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Marriott International Inc. (NASDAQ:MAR) announced this morning that its acquisition of Starwood Hotels & Resorts Worldwide Inc. has been finalized. Marriott is now the world's largest hotel company with 30 hotel brands and 5,700 hotels in 110 countries. The company's expanded distribution of hotels has in one swoop more than doubled in Asia, the Middle East and Africa combined.
"With the addition of Starwood's strong brands, great properties, and talented people, we have dramatically expanded our ability to provide the best experiences to our customers," said J.W. Marriott, Jr., executive chairman and chairman of the board of Marriott International.
Arne Sorenson is to remain president and chief executive officer of Marriott International. Marriott's headquarters will remain in Bethesda, Maryland.
Of the new larger franchising company, Arne Sorenson stated: "We can now provide a better range of choices for our guests, more opportunities for our associates, and greater financial benefits for our owners, franchisees, and shareholders."
The acquisition was hotly contested. In the end Marriott outlasted Chinese rival bidder Anbang Insurance Group Company, which abruptly withdrew its offer for Starwood. But then Marriott had to wait quite some time for Chinese regulators to approve its merger in China. Announcement of China's approval was made on Tuesday, September 20.
Marriott's buyout of Starwood enables the franchisor to expand the scope of its hotel distribution and brand portfolio, while realizing cost efficiencies in its corporate operations. Marriott uses an asset light franchising model to better leverage corporate staff to support franchisees. That is to say, the hotels that hoist its brand flags are essentially owned by franchisee property developers. The company is confident it can achieve $250 million in annual corporate cost savings. It reassures franchisees that they can expect better corporate sales expertise and improved account coverage and support with the combined organization. The company argues that this will provide its franchisees with better revenue opportunities and insights.
"These enhanced efficiencies and revenue opportunities should drive improved property-level profitability as well as greater owner and franchisee preference for the combined company's brands, which will encourage new hotel development," Sorenson said.
A one-time transaction cost for the merger is expected to total approximately $140 million.
For consumers, Marriott announced it will match member status across Marriott Rewards with Starwood Preferred Guest (SPG). Members will be able to transfer loyalty reward points between the programs for travel and exclusive experiences when they link their accounts later today. The company touts that the combined loyalty program will offer members new destinations, such as Aruba, Tuscany's Serchio Valley, Kruger National Park in South Africa, the Maldives, Bora Bora and Santorini, Greece.
Effective today Marriott has expanded its board of directors from 11 to 14 seats. It has added director Bruce Duncan, chairman, president and CEO of First Industrial Realty Trust Inc. It has also added two former Starwood directors–Eric Hippeau, partner at Lerer Hippeau Ventures and Aylwin Lewis, chairman and CEO of Potbelly Corporation.