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
| Dec 29, 2014
Reef Worlds to build world’s largest underwater theme park for luxury resort [BD+C's 2014 Great Solutions Report]
Dubai is known for its gargantuan commercial building projects. The latest to be proposed is the world’s largest underwater theme park, designed and built by Reef Worlds. The project was named a 2014 Great Solution by the editors of Building Design+Construction.
| Dec 28, 2014
AIA course: Enhancing interior comfort while improving overall building efficacy
Providing more comfortable conditions to building occupants has become a top priority in today’s interior designs. This course is worth 1.0 AIA LU/HSW.
| Dec 22, 2014
Studio Gang to design Chicago’s third-tallest skyscraper
The first U.S. real-estate investment by The Wanda Group, owned by China’s richest man, will be an 88-story, 1,148-ft-tall mixed-use tower designed by Jeanne Gang.
| Dec 2, 2014
Nonresidential construction spending rebounds in October
This month's increase in nonresidential construction spending is far more consistent with the anecdotal information floating around the industry, says ABC's Chief Economist Anirban Basu.
| Nov 29, 2014
20 tallest towers that were never completed
Remember the Chicago Spire? What about Russia Tower? These are two of the tallest building projects that were started, but never completed, according to the Council on Tall Buildings and Urban Habitat. The CTBUH Research team offers a roundup of the top 20 stalled skyscrapers across the globe.
| Nov 18, 2014
New tool helps developers, contractors identify geographic risk for construction
The new interactive tool from Aon Risk Solutions provides real-time updates pertaining to the risk climate of municipalities across the U.S.
| Nov 17, 2014
Goettsch Partners-designed Grand Hyatt opens in Dalian, China
The triangular shape of the 44-story tower ensures that all bays receive southern light and views of the Yellow Sea.
| Nov 10, 2014
5 guiding principles for solving airflow issues in open-plenum office spaces
Although architecturally appealing, exposed ceilings can create unwanted drafts and airflow problems if not engineered correctly. McGuire Engineers' Bill Stangeland offers tips for avoiding airflow issues on these projects.
| Nov 10, 2014
Hotel construction pipeline hits five-year high
The hotel construction pipeline hit a five-year high in the third quarter, clocking in at 3,516 projects and 443,936 rooms, Lodging Econometrics reports.
| Oct 31, 2014
Dubai plans world’s next tallest towers
Emaar Properties has unveiled plans for a new project containing two towers that will top the charts in height, making them the world’s tallest towers once completed.