In today’s analyst call following the announcement of the Marriott/Starwood Hotels merger, Marriott CEO Arne Sorenson said there are no plans to divest any of the Starwood brands.
Instead, Sorenson said that all of the Starwood flags have specific demand in the marketplace, and they all have opportunity to grow more quickly due to the combined company’s heightened positioning and leverage power.
The Online Booking Factor
We reported on April 30, 2015 that Sorenson said Marriott wasn’t interested in any large mergers in the near term, but today he said that Marriott’s change of heart was based on two reasons.
One is the revaluation over the last seven months of Starwood financials, which lost 15% of shareholder value since April.
Two, Sorenson said that the big mergers in the online travel booking space, and the growth of companies like Google moving into travel distribution, suggested that it might be in the long term interest for Marriott to expand its room inventory by 50% in the short term.
Shedding Sheraton Properties
There’s a lot of interest in how the merger impacts brand differentiation from a consumer-facing view.
Sorenson said both Ritz-Carlton and St. Regis are very strong and unique verticals with enough space in the market for them to flourish independent of each other. He emphasized that there is significant growth opportunity in the luxury hospitality sector.
Starwood’s new soft brand, Tribute, could be folded into Autograph Collection because there are so few properties involved, but Starwood Luxury Collection will remain as it is for now.
Sheraton and Marriott also have similar consumer bases, although Sorenson said Marriott has been performing better, so there could be some culling of the lower end of Sheraton properties into perhaps Marriott’s new Delta brand.
The closest clash of brand identities is Marriott’s Renaissance Hotels and Starwood’s Le Meridien Hotels. Sorenson said nothing further can be added about that until discussions commence with Le Meridien’s executive and creative teams.
>> Related: Starwood Concedes That Sheraton Is a Tired Brand
The Value of Loyalty
Sorenson said a significant factor behind the decision to merge with Starwood was based on the attractiveness of the Starwood Preferred Guest (SPG) loyalty program, which he said skews somewhat toward a younger audience.
The merger could spur Marriott to invest more significantly on the tech side to improve the SPG platform even further, and it will improve the overall cost per reservation for all of the 30 brands in the new portfolio.
Mostly, the new Marriott loyalty ecosystem becomes much more attractive to consumers due to the exponentially larger choice of properties where they can redeem awards.