Analysts say, though, it is unlikely to survive the merger with Marriott, which is the larger program.
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The W Hotel, owned by Starwood Hotels & Resorts Worldwide, is seen in New York’s Times Square. The combined company will operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide.
“We became more convinced about the advantages of size by combining the two companies together”, Arne Sorenson, CEO of Marriott, told The Wall Street Journal. The company expects to deliver at least $200 million in annual cost savings in the second full year after the transaction has closed.
The company has plans to relocate its headquarters in the coming years, and Sorenson said he did not foresee any changes to the company’s search for a new campus.
The country’s largest hospitality player in terms of number of rooms – the Tata Sons-promoted Taj group of Hotels – has been displaced from its top position by the global merger of worldwide hotel chains Marriott and Starwood.
Shares of Marriott rose 2% to $74.21 in morning trading and Starwood fell 3.5% to $72.34.
Starwood’s brands will join such Marriott’s 19, which include The Ritz-Carlton, Residence Inn, and Courtyard.
Both the hotel groups agreed on the deal on Monday, surprising other big hotel chains that bid in the process such as Hyatt Hotels Corporation, InterContinental Hotels Group and a few Chinese companies.
“Our board concluded that a combination with Marriott provided the greatest long-term value for our shareholders, and the strongest and most certain path forward for our company”, said Bruce Duncan, chairman of Starwood.
Marriott offered to pay $2 a share in cash and 0.92 of its own stock for Stamford, Connecticut-based Starwood, the companies said in a statement on Monday.
Last month, Starwood announced the sale of its timeshare unit to Interval Leisure Group, with its shareholders retaining a 55-per cent stake in the company.
Starwood’s stock closed at $74.99 per share on Friday, November 13, down from $76.23 per share one year ago. That deal is expected to close before the Marriott acquisition, with Starwood shareholders receiving additional compensation for their stake in the timeshare business. The company has expanded overseas faster than its rivals; roughly half of its more than 350,000 rooms are outside the US.
The deal is expected to close during mid-2016. Frequent business travellers will also be closely watching the deal.
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Travel blogger The Points Guy said Marriott has incentive to preserve the value of the Starwood Preferred Guest program because of its attractive partnerships with airlines and credit card issuers.
