Marriott-Starwood Merger a Go; More to Come?
With this week's news that Marriott’s acquisition of Starwood received antitrust approval in China, the two hotel giants are slated to become a combined entity on September 23. As the hotel business remains hot with sales growth across the board and a raft of hip, new flags, there’s an obvious question: Are more hotel weddings on the horizon?
With the Chinese Ministry of Commerce giving Marriott-Starwood its blessing—the last regulatory approval required to complete the merger—Marriott will solidify its status as the world’s largest hotel company and largest franchised hotel brand in the Franchise Times Top 200+. From year-end 2014 numbers, Marriott posted $9.6 billion in global sales, which was an 8.2 percent increase over the previous years.
I can’t share the numbers we’ll soon be publishing from this year’s Top 200+, but I can tell you that most hotel brands saw significant sales gains in the previous year—and Marriott is quickly closing in on the $10 billion mark. It will be interesting to see how much higher that number goes with Starwood now under its wing.
While times are fantastic in the hotel business in recent years, it’s an industry with a high barrier of entry for parent companies, franchisees and developers alike. Interviews with execs of various brands suggest they’re well aware that this surge will inevitably slow. As that happens, I think it’s reasonable to expect further hotelier consolidation as most parent brands are now supporting a larger number of brands rolled out for us millennial customers.
More brands, of course, means more overhead and marketing dollars, suggesting there are costs to be saved through tie-ups like Marriott-Starwood. The automotive and airline industries have seen similar consolidation. In the auto and collision repair world, that has led to a steady downfall of mom-and-pops and a larger umbrella for national, franchised brands. I’d argue this benefits consumers who’d rather take their cars to cleaner, professionally run service centers rather than scuzzy shops where upselling is the name of the game. Consumers haven’t felt the same benefits (or any?) from airline consolidation, but that industry plays by its own rules.
There have never been more (or better) choices for traveling professionals or vacationers these days. When travel spending inevitably slows, expect to see a smaller number of parent companies pulling in massive annual revenue numbers. But please, if any of you hotel M&A folks are listening, I’d rather not pay extras for the pillows.