It’s been one year and one day since Marriott International announced its intentions to acquire Starwood Hotels & Resorts Worldwide. Here’s my take on how this deal played a part in some big-picture trends.
In case you missed it, yesterday was the one-year anniversary of Marriott International announcing its intentions to acquire Starwood Hotels & Resorts Worldwide. Yep, hard to believe but that was a whole year ago. A lot can—and did—happen in a year.
The impacts of this deal on Marriott and Starwood, their guests and competitors have driven conversations and HNN’s reporting countless times over the past 12 months. But here I examine six things this deal had a big impact on throughout the entire industry over the last year.
Here’s my take on how this particular deal influenced six larger industrywide trends this year, in no particular order:
1. Brands gained power over OTA commissions and rate parity
From the very beginning, Marriott CEO Arne Sorenson emphasized that “size matters” when it came to bargaining power across the board and particularly with online travel agency commission negotiations.
This year, we saw many of the big brands take back some power by rolling out lowest-rate offers to loyalty members who book direct. In the course of developing these programs, they quietly took some of that power away from OTAs.
Mind you, the jury’s still out on the long-term effectiveness of these low loyalty-tier rates—and OTAs certainly won’t stop finding new programs to charge hotels for—but Marriott’s deal showed some much-needed public muscle at the negotiating table for all international brands.
2. Loyalty wars exploded
When the Marriott/Starwood deal was announced, Sorenson asserted that Starwood’s SPG loyalty program was a big attraction in the deal, and making members happy proved to be a top priority for the company. Case in point—formally combining the two loyalty programs was the first true resolution to come once the deal finally closed.
This emphasis on loyalty has every other international hotel brand scrambling to refine their own programs. They know that competition for the loyal customer is only getting tougher. And the time is ripe in the cycle for loyalty wars, so expect further refinement.
3. The benefits of consolidation took center stage
Hotel companies merge and acquire all the time, and for different reasons. Yes, now is a good time in the cycle for large-scale M&A activity (as we’ve seen from deals involving Carlson, FRHI, Vantage Hospitality, the list goes on and on).
As more people talk about the Marriott/Starwood deal in particular, though, it brings the topic of consolidation to the forefront. We’ll see this acquisition play out in a very public spotlight over the next few years and hear about Marriott reaping the benefits. Other big M&A deals will be compared to Marriott/Starwood, and who knows, maybe the real estate investment trust consolidation we’ve heard about might soon kick off.
4. The supply picture got muddied further
This deal underscores the larger conversation about the impact of supply growth the industry has been seeing for some time. Many say Starwood couldn’t hack it in the end because the company couldn’t grow fast enough to keep Wall Street happy. Sorenson has plenty of growth plans for Marriott’s new stable of brands these days and will be in the spotlight to show that growth.
But how does this affect the overall supply picture, especially in the U.S.? Add to this the competitive juices that will continue to flow for brands that will experience new impact issues under a new Marriott, and I’m afraid we may see some supply spikes—right at a time when the industry doesn’t need them.
5. A new era of brand clarification starts now
I know I’m not alone in thinking one of the biggest unresolved issues in the Marriott/Starwood deal right now is the brand one. What’s going to happen to all of them?
While Marriott decides, the rest of the industry quietly freaks out, wondering what they’re going to have to do to compete, especially those in the upscale and upper-upscale chain scale segments. We’re also at the point in the cycle where we’ll begin to see a more obvious flight to brands, and I anticipate hearing much more conversation in 2017 about brand differentiation and clarification (at what cost to owners?).
6. Don’t underestimate the power of Chinese capital
If a Chinese insurance company could nearly topple one of the largest, most influential international hotel companies in a bidding war, that should be enough to tell the industry that it’s not the last we’ve seen of Chinese capital. Anbang will continue to simmer in the background as a hotel buyer, while in the short term all eyes turn to Hong Kong’s HNA Group and its recent moves on Hilton Worldwide Holdings and Carlson Hospitality Group.
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