Thoughts on Marriott acquiring Starwood
Note: I began writing this post a few days after the Marriott-Starwood merger announcement. Unfortunately, due to events regarding my day job, I am just now getting back to finishing this. I know this seems a bit dated, but since my goal was not to break the news, but rather to offer my perspective, I decided to finish it.
Marriott is acquiring Starwood, creating the world's largest hotel company
If you read points and miles blogs, you are no doubt aware that Marriott International announced yesterday that it is buying Starwood hotels. This news took not only points and miles bloggers by surprise but the financial community as well. My girlfriend texted me the news and I sure did not see it coming. In fact, I was beginning to wonder if I had missed an announcement of Hyatt taking over Starwood given that speculation earlier this month.
I am disappointed because I was excited about the prospect of a Hyatt-Starwood tie-up. I have only begun staying at Starwood properties this year, but I have come to like what I have found at its brands. In fact, I am very close to attaining Starwood Preferred Guest Gold status for 2016. While I do not have any real Hyatt experience (aside from a couple of thousand stranded points from a business trip last year), I was intrigued at the prospects of a chain with two well-regarded loyalty programs that included numerous premium properties between them.
I must admit, I really do not know what to think of this merger. I had a Marriott Rewards account about a decade ago, but I have not stayed at any of its hotels in about as long. Marriott Rewards gets light coverage in points and miles blogs where most of the attention seems to go to Hilton, Hyatt, IHG and Starwood. Rather than attempt to muster up a rather uninformed opinion on this merger, I thought it better to survey the thoughts of my more experienced fellow bloggers. As is often the case, I felt that Ben Schlappig at One Mile at a Time did a masterful job summarizing the issues and mysteries of the merger.
Ben offered thoughtful points on why the merger made sense for Starwood as well as his usually prescient insight as to the impact of the merger on the loyalty programs. His analysis of the benefit to Starwood resonates with me:
“The reason Starwood has been underperforming is because they’ve been lagging the competition when it comes to limited service properties. They have nearly a dozen hotel brands, but very few of them are limited service. Instead they mostly have “lifestyle” brands, which means they’re missing out on a big portion of the market. Marriott, on the other hand, does really well in the limited service market (they have Courtyard, Residence Inn, Fairfield Inn, etc.), and also does well with more “traditional” brands. So this does seem like a better fit for Starwood than Hyatt, in my opinion, where I really didn’t see any synergies, given that Hyatt also doesn’t do very well in the limited service sector. Still, the “new” Marriott will have a total of ~30 brands, which is sort of insane. I can’t keep track of the brands from just Starwood or Marriott, let alone their combined brands.”
My preferred properties tend to be limited service hotels. For my needs, I long ago came to the conclusion that once the lights go off, assuming the room is comfortable, all hotel rooms are basically the same: a place to sleep while I am exploring new places. Few of my trips include significant time in a hotel room, so I am loathe to pay extra for niceties from which I get limited value. I will occasionally spend a little more for location but that is about it. Don’t get me wrong, I do like higher end properties but, while I occasionally splurge, I rarely will spend the money for those. I will use loyalty points for stays at premium hotels so a chain that has limited service properties where I can earn points and higher end locations where I can spend those points is very attractive to me. Due to Starwood’s paltry offerings on the limited service end of the spectrum, I have struggled to find SPG properties that fit my needs since I began staying with the chain this year.
Marriott International brand portfolio
Many of my destinations are rural interstate stopovers. Finding a Hampton Inn or Holiday Inn Express is not too difficult in these locales. However, finding an SPG property is often near impossible. When booking a room for my road trip to the Georgia Tech-Virginia football game in October, I found one SPG property in all of western Virginia, the Sheraton in Roanoke. If I had not been trying to use a free night I had earned and was about to expire, I would almost certainly not have booked a stay there, both due to cost and location. To the degree that the merger with Marriott increases options in areas such as this, I too see the benefits of the combined company. Where my concern lies also parallels that of Ben’s: the loyalty programs.
Starwood brand portfolio
Schlappig suspects that if there is only one surviving programs, “it will be Marriott Rewards, given that it’s more than twice as large as Starwood Preferred Guest.” I think that conclusion and reasoning is sound. Ben goes on to opine on some possible scenarios for the combination of the two loyalty programs. I think the most interesting is his first possibility:
“It’s possible that both Marriott Rewards and Starwood Preferred Guest will continue to exist independently, much like there’s Ritz-Carlton Rewards and Marriott Rewards, even though Ritz-Carlton is part of the Marriott portfolio. There could be separate elite benefits at Starwood and Marriott properties, and they could continue to be operated somewhat independently, with some reciprocal benefits between the two groups.”
While I see some validity in the comparison he is making here, I do not think this is likely. The difference between the Ritz-Carlton brand and all but a few other brands in the world - only one of which might include Starwood’s St. Regis - is vast. To maintain the ultra-premium branding that Rtiz-Carlton enjoys, Marriott almost has no choice but to maintain a separate program for the chain. As a whole, Starwood does not carry that cachet and there would be little branding motivation to carve out its properties into a standalone program. In fact, one could quite readily pair some Starwood brands with a similar Marriott brand. Hence, I do not feel that this scenario is likely.
“The SPG program was one of the most attractive aspects of our acquisition of Starwood. To state the obvious, devaluing points or member benefits is not the way to preserve and strengthen these programs, which is our aim.”
What I think is the most likely scenario is Ben’s second, where certain SPG features get rolled into the surviving Marriott Rewards program. Ben focuses more on suite upgrades but does not touch on the feature that I like most about Starwood Preferred Guest - conversion of points to airline partners. While there was little information from which to glean the future of the loyalty programs at the time of the merger announcement, since I started this piece, Marriott International CEO Arne Sorenson specifically commented in an online video, though with little specificity, on Starwood Preferred Guest and Marriott Rewards. While nothing definitive was conveyed in his comments, Starwood loyalists have some room for optimism as we await details on the merger’s implementation.