The Marriott-Starwood Merger's Ripple Effect

The announcement Monday that Marriott International will acquire Starwood Hotels & Resorts has prompted a lot of corporate travel players to ask what the merger will mean for their own sides of the industry. The short answer is that it’s too soon to tell.

Marriott CEO Arne Sorenson said he believes Starwood’s brands will remain intact, even adding that he expects Marriott will “meaningfully accelerate growth” of the brands. The two companies have a combined 30 brands between them, including one Starwood announced at the end of October. Sorensen said Marriott will finalize a brand strategy in the coming months.

Companies also are nearing the end of their corporate rate negotiations with hoteliers, meaning Monday’s news likely will have no effect on their 2016 contracts. “The timing could not appear to be worse, as we are in the middle of hotel (sourcing) season,” said GoldSpring Consulting partner Neil Hammond, “but we probably won't see any disruption to negotiations as the 2016 season will be over before any post-merger changes are determined.”

For future request for proposal rounds, however, the Marriott-Starwood merger could add to an already difficult negotiating climate. Earlier this year, the New York University School of Professional Studies Tisch Center for Hospitality and Tourism released an analysis that said travel buyers would face the largest hotel rate increases in three decades in 2016.

“It's a tough market for travel managers anyway,” said Tisch Center clinical professor Bjorn Hanson. “To the extent that those buyers send out their RFPs to a bigger, stronger company with more inventory control, this will make the job for corporate travel managers a bit more challenging."

During recent quarterly earnings reporting periods, Marriott has been vocal about its initiative to reduce special corporate business in favor of higher-rated retail business.

“Starwood is a great partner of mine and my competitors, and Marriott typically is not,” said Chris Dane, president of Hickory Global Partners, a company that provides hotel rate programs for travel agencies. “That will be interesting, to say the least.”

Dane said each hotelier already has sent correspondence to partners that it’s “business as usual” and they’re still “two separate companies.”

TripBAM founder and CEO Steve Reynolds said the news has put travel management companies “in a bit of a tizzy.” Marriott, he said, pays lower commissions than Starwood. “The concern now is: Is Starwood going to adopt those same practices? You could probably bet that they are.”

He said TMCs that rely heavily on hotel commissions are going to take a hit, and how they cope “is anybody’s guess. Those that are dependent upon commissions are going to have to figure out a way to make money somehow or some other way or start charging fees for booking Starwood or Marriott.”

Loyalty programs also could create headaches for corporate managed travel. Sorenson said Marriott plans to combine Starwood Preferred Guest and Marriott Rewards, taking the best aspects of each program. That could be great for consumers, who can earn more points at more properties, but bad for travel managers trying to keep employees in-program.

“Marriott is really strong on the loyalty side,” Reynolds said. “They give out points like candy, so travelers are heavily biased toward Marriott. … I'd be concerned that as a travel manager, you want to make sure that you can keep pushing share where you want to go, if my employees are biased to another way and they’re paying less commissions, life could get harder as a result.”

Hammond said the merger, too, could spark further consolidation within the industry. “We would expect this to trigger a response from the other players in the industry with Hilton, IHG and Hyatt potentially looking to strengthen their positions.”

Last month, among speculation that Hyatt or one of three Chinese companies would buy Starwood, The Wall Street Journal reported that AccorHotels is looking to acquire FRHI Hotels & Resorts, which owns the Fairmont, Raffles and Swissôtel hotels and resorts brands. Hanson said the deal would make sense, but neither company has officially responded.