When the long-anticipated yet still mind-blowing mega-merger of Marriott International and Starwood Hotels and Resorts was finalized last month, I had a gut-level, visceral reaction.
“This is like being on campus and seeing the nerdy math major holding hands with the captain of the cheerleading squad!”
In the world of putting “heads in beds”, this is indeed a curious pairing of bedfellows.
Let me explain …
Since 1927 when John Willard Marriott and his wife, Alice, opened a root beer stand in Washington, DC which later led to restaurants and hotels, Marriott has been a company known as reliable, predictable, steadfastly loyal to its employees (very high retention, very low turnover), formulaic and profitable. And maybe a little rigid if you’re a meeting planner negotiating function space, room block, F&B, etc.
Then in the 1990s, Starwood came along and quickly established itself as a new breed of hotelier. It was led by a 31-year-old real estate guy, Barry Sternlicht, who was considered an upstart, an outsider, in comparison with traditional, family-owned and family-led chains like Marriott and Hilton.
Starwood made an immediate impression on the hospitality industry and was instantly cool and hip (think introduction of the W Hotel concept, Heavenly Bed, Heavenly Crib, even Heavenly Dog Bed). It was forward-thinking and focused intently on the traveling guest’s experience (key word: experience), and willing to take risks and figure out the mundane like profit models later. Very un-Marriottish, if you will.
It worked. Starwood grew and quickly became a player in the industry.
Much like Apple’s Steve Jobs, Starwood’s leadership had an innate ability to identify what travelers wanted – even before the traveler knew they wanted it. By focusing relentlessly on guest needs and infusing home-like touches, Starwood rolled out innovation after innovation and the industry followed. And it operated in a meeting planner-friendly way, by the way.
From the Funny-How-Things-Turn-Out Department: Former Marriott Chairman Bill Marriott once referred to Starwood’s leader in its early days – the wunderkind Sternlicht — as “a kid with a backpack”. Eighteen years later, Marriott bought that backpack and everything the kid had in it for a cool $13.6 billion and, overnight, Marriott-Starwood became the world’s largest hotel operator with 30 brands, more than 5,700 properties (1.1 million sleeping rooms) in more than 110 countries.
And suddenly, here we are!
But exactly where are we now that the math nerd and Miss Leader-of-the-Pack have hooked up? Time will tell.
Mergers and acquisitions can be great (Disney-Pixar) … or they can be disastrous (AOL-Time Warner). And with last weekend’s announcement that AT&T now plans to buy Time Warner – assuming the $85.4 billion deal passes what promises to be intense federal regulatory scrutiny – the trend continues.
Fact is, these deals can have huge, and sometimes negative, impacts on industries and competition. Just ask anyone who’s been in the airline or banking business for some time. The road is littered with miserable mergers and acquisitions that started out like a blissful wedding day then quickly devolved into business divorce, or all-out dissolution.
My concerns with Marriott-Starwood are four-fold:
- First and foremost, how will Marriott-Starwood affect the hospitality industry, in general, and my clients, in particular? And what will dynami need to do differently in order to ensure the best interests of our clients are always being protected?
- How will Marriott-Starwood impact traveling guests?
- How will Marriott-Starwood affect meeting planners?
- And what will Marriott-Starwood do to industry competition and the ability to negotiate in a manner that looks after the interests of all parties? Competition makes for a healthy, thriving marketplace where everybody enjoys some degree of success and profitability. But what happens when there are fewer players and the “big guys” have an unfair advantage when setting the marketplace agenda? (Remember when there was no such thing as baggage fees? It only took one large airline to institute them and the industry fell immediately in step – at the expense, literally, of air travelers.)
As I said, time will tell.
On the positive side, Marriott and Starwood have already combined their points-based loyalty programs (Marriott Rewards and Starwood Preferred Guest) which keeps road warriors happy. And now with so many locations in so many countries, those loyal to either the Marriott brand or Starwood brand have greater options and can still stockpile their points.
But questions hang in the air waiting to be answered:
- Will each of the 30 Marriott-Starwood brands honor their unique identities and still feel like a W, a Ritz-Carlton, a St. Regis, a Gaylord, or even a Courtyard by Marriott to biz travelers?
- Will the two companies combine their tech efforts? Starwood already has keyless entry while Marriott properties have mobile check-in and check-out. Will they each upgrade their technology and keep their apps and other tech offerings fresh, relevant and useful?
- Will Marriott leadership allow Starwood to continue to innovate, take risks, and find all-new ways to enhance the traveler’s experience, or will it quash creativity and rein in the entrepreneurial-leaning upstarts?
- From a meeting planner’s perspective, will Marriott adopt the equivalent of Starwood’s SPG Pro program whereby planners receive points for business they bring to Marriott properties in the future? If so, will they funnel those points into a single account, whether they’re earned at a Marriott property or a Starwood property? Or does SPG Pro get phased out? Hope not.
- And most importantly, competition. What happens here? Once a client selects a city for its upcoming meetings, planners typically open up bidding to competing entities like Marriott and Starwood to see who wants the business more and is willing to provide attractive group rates, value-based concessions, upgrades, etc. Now that Marriott and Starwood are one big (hopefully, happy) family, is that bargaining leverage out the window? I wonder. Again, I hope not.
As recent Nobel Prize winner for literature, Bob Dylan, once sang, “The times, they are achangin’.”
Let’s hope they’re changing for the better. Not just for Marriott and Starwood, but for companies who hold meetings and events, traveling guests, meeting planners, and those who believe in free enterprise and open competition.
Keep your fingers crossed that Marriott-Starwood will open up new and better offerings for those who host meetings and events, business travelers, and meeting planners … and keep the fingers on your other hand crossed that the recent mega-merger does not reduce marketplace competition.
Time will tell.