Despite the fact that Starwood is trying to look for a new company to take over their business, it seems that the current talks that they were having with IHG weren’t going anywhere, and this is why they are trying to find a new partner.
The discussions about a merger were in the early phases, but the ambitions were large, mainly because they wanted to create the largest hotel group in the world. Based on a source that is very familiar with the two companies and their meeting, the discussions have now ended.
When we touched Starwood for a comment they did not respond, whereas IHG said that they are not in talks with the company, despite all the rumours that are currently appearing in the online world.
According to numerous reports in the matter, Starwood is actually circling the idea of selling the company starting with this April, mainly because it feels that it has a slow growth when compared to rival companies such as Marriot and Accor for example.
In fact, this February the chief executive Frits van Paasschen has actually resigned mainly because the board pressured him since not that much growth was registered within the company in recent times.
It was at that particular time when speculations started to appear online that Starwood wants to sell, especially some of its larger brands that include Sheraton, W and Westin.
According to numerous reports that have appeared on the stock market, Starwood shares are now flat this year, which is bad for the company because they do want to evolve yet the growth just isn’t there. On the other hand, rival companies like Marriot have seen a growth of no less than 12% which is indeed a lot when compared to its rivals. According to the Starwood chairman, at least in the month of April there was no specific option off the table, they were considering all particular parties that might be interested in the purchase.
The important thing to note is that the Starwood company is operating no less than 1200 properties, with a current coverage of around 100 countries and a total of 180000 employees. Despite the large numbers offered here, growth is a major issue, especially with a massive company like Starwood, and that’s why selling the company is actually a natural thing to do considering this current state!
But even if IHG didn’t acquire Starwood, that doesn’t mean that there aren’t many parties involved in the story. In the end, Starwood will most probably find a company to purchase them, but other details involving such a deal aren’t known at this time. One can only hope that the company will find the means to grow, although one has to wonder how much will a company with 180000 employees can actually grow in the long run!
On the flip side the independent brands should look at these moves as positive. In an earlier article we described the move of Accor to open their business for the private sector with the acquisition of Fast Bookings. The underlying reasons for hotel brands to consider mergers and acquisitions is to reduce their corporate spending and improve their profitability. During a presentation of Expedia Inc. we learned that this OTA spends more then 2 Billion USD in 2014 on online marketing. Hotel brands would pay OTA’s like Expedia a commission between 15-25% for each booking, driving their yearly revenue for 2014 to 5.7 Billion USD (*source). This is the reason for more of the Hotel brands to unite their efforts to take back these “lost profits”.
Recent move from Marriott to hit the market hard with their TV add’s; It Pays To Book Direct marketing campaign, is creating a shock wave of criticism in the tour operator world. It shows that the brands just starting to show of their hidden power to protect their brand and securing their highest profitable channels.
