Marriott’s US$12.2 billion takeover of Starwood will create an international behemoth of 1.1 million rooms in 5,500 hotels flying 30 different flags. Assuming the transaction closes in mid-2016 as suggested, Marriott will be almost 50% larger (on a total room basis) than Hilton, the world’s next largest hotel chain.
But what does it mean in Canada? In a word, concentration. Of the 232,954 branded hotel rooms in Canada at December 31, 2014 (regional, national and international chains, excluding hotels of 30 rooms and less) a total of 45,954 or almost 20% will be controlled by Marriott. This total includes 16,610 Marriott rooms, 18,474 Starwood rooms and 10,070 Delta rooms. Marriott’s almost 46,000 rooms will fly 17 different flags ranging from Ritz Carlton and Meridien to Fairfield and Four Points.
These figures do not include hotels that have opened thus far in 2015 or the several Marriott projects in markets like Vancouver, Calgary, Edmonton and Montreal expected to come on stream over the next few years.
At the city level, particularly within the downtown submarkets, the concentration is much more pronounced. Marriott control ranges from less than 20% in downtown Quebec City to almost 75% in downtown Halifax. The city-wide figures reflect a greater dispersion but still significant control in markets like Ottawa/Hull, Halifax/Dartmouth and Montreal.
As the regulatory approval process gears up—creating a legion of delirious legal and tax advisors—it’s worth considering the perspective of various interested parties:
- Owners: Will the “bigger is better” approach be seen as an advantage or disadvantage on both the aggregate and individual market basis? What impact will the takeover have on potential development projects and brand decisions?
- Guests: How will Marriott integrate two of the strongest loyalty programs in the hotel world? (Owners will be interested in the cost and market implication of this process.)
- Partners: How will relationships with airlines and other travel industry services be affected?
- Meeting Planners: How could Marriott influence destination selection decisions for national and international conventions?
- OTAs: What impact will controlling large components of room inventory in specific markets do for Marriott’s negotiating power with these intermediaries?
- Industry leaders: What influence will Marriott wield with local hotel associations and destination marketing organizations?
- Competitors: The ball’s in their court. How will Hilton, IHG and other hotel chains react to such a substantive change on the competitive landscape?
While these issues may be specific to the current Marriott and Starwood transaction, the reality is that further hotel consolidation is inevitable. We are looking at interesting times ahead.