Marriott International on Monday morning agreed to acquire
Starwood Hotels & Resorts for $12.2 billion, creating the world’s largest
hotelier as well as the largest U.S. hotel operator by room count and revenue,
With the acquisition, Marriott will lengthen its lead over
Hilton Worldwide as the largest publicly traded U.S. hotel company by revenue
and will leapfrog Hilton and InterContinental Hotels Group in hotel and room count.
Combined, Marriott and Starwood total more than 5,500 hotels
with more than 1.1 million rooms. Together, the companies generated $15.1
billion in revenue through Sept. 30. Hilton, which has more than 4,500 hotels
totaling more than 745,000 rooms, generated $8.42 billion for the first three
quarters of the year. IHG as of Sept. 30 had 4,900 hotels totaling 727,000
Marriott will benefit by gaining a larger presence in the
lifestyle-brand sector and better exposure to younger hotel guests via the
acquisition of the W, Westin and Aloft brands.
Starwood gets a broader exposure in the upper-upscale and
select-service sectors though the Marriott, Renaissance, Courtyard, Residence
Inn and Fairfield Inn brands, executives with both hotels said on a conference
call with analysts Monday morning.
Marriott said it would realize $200 million in annual cost
savings within the second full year after the transaction is completed, primarily
though general and administrative cost savings.
“Marriott will have a broader portfolio, provide better
service and provide a deeper relationship with our guests,” Marriott CEO Arne
Sorenson said on Monday’s conference call. “We expect Starwood’s brands to
remain in place. We expect to meaningfully accelerate Starwood’s brands.”
“We realized that there’s opportunity for greater growth as
part of larger organization, especially in the upper-upscale and midscale
segments,” said Starwood Chairman Bruce Duncan, adding that the agreement
represented “an outcome with the highest value proposition and the best
possible one for Starwood shareholders.”
“We’re accelerating Starwood’s trajectory as part of a
best-in-class company,” added Starwood CEO Adam Aron. “We are thrilled about
With the acquisition, Marriott will increase its brand count
to 30 from 19, compared to 12 brands under Hyatt Hotels and 10 brands each for
Hilton and IHG.
While both companies’ executives said all brands would be
retained, the acquisition appears to create the greatest potential for brand
cannibalization in the upper-upscale segment, where the Marriott, Renaissance
and Autograph Collection brands compete against Sheraton, Westin, Le Meridien
and Tribute Portfolio.
With Starwood this spring unveiling plans to expand the
global footprint of its flagship Sheraton brand by about one-third with the
addition of 150 hotels by 2020, Sorenson noted the “need to think about the [Sheraton]
challenges as a little more in the U.S. than abroad.”
“Westin is a strong brand and a smaller brand than Marriott
or Sheraton, and will continue to grow in the space that it’s in,” Sorenson
added. “Beyond that, you’d get to Le Meridien and Renaissance. Those brands are
competing in a fairly near space, so we’d want to see what the right approach
would be, and we don’t really have the answers to that.”
The acquisition announcement takes place about seven months
after Starwood said it would seek strategic alternatives and about nine months
after former Starwood CEO Frits van Paasschen stepped down because of pressure
from a company board that was seeking acceleration in hotel-count growth.
The transaction also takes place almost three weeks after
reports surfaced that Hyatt was in talks to buy Starwood. Sorenson, on Monday
morning’s call, said the “final strokes” of the agreement “came together very,
Marriott will pay $72.80 a share for Starwood plus $7.80 per
share of Starwood’s Vistana timeshare division that Starwood has already
announced it will sell to Interval Leisure Group. That transaction is slated to
be completed before Marriot’s acquisition of Starwood.
The acquisition price is 3% less than Starwood’s
closing price Friday and 6.2% more than on Oct. 26, the last trading day
reports surfaced that Hyatt was in talks to buy Starwood. Of the $12.2 billion in
the transaction, $11.9 billion will be in Marriott stock. Marriott shares
initially fell about 1.5% in Monday morning trading but advanced about 1.5%
after the conclusion of the conference call.