In a move that will have major ramifications for the hospitality industry, Marriott International announced on Monday that it has agreed to buy Starwood Hotels and Resorts Worldwide for $12.2 billion in stocks and cash.
The purchase will make Marriott the world’s largest hotel company, with more than 5,500 hotels and 1.1 million rooms worldwide. It’s the second-largest purchase in the hotel industry, trailing only Blackstone Group’s purchase of Hilton Hotels for $26 billion in 2007.
The deal is scheduled to close in the middle of 2016. Marriott expects that it will create $200 million in annual cost savings in the second full year after closing by leveraging back-office and operational procedures.
Marriott and Starwood executives said that the purchase will help to accelerate the growth of Starwood brands. Sheraton, in particular, has been struggling during the past few years.
Arne M. Sorenson, Marriott’s president and chief executive, said that there are no plans to eliminate any Starwood brands. Both Ritz-Carlton and St. Regis are very strong, unique brands that can continue to succeed independent of each other. Starwood’s Tribute brand could be integrated into Autograph Collection because there are so few properties involved, and Starwood Luxury Collection will remain as it is for now.
Sheraton and Marriott have similar consumer bases, but Marriott has been performing better, so there could be some integrating of lower-end Sheraton properties into Marriott’s new Delta brand.
The closest clash of brand identities is Starwood’s Le Meridien Hotels and Marriott’s Renaissance Hotels. Sorenson said this would be discussed with Le Meridien’s executive and creative teams.
After the deal closes, Sorenson will remain Marriott’s president and chief executive, and the company’s headquarters will still be in Bethesda, Maryland. Three Starwood executives will be added to the Starwood board of directors, bringing the total to 14.