Two of the world’s expansion-minded hotel chains are joining forces, as Marriott International has agreed to acquire Starwood Hotels & Resorts Worldwide in a deal valued at $12.2 billion. Marriott will pay $11.9 billion in stock and $340 million in cash. Marriott will also assume Starwood’s recourse debt.
If this deal, which Marriott and Starwood signed on Nov. 17, closes as expected, it would create the world’s largest hotel company, with 5,500 properties and more than 1.1 million rooms, operating under 30 brands in more than 100 countries.
Marriott, based in Bethesda, Md., and Starwood, based in Stamford, Conn., are big franchisors, with most of Marriott’s properties and about half of Starwood’s 1,270 hotels operating as franchises owned by private investors.
There are 54 million members in the Marriott Rewards program, and 21 million in Starwood’s Preferred Guest loyalty program. These programs differ in complexity and how points are earned and rewarded, so they will need to be reconciled as a result of this deal, which is expected to close by next summer.
Marriott’s president and CEO, Arne Sorenson, projected that this combination to generate $200 million in annual savings by the second full year after this deal is closed, although he did not provide specifics. Industry observers expect there could be some brand shakeouts.
Starwood will spin off its timeshare business.
Starwood has been on the block since last sprint, and its management had been talking with several investors and competitors about merger possibilities. The Los Angeles Times and other news outlets report that as recently as last month, three Chinese companies had expressed interest in acquiring the hotelier.
Phoenix's Sheraton Hotel. Marriott will look to improve growth of Sheraton, a Starwood brand. Photo: Kevin Dooley/Creative Commons.
Sorenson told CNBC that his company and Starwood started negotiating about seven months ago, and signed nondisclosure agreements. “Initially, we were dissuaded. We thought the company was expensive and we backed away a bit,” he recalled. But Starwood became more attractive to Marriott as “the months went by and we saw a relative shift in the value of the company.” Starwood’s stock price lost about 15% of its value during the negotiating period.
“Our board concluded that a combination with Marriott provides the greatest long-term value for our shareholders and the strongest and most certain path forward for our company,” said Bruce Duncan, Starwood’s chairman. “Starwood shareholders will benefit from ownership in one of the world's most respected companies, with vast growth potential further enhanced by cost synergies.”
Marriott plans to accelerate the growth of Starwood’s brands, which include such well-known names as Sheraton and Westin, and boutique brands like W and Aloft. “The combined company will have a broader global footprint,” it stated.
In its most recent quarterly report to shareholders, released on October 28, Marriott anticipated that its room count in 2015 would increase by 7% to 8%, including 9,600 rooms from its earlier acquisition of Delta Hotels. Marriott expected its room count to increase by another 8% in 2016. “Nearly 40% of our more than 260,000-room pipeline is already under construction,” the company stated.
The big question for AEC firms with hospitality practices is how the Marriott-Starwood combo might affect the two companies’ design and construction choices, and whether this deal triggers more mergers-and-acquisition activity in that sector, further reducing their client pool.
Related Stories
Hotel Facilities | Mar 27, 2015
Morphosis unveils plans for controversial high-rise hotel in tiny Alpine village
Vals is a village of roughly 1,000 people, nestled in the Alps in Switzerland. That might seem like a strange place to put a skyscraper. But don’t tell that to developer Remo Stoffel.
Hotel Facilities | Mar 25, 2015
5 trends shaping today's hospitality industry
Digital concierges, smart locks, mobile check-in. These are among the emerging trends and technologies in hospitality design.
Codes and Standards | Mar 5, 2015
Charlotte, N.C., considers rule for gender-neutral public bathrooms
A few other cities, including Philadelphia, Austin, Texas, and Washington D.C., already have gender-neutral bathroom regulations.
Hotel Facilities | Mar 4, 2015
Hotel construction pipeline reaches six-year high
After a three-year bottoming formation, the pipeline for hotel construction has posted five consecutive quarters of double-digit year-over-year growth.
| Jan 20, 2015
Daring hotel design scheme takes the shape of cut amethyst stone
The Dutch practice NL Architects designed a proposal for a chain of hotels shaped like a rock cut in half to reveal a gemstone inside.
| Jan 19, 2015
Four Seasons tower will be Boston's tallest
On Jan. 14, 2015, developer Carpenter & Company and executives from the Four Seasons broke ground on the Four Seasons Hotel & Private Residences, which will become the tallest building in Boston at 699 feet.
| Jan 7, 2015
4 audacious projects that could transform Houston
Converting the Astrodome to an urban farm and public park is one of the proposals on the table in Houston, according to news site Houston CultureMap.
| Jan 6, 2015
Tender issued for Qatar's pincer-shaped Katara Towers
The towers will house five- and six- star hotels, as well as apartments, with a total of 614 rooms on the property.
| Jan 6, 2015
Construction permits exceeded $2 billion in Minneapolis in 2014
Two major projects—a new stadium for the Minnesota Vikings NFL team and the city’s Downtown East redevelopment—accounted for about half of the total worth of the permits issued.
| Jan 2, 2015
Construction put in place enjoyed healthy gains in 2014
Construction consultant FMI foresees—with some caveats—continuing growth in the office, lodging, and manufacturing sectors. But funding uncertainties raise red flags in education and healthcare.