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Marriott Announces Plan to Acquire Starwood Hotels

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It’s not IHG, Hyatt, or a mysterious group of Chinese investors. No — the company that will acquire Starwood’s portfolio of 1,270 properties is Marriott, creating the world’s largest hotel company when the deal is complete in mid-2016. Once the merger is complete, the combined chain will manage more than 5,500 properties with a grand total of 1,100,000 hotel rooms located in 100+ countries. In other words — Marriott/Starwood’s combined 75 million members (or 75 million loyalty accounts, at least) shouldn’t have a hard time finding a place to redeem their free nights.

The new chain will have more than 5,500 properties.
The new chain will have more than 5,500 properties.

What does this mean for you?

While the deal is absolutely fantastic news for Marriott Rewards members, who will eventually have access to Starwood’s arguably higher-end portfolio, the implications aren’t so positive for the Starwood Preferred Guest program — and its 21 million members. SPG is significantly more rewarding than Marriott Rewards, which only last month announced plans to up its game a bit in order to catch up with the competition.

We can of course hope for Marriott to adopt the SPG program, but with fewer than half the members of Marriott Rewards, that certainly isn’t likely. And there is some hope that Marriott could operate the Starwood Preferred Guest program alongside its own, as IHG is currently doing with Kimpton, though with less competition in the lodging industry there may be little incentive to do so in the long term.

What do we know right now?

Unfortunately not much when it comes to points and miles. Starwood is currently mum, with Marriott handling the news — and that news is limited to details surrounding the transaction itself, which includes handing over $12.2 billion in cash and stock to Starwood’s current shareholders. If you’re interested in those details (or are perhaps an investor yourself), shareholders are expected to get $2 and 0.92 shares of Marriott stock per share of Starwood. We also know that both companies are targeting mid-2016 for the merger, so by this time next year we should certainly have a better idea of where SPG is headed.

Starwood's W alongside Marriott's JW.
Starwood’s W alongside Marriott’s JW. Not the same thing.

Updates from Marriott’s Conference Call

Marriott held a conference call at 9am ET. Details were largely focused on the transaction itself, though there were a few interesting tidbits:

  • Marriott President and CEO Arne Sorenson will lead a combined Marriott/Starwood
  • Marriott will maintain Starwood’s current brands, with more details to come in the next few months
  • Marriott hopes to appeal to a younger demographic through select Starwood brands
  • Starwood would need to pay a “breakup fee” of $400 million if it backs out of the deal.
  • In response to an analyst question, Marriott said “we too are attracted to Starwood in part because of the strength of SPG.” More on that below.

The Future of SPG

Following today’s conference call, it was clear that Marriott finds the Starwood Preferred Guest program very appealing and has incentive to preserve value, not only because of its very loyal members (like you and me), but also because of very strong partnerships with other brands and card issuers, such as American Express with the Starwood Preferred Guest Credit Card from American Express.

Sorenson specifically referenced the Starwood app, in addition to other attributes: “Whether you look at their app, which I think is a wonderful, inspirational travel planning app; if you look at a little bit the way that SPG skews a little bit younger in some respects; and very valued by elite travelers — we think that there is great value in that program.” Sorenson continues, “Obviously we think there’s tremendous value in the Marriott Rewards program as well… We will take the best of both of these programs and make sure that those bests are preserved and that the program is enhanced.”

Screen Shot 2015-11-16 at 4.08.57 PM

Update: SPG has published the above statement, reinforcing the position Sorenson provided on this morning’s call.

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