{"id":1004131773,"date":"2015-11-17T07:18:29","date_gmt":"2015-11-17T15:18:29","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004131773"},"modified":"2020-05-14T02:09:12","modified_gmt":"2020-05-14T10:09:12","slug":"marriott-starwood-deal-will-shake-up-franchisees-others","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/marriott-starwood-deal-will-shake-up-franchisees-others\/","title":{"rendered":"Marriott-Starwood Deal Will Shake Up Franchisees, Others"},"content":{"rendered":"
\"Marriott<\/a>

Marriott Hotels & Resorts (PRNewsFoto\/Marriott Hotels & Resorts<\/em>)<\/p><\/div>\n

By Scott Baltic, Contributing Editor<\/em><\/p>\n

The $12.2 billion acquisition by Marriott International Inc<\/a>. of Starwood Hotels & Resorts Worldwide Inc.<\/a>, announced<\/a> on Monday morning, looks likely to bring a substantial change to the hospitality industry in the United States, according to two long-time observers who spoke with Commercial Property Executive. That\u2019s no surprise, given that between them the companies operate or franchise more than 5,500 hotels totaling 1.1 million rooms across 30 brands worldwide.<\/p>\n

\u201cThe acquisition of Starwood by Marriott will combine two of the most powerful guest rewards programs in the marketplace; it will create challenges for the franchisees and will over-saturate select markets with \u2018Marriott\u2019 product,\u201d Peter Nichols, national director of the National Hospitality Group at Marcus & Millichap<\/a>, told CPE. \u201cThere will be definite pros and cons for both the guests and the shareholders. What remains to be seen is how Marriott will deal with these issues.\u201d<\/p>\n

If the Starwood and Marriott Rewards guest-loyalty programs (with 21 million and 54 million members, respectively) are combined, Nichols said, and even taking into consideration substantial duplication, because of travelers who belong to both programs, \u201cthe number will still likely be north of 60 million in total.\u201d That\u2019s in comparison, he noted, to 44 million members of Hilton Honors.<\/p>\n

\u201cChallenges for franchisees,\u201d Nichols added, \u201cmay come in the form of a more difficult negotiation process for new franchisees, or a more difficult time negotiating property improvement plan requirements. With fewer franchisors, there will be less leverage in the owners\u2019 hands.\u201d<\/p>\n

As to potentially over-saturated markets, he pointed out, \u201cMany markets have significant supplies of both Starwood and Marriott product, so with Marriott now in control of both brands, they will effectively \u2018own\u2019 certain markets.\u201d<\/p>\n

Drawing from Marcus & Millichap\u2019s in-house research, Nichols noted that the combined room counts of the two companies today account for 22 percent of all flagged hotel rooms in the United States.<\/p>\n

Going a little deeper, the combined brands will dominate the upper upscale segment, which includes brands such as Starwood\u2019s Westin<\/a> and Marriott\u2019s Marriott and Renaissance<\/a> flags, with more than half of the upper upscale hotels in the country. \u201cFurthermore, improving the performance of, or repositioning, Starwood\u2019s venerable Sheraton<\/a> brand may provide some additional operational upside for the merged company,\u201d Nichols suggested.<\/p>\n

Finally, the acquisition of roughly 27,000 of Starwood\u2019s upscale rooms, principally in the Aloft and Four Points by Sheraton flags, will put the combined company in control of 41 percent of the upscale chain segment, Nichols noted. \u201cIndustrywide, many brands in this \u2026 segment, including Courtyard by Marriott and Hilton Garden Inn, are widely patronized by travelers and highly coveted by franchisees and investors.\u201d<\/p>\n

In its announcement yesterday, Marriott said it expects the transaction \u201cto be earnings accretive by the second year after the merger, not including the impact of transaction and transition costs.\u201d<\/p>\n

\u201cWe expect Marriott\u2019s acquisition of Starwood will be accretive on the hotel real estate side, as well, especially for hotel owners with franchised license agreements from Starwood,\u201d commented Rich Lillis, executive vice president at Colliers International Hotels<\/a>. \u201cAs many institutional hotel investors favor franchised Marriott and Hilton properties, the acquisition will quickly raise the profile and value of many Starwood-branded hotels.\u201d<\/p>\n

\u201cAdditionally, redundancies in brand positioning, such as Starwood\u2019s Aloft and Marriott\u2019s AC Hotels, could lead to some consolidation, re-flagging of certain hotels and further value enhancement,\u201d Lillis predicted.<\/p>\n

Assuming that the necessary approvals are obtained, and that Starwood\u2019s timeshare business is spun off and then merged with Interval Leisure Group according to plan, the parties expect the transaction to close in mid-2016.<\/p>\n","protected":false},"excerpt":{"rendered":"

CPE got an industry insider perspective on the historic Marriott-Starwood deal.<\/p>\n","protected":false},"author":1269,"featured_media":1004131828,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21808,21751,21742],"tags":[],"class_list":["post-1004131773","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-hotel","category-latest"],"acf":[],"yoast_head":"\nMarriott-Starwood Deal Will Shake Up Franchisees, Others - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/marriott-starwood-deal-will-shake-up-franchisees-others\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Marriott-Starwood Deal Will Shake Up Franchisees, Others\" \/>\n<meta property=\"og:description\" content=\"CPE got an industry insider perspective on the historic Marriott-Starwood deal.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/marriott-starwood-deal-will-shake-up-franchisees-others\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2015-11-17T15:18:29+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-05-14T10:09:12+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/marriott.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2700\" \/>\n\t<meta property=\"og:image:height\" content=\"2019\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"the Editors of Commercial Property Executive\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/marriott-starwood-deal-will-shake-up-franchisees-others\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/marriott-starwood-deal-will-shake-up-franchisees-others\/\",\"name\":\"Marriott-Starwood Deal Will Shake Up Franchisees, Others - Commercial Property Executive\",\"isPartOf\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/marriott-starwood-deal-will-shake-up-franchisees-others\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/marriott-starwood-deal-will-shake-up-franchisees-others\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/marriott.jpg\",\"datePublished\":\"2015-11-17T15:18:29+00:00\",\"dateModified\":\"2020-05-14T10:09:12+00:00\",\"author\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/1b82b91678533ae5d40e3240086a42bb\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/marriott-starwood-deal-will-shake-up-franchisees-others\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.commercialsearch.com\/news\/marriott-starwood-deal-will-shake-up-franchisees-others\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/marriott-starwood-deal-will-shake-up-franchisees-others\/#primaryimage\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/marriott.jpg\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/marriott.jpg\",\"width\":2700,\"height\":2019,\"caption\":\"Marriott Hotels & Resorts logo. 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