Marriott surprised us all yesterday by emerging as the winner of the auction to acquire the Starwood hotel group. Of all the names that had been linked to the transaction, Marriott had not been seen as a serious contender.
The deal creates the biggest hotel group in the world.
From a top-line business viewpoint, you are creating a business model which seems to make little sense. The combined Marriott / Starwood business will have 30 different hotel brands. I don’t think you need to be a £1,000 per day management consultant to realise that this is far, far too many.
The initial statement implies that all of Starwood brands (Sheraton, Westin, W, St Regis, aloft, Le Meridien, The Luxury Collection etc) will remain. The terms of the management contracts that Starwood has with the individual hotel owners would make it very difficult to rebrand in the short term.
All ‘company owned’ Starwood hotels will be sold immediately, albeit with management contracts to be retained where possible.
Culturally, I do not see this as a great fit. Marriott is the most straight-laced company in the business. No-one ever woke up in the morning and said “I’m staying at a Marriot tonight, I can’t wait”. The ludicrously huge photographs of Bill Marriott that hang in the lobby of every hotel in the chain are, frankly, creepy.
Starwood, on the other hand, is about as funky as a hotel business worth $12 billion can be – ie not really cool, but they do try their best. It is hard to imagine many Starwood employees wanting to work for Marriott – especially not the SPG Europe team, who are the people I know best.
What about the loyalty programmes?
We don’t know. The official statement says:
“Leading Loyalty Programs: Today, Marriott Rewards, with 54 million members, and Starwood Preferred Guest, with 21 million members, are among the industry’s most-awarded loyalty programs, driving significant repeat business. They should be even stronger when the companies merge.”
The truth is that Marriott Rewards is about as unexciting as a hotel loyalty programme can be. I accept that top tier members (75 nights per year) are generally happy. For everyone else, in terms of promotions, buzz and general interest, it is tumbleweed territory.
Starwood Preferred Guest, on the other hand, is an excellent programme. Because Starwood was a small business, it realised early on that it could use its loyalty programme to make a real difference. You usually had to make a bit of an effort to stay at a Starwood hotel so the company wanted to make it worth your while.
There is no logic in Marriott retaining Starwood Preferred Guest. However, integration will be slow. As an example, it is exactly two years since Marriott bought Protea Hotels in South Africa and it was only last week that you could earn and spend Marriott Rewards points across the full chain.
The acquisition of Starwood will not complete until ‘mid 2016’. I believe that SPG will probably survive until the end of 2017, and your status will transition over at that point into Marriott Rewards status for 2018.
You have the thorny issue of benefits. Top-tier Starwood members are very well treated in terms of suite upgrades – you won’t be getting that under Marriott Rewards. Unless the Marriott scheme evolves substantially, there is a real risk that heavy Starwood stayers walk away as they see their benefits disappear.
American Express will also be having some serious issues. Marriott does not appear to have a good relationship with the company – it pulled out of Membership Rewards many years ago and works with Visa in the US.
The Amex / Starwood relationship exists on a number of levels:
Starwood is a Membership Rewards transfer partner (one of only three hotel transfer partners available in the UK)
Amex offers a Starwood-branded Amex card in the UK and North America
I expect all of this to disappear, to be honest, although not for a couple of years.
The loss of SPG will also be a big blow if you collect airline miles in a programme without a UK credit card and not supported by Amex Membership Rewards. For many airline schemes, the only way to collect miles in the UK was to get the Starwood Amex. If you transferred in chunks of 20,000 points, you were getting £1 = 1.25 airline miles in, for example, Air Canada Aeroplan. The airline transfer ratio from Marriott Rewards is nowhere near as attractive.
You will be able to read about the integration of the two programmes on Head for Points as it happens.
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