The hotel industry has a new and very sizeable player.
Marriott's merger with Starwood has cleared all regulatory hurdles and the two will now form the largest hotel group in the world. The new company has approximately 5,500 properties across 30 brands with more than 1 million rooms. For scale, that's almost a 300,000 room advantage on its nearest competitor, Hilton.
A month ago it looked like the deal was in trouble. Chinese regulators were requesting additional time to review the transaction and rumours of Marriott having buyer's remorse were circulating in the media. However, the chatter proved to be unfounded and both executive teams now have the considerable task of integrating the companies and combining two loyalty programs without alienating guests.
So what does it mean for customers?
Not much just yet.
The complexity of the merger is such that it will take more than a year for the effects to be fully realised. Regarding the loyalty programs, Marriott CEO Arne Sorenson has said he expects Marriott Rewards and Starwood Preferred Guest will continue to operate separately until 2018.
Industry commentators highlighted the fusion of loyalty programs as one of the most difficult elements of the deal to implement. In this capacity, Marriott should be commended for already taking steps to enable Starwood Preferred Guest members to status match and transfer points.
Long term, the impact will be more significant.
How the merger affects private rate negotiation will be one of the most important developments for business travellers. In markets where Marriott is now the dominant player it will have less incentive to engage in the RFP process. Marriot's true influence on this process will become clearer during the September to February negotiation season in 2017.
Additionally, Marriott now has 30 brands under management. Sorenson has said he has no plans to scrap any at present but it's highly likely some will merge in the medium term. The real strength of Marriott's new position is its ability to offer increased choice. Hotel loyalty programs offer great value but lack the stickiness of their airline counterparts. Trust in a brand is an equally strong factor for travellers and Marriott's capability to offer guests more places to stay in more markets is now its greatest asset.
The challenge for Marriott's executive team will be settling on a brand mix that best sustains customer loyalty, eliminates overlap and maintains operational efficiency.
The challenge for its competitors will be to counter Marriott's increased range of choice by distinguishing their offerings and delivering on their own brand promises.
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