What the Marriott-Starwood Merger Means for You
This post from Rocketrip’s Dan Ruch first appeared on Inc.com, where Dan writes a biweekly column on travel, tech, and entrepreneurship. Since the Marriott-Starwood merger closed last month, we’ve gotten some more details about the merger of two rewards programs. If you’re unsure how to find your way in this crazy new post-merger hotel landscape, don’t despair! We’ve got you covered with these tips for saving on hotels.
It’s official. Ten months after Marriott International announced plans to acquire Starwood Hotels and Resorts Worldwide, the $13.6 billion merger is now complete following approval from Chinese regulators. With 30 brands, 5,800 properties, and more than one million rooms, the combined Marriott-Starwood becomes the world’s largest hotel company.
The merger looked uncertain as recently as June, when a Chinese consortium led by the Anbang Investment group made a rival takeover bid, later withdrawn. With both companies’ stockholders along with regulators in the United States and Europe already having signed off on the deal, there are no more hurdles left to clear. Starwood shares ceased trading on the New York Stock Exchange before market open on September 23rd.
So what now? The combined Marriott-Starwood will be the biggest player in a hotel industry that’s grappling with major changes, from the shifting preferences of Millennial travelers, to the steady encroachment on market share from Airbnb.
Uncertain Effect on Loyalty Programs
As for the merger’s effect on consumers, most speculation has focused on how the two companies will combine their loyalty programs. Both Starwood Preferred Guest (SPG) and Marriott Rewards are well-regarded; SPG is “beloved among frequent travelers,” according to one industry publication, while Marriott Rewards has been US News & World Report’s top hotel rewards program in three out of the past four years.
Both programs are massive. Marriott Rewards has 54 million members, SPG 21 million, and many of them are anxious to see who stands to gain and who stands to lose when the programs are joined. There’s some concern that a combined Marriott-Starwood program will be less than the sum of its parts.
Frequent travelers, the ones who benefit most from hotel loyalty programs, can be quite particular about their hotel preferences. Being able to earn and redeem rewards at a Marriott means little to someone who always stays at the Westin (a Starwood hotel), while the massive influx of customers from another loyalty program could have a negative effect on that person’s elite status. “Elite bloat,” a coin termed to describe the ever-growing tiers of loyalty status levels for airlines, could potentially apply to an unwieldy Marriott-Starwood rewards program.
But any program changes appear to be at least a year away. In a letter to Marriott Rewards members earlier this year, Marriott CEO Arne Sorenson wrote that the combined hotel networks expect to run parallel loyalty programs during the integration phase, and don’t anticipate launching a newly combined program until 2018. Sorenson told Marriott Rewards members that “during this period, there [will be] no change to how you manage your Marriott Rewards account or book reservations, and you will maintain your existing member benefits for some time.”
Reduced Competition, Increased Rates?
With room rates and occupancy levels already at all-time highs in many major markets, a merger of two of the world’s largest hotel chains reduces competition in a way that doesn’t figure to bring cheaper prices, to say the least.
Unlike airline mergers, which reduce competitive price pressures but can also result in more extensive connecting service, there’s minimal benefit to consumers when one hotel chain acquires another. Hotels operate independently from one another, with very little in the way of a positive network effect.
Still, regulators approved the deal without much pushback, suggesting they didn’t expect the merger to have a major anti-competitive impact. While you might not notice higher prices next time you plan a vacation, in the corporate travel sector, where room rates are negotiated between hotel chains and a company’s travel manager, the merger already appears to be a bigger deal.
According to a report from CWT Solutions Group, a travel management company, Marriott-Starwood “will have nearly a third – and in some cases half – of the corporate travel hotel spend in 14 of the world’s top 20 cities, including Chicago, Dallas, Mexico City, Minneapolis, New York, and Shanghai.” That level of market share is worrying for travel managers, who are expecting a more difficult environment for rate negotiations.
However, the merger also presents opportunities for cost savings, as smaller hotel chains could respond with price breaks for travelers. Marriott’s acquisition of Starwood has certainly shaken up the hotel industry, but it hasn’t changed the booking calculus for individual travelers. If you’re looking to save money on a hotel, it still pays to keep an open mind and shop around.