Marriott buys Starwood Hotels for $12.2 billion

The merger, announced Monday, will create the world’s largest hotel chain with more than one million rooms at 5,500 hotels across 100 countries.

About three-quarters of Marriott’s rooms are in the United States.

Just a few hours after the deal was announced on Monday, Starwood shares dropped 3.6 percent and closed at US$72.27 (AU$102.03), while Marriott witnessed a rise of 1.4 percent in shares, closing at US$73.72 (AU$104.07), reported BBC.

In the meantime, Marriott’s CEO and president Arne Sorenson has moved in to reassure travellers. Its headquarters will be in Bethesda Maryland. The companies expect the deal to close in mid-2016, following shareholder and regulatory approvals. The companies said the deal will not only initiate an increase in global growth by using Marriott’s extensive relationships, but it will also help the combined company improve in areas like reservations and procurement, profitability, and franchise attractiveness. Much of its focus had been in expanding its presence overseas.

Marriott has agreed to pay $72 a share for Starwood’s buyout, which includes brands like Westin, the W, Sheraton, and St. Regis. After several consecutive quarters of falling sales, the company’s president and chief executive, Frits van Paasschen, resigned in February. The Tribute Portfolio is a collection of four-and five-star independent hotels. Starwood has 11 brands under its umbrella. Marriott has always been stronger in the luxury and select-service tiers and the convention and resort business.

The Marriott-Starwood deal also marries two enormous loyalty programs, although gauging the combined size is hard, since the 54 million combined membership in Marriott’s Marriott Rewards and The Ritz-Carlton Rewards overlap with Starwood’s 21 million Starwood Preferred Guest members.

Marriott is paying US$2 a share in cash and 0.92 of its own stock for Stamford, Connecticut-based Starwood, the companies said in a statement yesterday.

The announcement comes more than two weeks after Starwood spun off its time share business, Vistana Signature Experiences, and merged it with a subsidiary of Interval Leisure Group. That is supposed to be completed prior to the Marriott-Starwood merger.

According to Euromonitor, the largest acquisition deal in hotel history was Blackstone’s acquisition of Hilton Hotels for $26bn in 2007, although that was an external investor buying the hotel company, not a competitor.

“This is a bad deal for Starwood shareholders”, Cramer, whose charitable trust owns Starwood stock, said.