been growing in the past.”

My viewpoint: Marriott had recognized the huge disruptions to the lodging marketplace created by the recent merging of the global OTA’s on one side and the emergence of the sharing-economy namely AIRBNB.

Marriott simply grabbed this golden opportunity available in the market and buys Starwood’s distribution and development pipeline.

According to recent numbers I saw on the web: Marriott Loyalty has 49 million members and Starwood’s SPG another 32.5 million members which brings the total combined loyalty number to over 80 million members. By controlling those members, Mr. Sorenson thinks that will be able fending-off the OTA’s. Bring back the control over the brands and the room supply to Marriott.

Maybe Mr. Sorenson is right. Marriott will have a huge marketing platform with over 1 million rooms and 30 brands in its lodging Mega Market. Would that be enough to control the marketplace? We shall see…

As some Brits and Americans say;” The proof of the Pudding is in the eating”

For Starwood Hotels board, one key issue has been solved by this takeover. Leadership. No need to look any further for a permanent CEO position. It’s now Marriott’s problem.

The first questions that come to my mind resulting from this deal and still need to be looked at, are:

• Is this deal good only for the shareholders or also for the end consumers?
• How can one lodging giant manage 30 brands successfully?
• There is much overlapping in the existing brands for example Ritz- Saint Regis, Marriott core brand and Sheraton, The Luxury Collection-Autograph Collection, JW Hotels & Renaissance �" Westin Hotels, Edition Hotels �"W hotels, AC Hotels by Marriott �" Aloft Hotels. Who can differentiate, for sure not the customers?
• Would the EU Antitrust and competition Authority approve the deal and if they will, under what stipulations?
• Would this take-over be the catalyst for other upcoming Mega-Mergers involving Hilton, Hyatt, IHG, Accor, Carlson-Radisson and the large Chinese lodging players?
• What will happen to the medium size and small regional hotel chains in the aftermath of such a deal?

Interesting times ahead for the lodging global industry. Hopefully it has nothing to do with the famous Chinese curse; “May you live in interesting times”....

This is strictly an exclusive feature, reprints of this article in any shape or form without prior written approval from 4Hoteliers.com is not permitted.

Joseph - Yossi - Fischer the CEO of Vision Hospitality & Travel - international lodging & Travel Solutions