Marriott's $12.2 Billion for Starwood Signals Further Deals

By Publications Checkout
Marriott's $12.2 Billion for Starwood Signals Further Deals

Marriott International's agreement to buy Starwood Hotels & Resorts in a $12.2 billion deal, creating the world’s largest lodging company, signals more consolidation to come as hotel operators find being bigger is better to compete with each other and such upstarts as Airbnb.

The combined company will operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide. The properties are operated under 30 brands, including Marriott’s Ritz-Carlton, Courtyard and SpringHill Suites, and Starwood’s W, Westin and St. Regis.

Scale is becoming increasingly important in the hospitality business as Airbnb siphons off travelers and online booking services eat into room revenues. Marriott’s planned acquisition, the largest takeover of a hotel company since Blackstone Group bought Hilton for $26 billion in 2007, indicates the industry’s business model is under pressure, with companies being pushed to consolidate in an effort to cut costs and attract customers.

“The reality is that all these groups need to become bigger and stronger to be able to fight against the newcomers,” said Andre Juillard, a Paris-based analyst with Kepler Cheuvreux SA. “We’ve been expecting consolidation for a while. We can see more deals coming to market.”

Airbnb Threat


In September, Blackstone agreed to buy Strategic Hotels and Resorts, owner of luxury properties such as Manhattan’s Essex House, for about $3.93 billion. Takeovers in the lodging industry aren’t limited to traditional hotel operators. Earlier this month, Expedia agreed to pay about $3.9 billion in cash and stock for HomeAway as the vacation-rental company competed with Airbnb.

Closely held Airbnb is a “real” competitor that is “here to stay,” Starwood CEO Adam Aron said on the company’s third- quarter earnings call, on Oct. 28. Airbnb was valued at $25.5 billion in its latest financing round earlier this year, according to people familiar with the matter. That’s more than double Starwood’s market value of about $12.2 billion. Airbnb in July hired Laurence Tosi to be its chief financial officer, the same job he’d held at Blackstone, in a move seen as a prelude to an initial public offering.

“The scale of this merger was done to fight the OTAs - the online travel agents - and also the potential threat of Airbnb,” Barry Sternlicht, who founded Starwood Hotels and ran it for a decade before leaving in 2005, said in an interview on Bloomberg Television Monday. “We’re going to see global consolidation. This probably won’t be the last deal.”

Hyatt Hotels, reported to be a potential suitor for Starwood, may now be a takeover candidate, Sternlicht said. Hyatt declined to comment.

InterContinental Hotels, which has said it isn’t exploring a sale, also has been reported as a possible merger candidate. And France’s Accor is in talks to acquire FRHI Hotels & Resorts, owner of the luxury Fairmont, Raffles and Swissotel brands, for about $3 billion, the Wall Street Journal reported Oct. 29, citing people familiar with the matter.


News by Bloomberg, edited by Hospitality Ireland