Marriott and Starwood: Creating the worlds largest hotel chain

Marriott and Starwood: Creating the worlds largest hotel chain

Code: ML-ML00022-035 | Published: Jul-2016 | Pages: 17 | MarketLine
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At the beginning of May 2016 the final chapter of one of the most anticipated deals in the hospitality industry was completed. Around a year previously it became clear that Starwood was considering offers on its business and its rivals began to circle. A number of offers were made from multiple different hotel groups but it was the Marriott that eventually managed to secure the deal. The rewards scheme business model is hugely important still in the hotel industry and investors and clients have been very nervous about how the two rewards schemes would combine, worrying that Starwood or Marriott customers may lose their carefully cultivated rewards in the merger. There are also some last minute legal challenges to the deal which could still scupper it. The final figure that secured the deal will likely hit around $12.4 bn and by room count would create the worlds largest hotel chain.

Key Findings
- Analyzes the hotel industry looking at the strengths and weakness of Marriott and Starwood.

- Looks at the changes within the industry including mergers and acquisitions.

- Considers threats from competitors and the future of the industry

Reasons To Buy
Why has Marriott purchases Starwood?
Are others in the industry considering acquisitions?
What are the main threats in the industry?
Just how important is the rewards scheme in the industry?

Key Highlights
- Both Starwood and Marriott are very large international hotel chains. Whilst there are some similarities between the groups in terms of their focus on luxury and mid to high tier hotels, they have different approaches to their rewards schemes, focus on different international locations and have a different approach to ownership of their hotels and real estate.

- The deal has been quite full of intrigue as players stepped forward to attempt to purchase Starwood as soon as it became apparent the company was open to offers. Chinese bidder Anbang Insurance group looked at one stage to have completed a major coup as it out bid Marriott. The amount of players who appeared ready to buy Starwood showed that the market players have set a policy of consolidation.

- Reward schemes are absolutely crucial to the industry they help guarantee custom and attract the reliable business and frequent users to remain loyal to a brand. Marriott and Starwood have rather different offerings for their reward schemes customers and investors have been concerned at how the two will be merged.

Table of Contents

Overview
Catalyst
Summary
Marriott and Starwood hotel groups
Starwood Hotel Group
Starwoods reward program
Marriott Hotel Group
Marriott Rewards Program
The market is rife for consolidation
Bid and counter bid went on for weeks as Chinese firm
Consolidation in the market may be the most important aspect
Merging the companies will be difficult
How the two reward schemes work shows investor concerns
Merging of the brands is unlikely to happen
There has been a challenge to the merger via exclusivity deals
Hotel industry is beginning to change
The economic down turn led to some big changes
Biggest hotel chains have an over reliance on the USA
The threat from Airbnb is growing especially in the inner city
Conclusions
This huge new company could dominate for the time being
What to do about real estate is a big question
The rewards scheme and any future mergers could threaten
Appendix
Sources
Further Reading
Ask the analyst
About MarketLine
Disclaimer

List of Tables


Table 1: Key Starwood Hotel Segments
Table 2: Key Marriott Hotel Segments
Table 3: Key events of the merger

List of Figures


Figure 1: Worlds largest hotel groups by room count 2015

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