First Free Story (1 of 3)Join Skift Pro
After a first quarter involving one of the most bizarre and unexpected bidding wars of the year, Marriott International emerged victorious, having kept Starwood from the likes of Anbang and seeing an increase in its revenues, room rates, and occupancy rates.
It’s clear that a lot of work lies ahead for the company, especially as it closes the Starwood deal and executes the integration process that follows, according to comments made by Marriott CEO Arne Sorenson and Marriott CFO and EVP Leeny Oberg during the hotel giant’s first quarter earnings call.
The call was also an opportunity for Marriott to discuss larger themes impacting the travel and hospitality industry.
Here are five highlights from the call:
About the Starwood Deal
Sorenson and Oberg couldn’t reveal too many details with regard to Marriott’s estimated $12.4 billion acquisition of Starwood, which was approved by both sets of shareholders on April 8. Sorenson said the deal is expected to close by mid-year 2016 and that it is still awaiting regulatory approval from the European Union, China, Mexico, and Saudi Arabia.
He also reiterated that the acquisition will better enhance the company’s global reach, saying that after the acquisition, “We estimate more than a third of rooms and fees will come from outside the U.S.”
Combined with Starwood’s portfolio, Sorenson said, “This means we can play in more sandboxes than many of our competitors, winning the highest value opportunities.” Together, Starwood and Marriott will have 1.1 million rooms spread out over 5,500 properties and 30 different brands.
Loyalty and Rewards
Sorenson said the integration of the two companies’ loyalty programs is “very much a work in progress” and that it will most likely take at least two years for the two programs to be combined.
Most recently, Marriott Rewards and Ritz-Carlton Rewards introduced a number of new perks that seem to have been inspired by moves taken by Starwood’s Starwood Preferred Guest Program, including branded experiences, late check-out, and a concierge service for elite members.
The exact price that Marriott will pay for Starwood remains dependent on Marriott’s stock price at the time of closing, Sorenson also noted.
Under the new terms of their agreement, Starwood’s shareholders will receive 0.8 shares of Marriott common stock and $21 for each share of Starwood common stock.
About Direct Bookings
Although Marriott was the first big hotel company to enter the direct booking wars with its “#itpaystobookdirect” digital campaign from August 2015, the company hasn’t revealed many details about whether or not this campaign, or the company’s latest Marriott Rewards Member Rates are translating into more market share and more bookings.
Sorenson said that, currently, 65 percent of transient room nights for Marriott are coming from Marriott Rewards members but because the new discounted rates for loyalty members are still fairly new, it’s “too early to give you statistics.”
Marriott, so far, has only promoted the rates on its sites, but Sorenson said, “We are optimistic about this approach in driving and increasing direct bookings, and driving that much more awareness of direct bookings.”
About the U.S. Market and Business Travel
In the U.S. for the first quarter, Marriott saw strong demand in cities that included San Francisco, Los Angeles, and Atlanta, but weaker business in markets that include Chicago, New York, Miami and Houston. Sorenson said the “strength of the digital economy” drove demand in San Francisco and Los Angeles, while increased supply growth and the strength of the U.S. dollar impacted New York City.
Because some companies are having challenges with their topline growth while others are doing exceedingly well, Sorenson said there’s a mixed bag relating to the corporate transient travel budgets in general.
About the International Market
Internationally, Marriott saw incredible revenue growth per available room in Mexico for the first quarter, up 30 percent from the same period last year. This offset some of the loss in Caribbean and Latin America business due to Zika virus concerns. Sorenson noted that some groups had cancelled their meetings in the Caribbean and Latin America because of Zika-related concerns. Brazil, with the exception of the Olympics, will continue to be weak.
In Europe, Marriott saw strength in Germany and Spain, with weaker business in Paris, Brussels, and Istanbul, related to recent terrorist attacks, that also “spilled over” into some softer numbers for London.
The Asia-Pacific region “performed better than expected,” Sorenson said, with consumer spending on travel remaining strong in Beijing and Shanghai. He said nearly 60 percent of mainland China hotel demand for Marriott properties was from mainland tourists from China, and Marriott saw a 25 percent increase in Chinese tourists visiting Marriott’s hotels abroad.