additional ‘phase three’ extension period, which could allow the Chinese Ministry of Commerce an extra 60 days to review the merger transaction.)
Assuming the green light is given,
Marriott’s CEO Arne Sorenson has said that integrating the two companies will be a “two-year project” although there has been “exhaustive planning” by both Marriott and Starwood management teams in the run-up to the deal’s completion. The picture should start to become clearer a year from now as buyers look to secure contracts for 2018. Marwan Batrouni, senior director at BCD
Travel’s consultancy arm Advito, agrees there will be no “immediate impact on the sourcing process” for the 2017 RFP season as it will take time for an enlarged Marriott to develop a combined pricing strategy. He adds: “From a pure buying process – with one less competitor, suppliers will have more power. With more consolidation, the number of markets where a single chain is dominant will increase.” Many in the industry ultimately see that
having fewer major hotel groups to deal with will be beneficial to travel buyers – not only with fewer contracts to negotiate but also by having the ability to drive more bookings through a smaller pool of preferred suppliers who are able to offer a wider choice of hotel brands and global coverage. ACTE’s Koch says the current trend for consolidation could help to make the hotel procurement process “faster, smoother and better” for buyers. He adds: “The current hotel buying approach seems like it never ends. The RFPs start around the end of the summer – but by the time the contracts are signed and the rates are loaded into the system, nearly nine months have gone by before travellers can access the new rates.” While there may be some practical benefits for buyers due to hotel consolidation, the thornier issue is that of price and whether bigger hotel firms will be able to control room rates in key cities.
POWER BALANCE CWT identifies three main threats to travel buyers in a more consolidated hotel market: fewer competing properties in key markets; an increase in hotel companies simply declining to bid for corporate contracts; and a higher risk of non-compliance by travellers who may choose to book directly so they can earn more loyalty points for themselves. The TMC also notes that Marriott is the major hotel player most likely to turn down
BUYINGBUSINESSTRAVEL.COM
THE COMBINATION OF MARRIOTT AND STARWOOD will create the world’s biggest hotel company when measured by rooms – offering around 1.1 million rooms in more than 5,700 hotels around the world.
As a merged company, it will have 30 brands including W, Ritz-Carlton, St Regis, JW Marriott, Le Meridien, Renaissance, Sheraton, Delta and Westin. Despite its size, Marriott only controls about 15 per cent of all hotel rooms in its US heartland. The second biggest global player by rooms is Hilton with around 4,700 properties and 776,000 rooms, followed by Holiday Inn-owner Intercontinental Hotels Group (IHG) with 5,000 hotels and 742,000 rooms. Wyndham Hotel Group has the most individual properties – 7,800 hotels with 678,000 rooms. Over the last year, there has been much speculation about the future of IHG regarding a possible takeover of the UK-based firm but no official bids have emerged. French hotel chain Accorhotels, which operates brands such as Ibis, Mercure and Sofitel, has bolstered its portfolio with the purchase of Canada’s FRHI Hotels and Resorts, which owns the Fairmont, Raffles and Swissotel brands. These 115 new properties have already tripled Accorhotels’s footprint in the US and helped speed up its development in China. A more recent deal has seen Chinese firm HNA Tourism Group purchase Radisson- owner Carlson Hotels from Carlson Wagonlit Travel’s parent firm Carlson. This has added 1,400 properties to HNA’s portfolio and established its presence in the key US market. Another US firm, Hyatt, which had been interested in buying Starwood before Marriott swooped, is a relative minnow with 650 properties around the world.
“The way in which major hotel groups price and distribute their product may need to change”
an RFP – with CWT’s data showing that Marriott declined to bid on 18 per cent of requests during the 2016 negotiating season, compared to a decline rate of just 5 per cent for Starwood. Will the newly merged company continue declining to participate in a significant proportion of RFPs? It will take a while to find out what
Marriott’s strategy will be when it comes to RFPs, but a more immediate outcome is likely to be on pricing in some markets where the enlarged company has an abundance of properties. Paul Wait, CEO of the Guild of Travel
Management Companies (GTMC), says: “The way in which major hotel groups price and distribute their product may need to change if they become too dominant in any business city. This may not be obvious at first but prices and benefits – wifi, for example – could well be affected. It’s key that this is monitored closely by both corporate buyers and TMCs.”
Alwyn Burrage, supplier relations manager at ATPI, believes the pricing issue will be “more strongly felt in the US” because of Marriott and Starwood’s strength in their home market. “We believe that this merger will ultimately lead to a reduction of brands as they are consolidated together with an eventual impact on rates, which will most likely increase,” he adds. Cities where Marriott-Starwood already command more than 40 per cent of corporate spending include Los Angeles, Dallas, Philadelphia, Minneapolis, Mexico City, Toronto and Montreal, according to CWT. But the combined company would only have a market share of 10 per cent in London and 14 per cent in Paris. On this side of the Atlantic, the European Commission (EC) cleared the deal in June, after assessing that it “would not adversely affect competition in Europe”.
The EC’s investigation into the acquisition focused on the impact on five cities where
BBT September/October 2016 77
Hotel groups: state of play
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