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Marriott International’s $12.2 billion acquisition of Starwood Hotels is very much about filling out Marriott’s brand portfolio and global growth but it also about something else — leverage.
On a call with analysts this morning, Marriott CEO Arne Sorenson described why “being bigger” can make the combined companies more effective in competition against the consolidating online travel agencies (Expedia, Travelocity, Wotif, Orbitz Worldwide and HomeAway), the sharing economy, Alibaba, and Google, which is accelerating its initiative to become a hotel booking site in its own right.
“Over the course of those seven months we’d become more impressed by what we could accomplish by being bigger,” Sorenson said. “Whether you look at what the OTAs had done by consolidating in their space, and entering into tangential spaces for them. Whether you look at the Alibabas and the Googles of the world, and what they’re trying to do in the travel space. Whether you look at the home-sharing sites and the way they’re trying to get in.”
“Watching all of that we became more convinced that strategically we could drive better value by being bigger,” Sorenson said. “That really starts with things like the loyalty programs, things like the technology spending that we’ve got to do, and by being bigger we can do that more effectively and prioritize in a way that will really help us compete.”
It will also help when it comes time to negotiating multiyear deals with the big online travel agencies such as Expedia Inc. and the Priceline Group. One hotel digital marketing executive recently argued that one of the main reasons Marriott International agreed to join Book on TripAdvisor, the metasearch site’s hotel-booking program, was to exert more negotiating clout against the online travel agencies.
Hotels and online travel agencies have often had a frenemy relationship as hotels seeks to utilize the marketing power of Expedia, Booking.com and others but hoteliers are also doing lots of things to reduce their reliance on such distribution. New TV commercials urging booking directly on the hotel website and exclusive perks, such as free Wi-Fi, loyalty points, and smartphone check-ins are some of the tools in the hotel industry tool box.
Asked about Marriott International’s acquisition of Starwood, a Priceline Group spokesperson told Skift: “Our industry is defined by competition and cooperation and both come from many different players within an ever-evolving landscape. But we focus the majority of our time on building a great user experience defined by choice, transparency and great pricing through a seamless product interface.”
The interface — or conversation — between Marriott International with Starwood may go a tad differently the next time Marriott and the online travel agencies get together for the next round of their negotiating ritual.