Marriott International has been expanding its global footprint for years. But now the company is taking its acquisition strategy to new heights and purchasing Starwood Hotels and Resorts Worldwide. The strategic move is largely intended to help the traditional hotel chain compete against rapidly expanding home-sharing services. [bctt tweet=”Airbnb now offers more rooms than Marriott or Hilton.”]
Marriott’s acquisition will make it a global force to be reckoned with. When its $12.2 billion purchase of Starwood closes, the hotel company will become the world’s largest, boasting more than 5,500 properties and 1.1 million rooms in more than 100 countries. It’s the hotel industry’s largest deal since The Blackstone Group purchased Hilton for $26 billion in 2007.
Marriott CEO and President Arne Sorenson believes Starwood’s international presence and appeal to young travelers will strengthen the company’s position against home-sharing services. “This is a transformative event for Marriott,” Sorenson told investors in November. “Following the transaction, Marriott will be better able to compete in an evolving marketplace.”
Marriott and Starwood executives are confident the deal to will offer big benefits, particularly through the leveraging of larger marketing, technology spending and loyalty programs. The new organization’s economies of scale will also make it more cost-effective to manage new and old hotels, Starwood CEO Adam Aron said.
“To be successful in today’s lodging space, a wide distribution of brands and hotels across price points is critical.”
—Arne Sorenson, Marriott CEO and President
Marriott expects to drive strong earnings and cash flow by cutting at least $200 million in annual costs and raising $1.5 billion to $2 billion in asset sales by the end of 2017. Still, challenges are likely to accompany the enterprise transformation as executives grapple with how to strengthen a portfolio of 30 brands involving many different hotel owners and franchisees. The lackluster performance of some Starwood brands, such as Sheraton, has caused some industry analysts to wonder whether Marriott will transform those brands or sell them off.
For now, Sorenson remains adamant about keeping all brands in the portfolio as he leads the integration of the two companies. “We expect to benefit from the best talent from both companies as we position ourselves for the future,” he said.