Over the past year, the hospitality industry has witnessed the birth of a colossus. In the wake of the Marriott / Starwood merger, which recently received anti-trust approval in China, the hospitality industry has attempted to project what comes next. Many of the sentiments point to doomsday issues involving non-trivial concerns wrapped around ownership agreements, customer reward programs, and customer preferences. Focusing on these concerns misses the mark that these two organizations considered their value to shareholders and that the public valuation has greater worth together rather than separate. Further, the new Marriott has the opportunity to become a template for how the hospitality industry looks to move forward.
On the surface, the merger of Marriott and Starwood had contradiction written all over it. Their management agreements with owners more often than not contain provisions that prevent owners from engaging with competing properties. In some situations, Starwood properties are located within shouting distance of Marriott managed hotels, and thus constitute a clear violation of the original management agreement. This has led to hotel owners seeking to exit management agreements.
The clear contradiction of the management contracts cannot be ignored. However, what if the organizations realized that they needed to change based on the changing consumer with whom they must interface? Clearly, in the new normal, the customer requires more personalization and engaging guest experiences. When considering a merger of two heavyweights, they must recognize and respect the exceptional core competencies of their former competitor. Within this landscape, Marriott and Starwood must see something in each other in that the other performs with higher quality, providing an opportunity to give a better guest experience.
While the merger did not create shockwaves like the aforementioned merger, the Commune Hotels and Destination Hotels merger provides a microcosm of what Starwood and Marriott see in each other as suitable partners. Now operating as Two Roads Hospitality (September 27, 2016), the new organization led under the joint leadership of Jamie Sabatier, CEO of Two Roads Hospitality, and Niki Leondakis, CEO of Hotels & Resorts, will look to leverage their best practices.
At the original announcement of the merger, the focus of the new organization was the following: 1) Driving Continued Operational Excellence; 2) Offering Exceptional Service at a Wide Variety of Properties; 3) Becoming an Employer of Choice. With this concise vision in place, it is apparent that the addition of the two organizations will allow Two Roads Hospitality to provide a robust platform, facilitating leisure, corporate, and group guests who are attracted to their independent and lifestyle properties.
Moreover, the new organization shows that combined efforts can allow for guests to experience a greater array of the best parts of each brand. When considering the gargantuan merger of Marriott and Starwood, it is not without reason to think that instead of one organization swallowing the other, the executive memorandum offers ways that their combined portfolio could provide the opportunity to offer leisure, business, and group guests a more expansive offering. One better equipped to compete against the smaller players in the market, like AirBnB.
Another merger receiving smaller headlines, but significant in its completion involves Benchmark Resorts & Hotels and Gemstone Hotels & Resorts. As with the other two mergers, the two competitors came together in an environment that looks contradictory. Yet the two organizations recognized that they had more to share to create greater opportunity. With their accumulation into an extraordinary portfolio, the single entity can respond to a rapidly changing market; a market having a strategic focus on experience-driven, destination travel.
While Marriott and Starwood definitely have immediate management concerns, all that looks bleak on the surface may not necessarily be the case. Instead, the greater consideration that the new, giant organization may be looking to address is the changing guest in the hospitality market. This revolutionized guest is one that looks for greater options and a more individualized experience. The merger, while representing an opportunity to combine the collective resources of both companies, truly shows the need for organization in the new normal environment to position brands based on greater customer individualization requirements.
