A Marriott flag hangs at the entrance of the New York Marriott Downtown hotel in Manhattan, New York November 16, 2015.Andrew Kelly/Reuters
Marriott International Inc. 's blockbuster takeover of Starwood Hotels & Resorts Worldwide Inc., creating the biggest hotel chain on the planet, will give its business customers more choice and a reason to stay loyal, the company's CEO says.
Marriott and Starwood closed their deal at midnight Thursday, a $13-billion (U.S.) cash-and-stock arrangement that will create a 5,700-property chain with 1.1 million rooms.
Arne Sorenson, Marriott's chief executive officer who will remain head of the combined company, said in an interview Thursday that a key reason for the merger was to broaden the range of hotels available to regular customers, most of whom are members of loyalty programs. Clients will be able to transfer points among the programs.
"Those folks want to be cared for with good service … but they want choice as well," Mr. Sorenson said, and creating a bigger chain with multiple brands achieves that goal.
These customers also tend to book with the hotels directly, he said, which means Marriott does not have to pay commissions to the ubiquitous online booking sites that are now often used by leisure travellers.
The Marriott chain, which already included the Ritz-Carlton and several other brands, will now absorb Starwood's Sheraton, Westin, St. Regis and Meridien names, among others. Over all, the combined entity will have about 30 brands and operations in more than 110 countries.
In Canada, the deal adds 72 Starwood properties (mostly Sheraton and Westin hotels) to the 139 hotels Marriott already owned. Marriott Canada itself was beefed up early in 2015 when it bought the 38-property Delta Hotels Ltd. for $170-million (Canadian) from British Columbia Investment Management Corp.
Mr. Sorenson said the Canadian market has been a "steadier performer" for the company than many others around the world in recent years, because the economy did not take as deep a hit as in many other countries.
The Marriott takeover of Starwood has been a rocky journey that has taken almost a year to consummate.
Last November, Marriott signed an agreement to pay just over $12-billion (U.S.) in cash and stock for Starwood. But in March of this year, Starwood received a higher bid from China-based Anbang Insurance Group, which already owned New York's Waldorf Astoria hotel and was looking to beef up its hotel portfolio.
The counter offer from Anbang prompted Marriott to raise its offer. Anbang initially moved to make yet another counterbid, but then abruptly withdrew its offer, leaving Marriott to complete the deal with Starwood.
There were further delays while the merger got approval from anti-trust authorities in several countries. China was the last to give the nod, just this week. Mr. Sorenson said competition is not really an issue because even where the combined company has the biggest market share – in the United States – it represents only about 15 per cent of the rooms available.
The arrangement will mean Starwood shareholders get $21 in cash and 0.8 of a Marriott share for each share they own.
The Starwood deal will give Marriott a larger presence in Europe, Latin America and Asia, and also allow it to better compete with online apartment-sharing companies such as Airbnb.
The overall global travel market – for both domestic and international travel – is increasing because of the growing middle class in many developing countries, Mr. Sorenson said.
Marriott says it plans to squeeze $250-million in annual cost savings out of the combined entity within two years of closing the deal. Initially it had said it could glean $200-million in savings, but later boosted that amount.