Marriott to Buy Starwood, Creating the World’s Largest Hotel Company

Marriott to Buy Starwood, Creating the World’s Largest Hotel Company

Marriott International, the Bethesda, Md.-based hotel behemoth, said Monday it has agreed to buy Starwood Hotels & Resorts in a $12.2 billion deal that would create the world’s largest hotel company.

The combined hotelier would own or franchise 5,500 properties and be the only company to have more than 1 million hotel rooms. The cash and stock purchase marks the largest hotel deal since the private equity firm Blackstone Group bought Hilton Worldwide for $26 billion in 2007.

“This is a transformative event for Marriott,” Arne Sorenson, Marriott’s president and chief executive, said in a Monday morning briefing with investors. “When we look at Starwood, we see many aspects of its business that complement Marriott.”

Specifically, Sorenson said Marriott was drawn to Starwood’s large international presence, strong rewards program and its popularity among younger travelers. The Stamford, Conn.-based company owns 11 brands, including St. Regis, W, Westin and Sheraton.

“To be successful in today’s lodging space, a wide distribution of brands and hotels across price points is critical,” Adam Aron, Starwood’s chief executive, said to investors.

The combined company, which would have 30 brands, 1.1 million rooms and $2.7 billion in annual revenue, would cement Marriott’s lead as the world’s largest hotel company. Hilton Worldwide, which is based in McLean, would be the second-largest hotelier, with 4,400 properties, 731,000 rooms and $10.5 billion in annual revenue.

The U.S. hotel industry is dominated by a handful of large chains, and some analysts say the purchase means less choice for consumers.

“Losing Starwood with properties all over the spectrum is a significant loss in the competition,” said Jim Butler, head of global hospitality at the law firm Jeffer Mangels Butler & Mitchell in Los Angeles. “It is going to be a major change in the hotel industry.”

The sheer size of the deal may give pause to regulators, according to some anti-trust experts.

“There is not a clear path that’s been charted by the Federal Trade Commission or by the courts on these deals in the past,” said Edward B. Schwartz, a partner at the law firm of Steptoe & Johnson. “I would imagine the FTC is going to want to take a close look at this.”

The last time two major hotel companies merged, he said, was in 2004, when MGM Mirage purchased Mandalay Resort Group for $7.65 billion. The FTC approved that deal, but only after requesting more information.

Both Marriott and Starwood have large loyalty rewards programs but the companies have yet to decide when — or how — those two programs will be combined.

Author: Abha Bhattarai The Washington Post

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