Marriott-Starwood merger — Consumers beware

Marriott International is buying Starwood Hotels for $12.2 billion in cash and stock. The Marriott-Starwood merger creates the largest hotel company in the world based on rooms. The combination of Marriott and Starwood does not bode well for consumers, business travelers, corporate travel buyers, and travel agents.

No matter what Marriott says, or how the analysts spin this merger, there is no upside for consumers. It is, at its core, anticompetitive.

All of us have been through the consolidation in the airline industry over the past eight years (and further back). Ultimately, the mergers have not been good for consumers. Increased consolidation of any industry is not good for competition, comparison shopping, and, thus, for consumers. This Marriott-Starwood merger will be felt immediately in the consumer sector; not that of families taking vacations, but in the business-traveler sector.

Business travelers and corporate travel planners can be assured of paying more for lodging in the coming years as Marriott-Starwood joins more and more tightly. With one of their major competitors out of the marketplace, Marriott will have a stronger hand when bargaining with corporate travel buyers and with travel agencies of all kinds. This does not bode well for consumers, be they business travelers or vacationers, period.

Marriott and Starwood say this merger will be a “long journey.” Every consumer has heard that from airlines. But, at the end of these long journeys the consumers end up with less and the larger merged company gets more. With airline consolidation, frequent flier member benefits were reduced, capacity restricted, takeoff and landing slots controlled, international airfares were increased, pricing algorithms changed to favor airlines, and additional fees were imposed.

Look at this as a merger of 30-plus hotel brands
Marriott-Starwood will have 30 hotel brands within the combined company. This kind of segmentation of the overall market has always been a ploy that allowed hotel management companies to get around restrictions that are part of their overall franchisee contract restrictions. It also aims to make consumers think that they have more choice about what lodging they prefer.

To consumers, The Ritz-Carlton Hotels, Bvlgari Hotels & Resorts, JW Marriott Hotels, EDITION, Autograph Collection, Renaissance Hotels, AC Hotels, Moxy Hotels, Marriott Hotels, Delta, Courtyard by Marriott, SpringHill Suites by Marriott, Fairfield Inn & Suites by Marriott, Residence Inn by Marriott, Towneplace Suites, Marriott Executive Apartments, Gaylord Hotel, Marriott Vacation Club, Grand Residences by Marriott, and The Ritz-Carlton Destination Club may seem like a collection of many different competitive hotel companies. However, these are all Marriott. There is no competition.

On the Starwood side, Sheraton, Westin, St. Regis, The Luxury Collection, W Hotels, Le Meridien, Design Hotels, Tribute Portfolio, aloft, Four Points, and Element are all part of the same company. There is no competition among these hotels. They are priced and located to benefit Starwood and not consumers.

With the merger, consumer choice, both leisure and business, will suffer, as will  hotel franchisee relations.

Will this inspire more hotel management company mergers?
In the airline industry one major merger spawned a half-dozen more. And, though, one will hear repeatedly, “Marriott-Starwood merger will only affect 15 percent of the hotel rooms in the US,” consumers should worry about finding four merged companies eventually controlling 60 percent of the market. Already, control of the hotel marketplace by three giant management companies is getting close to 40 percent with this merger. This is the first step in what can be expected, if we look at airline mergers is a similar light. If the Department of Justice does not step in early, future limitations on mergers of hotel management companies become more and more difficult.

Do consumers or the travel industry need this merger?
The resounding answer is, “No.” Hotel rates and occupancy rates are some of the highest in history.

This kind of merger will empower the new big kid on the hotel block in negotiations about everything from frequent stayer programs to credit card affiliations and from negotiations with major corporations and online travel agencies to tour package organizers. Across the board, there will be new pressures to increase prices and decrease customer service. That is the nature of the merger beast.

The larger a hotel company becomes the more leverage it has with online travel companies and with corporate travel buyers. Hotels detest these online travel agencies and corporate travel buyers because they promote comparison shopping and because many consumers choose to use these agencies to purchase travel that blends air, hotel, rental cars and more. It is not rocket science to know that with more leverage in the hands of hotel magnates, consumers lose.

Loyalty programs will take a hit, especially the Starwood program

• Lifetime status? This lifetime is based on the program’s lifetime, not the member’s. So, what will happen to the Starwood program folk? Time will tell.
• The Starwood loyalty program has been know as one of the best in the business. It had to be because Starwood was battling Marriott, Wyndham, IHG and Hyatt.
• What happens to the Starwood crossover programs with Delta, Emirates and Uber? Marriott’s program is with United. Will both be continued? Probably not.
• Plus, American Express, if it loses the Starwood affinity credit card account, will see big pressure on their earnings.

How does the merger impact Marriott’s market share?

Worldwide, the merger could create a more balanced company. But, this is no consumer benefit; only a corporate benefit.

There are several ways to look at this merger. This merger will not be enough to make Marriot/Starwood the largest hotel company in the world by number of properties. As far as the number of hotels is considered, Wyndham Hotel Group and Choice Hotels International will remain the top brands — 600,000 and 500,000 respectively. The Marriott-Starwood combined will have the largest number of available hotel rooms — 1.1 million worldwide.

Starwood has had a far stronger presence in the opposite side of the world (Middle East, Asia, Oceania) than Marriott – 653 vs. 206. This acquisition would allow Marriott to become the dominant brand in that region. Starwood has been investing here over the last several years, which is something Marriott will be able to capitalize on. Just last year, Starwood opened 30 new hotels, and signed 71 in Asia Pacific.

Here is a breakout of what the new combined Marriott-Starwood mega-hotel management company will look like, internationally.
USA/Canada/Mexico: Marriott 3,774, Starwood 782
S. America: Marriott 43, Starwood 65
Africa: Marriott 113, Starwood 57
Europe: Marriott 306, Starwood 181
ME/Asia, Marriott 200, Starwood 637
Aus/NZ: Marriott 6, Starwood 16

The bottom line: We repeat: No matter what Marriott says, or how the analysts spin this merger, there is no upside for consumers. This merger is, at its core, anticompetitive and anti-consumer.