In a jointed statement, Marriott International (NASDAQ: MAR) and Starwood Hotels & Resorts Worldwide (NYSE: HOT) announced that the form will acquire the latter in a mega deal worth $US 12.2 billion. The deal will create the largest hotel chain of the world subject to Marriott International and Starwood Hotels & Resorts Worldwide shareholder approvals, completion of Starwood’s planned disposition of its timeshare business, regulatory approvals and the satisfaction of other customary closing conditions. With all the required approvals in place, the transaction is expected to close in mid-2016.
Marriott / Starwood Joins As One
After the acquisition is completed, the combined entity will be the first the world to operate over 1 million rooms in over 100 countries and have in excess of 75 million loyalty members.
Arne Sorenson, President and Chief Executive Officer of Marriott International, will remain President and Chief Executive Officer of Marriott International following the merger and Marriott’s headquarters will remain in Bethesda, Maryland. Marriott’s Board of Directors following the closing will increase from 11 to 14 members with the expected addition of three members of the Starwood Board of Directors.
After the merger is completed, the new Marriott will eclipse the former largest hotel chain Hilton Worldwide® which closest has 4,500 properties in 97 countries with a total of 745,000 rooms. It also has over 40 million members in its HHonor® loyalty program.
In a separate communication to its hotel loyalty program members, Chris Holdren, Senior Vice President – Starwood Preferred Guest® announced that “For now, we remain separate, and there is no change to your SPG program status, your Starpoints® or your existing reservations. You will continue to earn Starpoints and elite stay/night credit for your stays, as well as bonus Starpoints for any promotions in which you are participating. There is no change to how you manage your SPG account or book reservations.”
Airlines and Hotels
Currently both Marriott and Starwood formed deeper partnerships with a few airlines. They include:
Delta Air Lines / Starwood
In 2013, Starwood and Delta Air Lines announced an industry first by introducing a comprehensive new partnership that offers benefits to Delta SkyMiles Medallion members and Starwood Preferred Guest® (SPG®) elite members. The program, called Crossover Rewards, began in March 2013 and provided elite members of both loyalty programs reciprocal benefits including:
Delta Air Lines‘ Medallion®members will earn one bonus mile for every dollar spent on eligible room rates at over 1,100 Starwood hotels and resorts in the SPG program. In addition, Diamond and Platinum Medallion®members can also enjoy 4pm late checkout, access to the SPG elite check-in line, complimentary in-room Internet access, and upgrades to enhanced rooms at check-in.
SPG Platinum and Gold elite members earn one Starpoint for every dollar spent on eligible Delta flights. In addition, SPG Platinum elite members receive Priority Check-In, Priority Boarding, Unlimited Complimentary Upgrades, and first checked bag free.
United Airlines / Marriott
Shortly after the Delta / Starwood’s news, United Airlines formed a similar partnership with Marriott called RewardsPlus®. Some of the key benefits of the partnership include:
For United’s Global Services, Premier 1K, Premier Platinum and Premier Gold MileagePlus® members, Marriott will offer Gold Elite status which allows the member (where available): lounge access, complimentary continental breakfast, room upgrades, complimentary high-speed internet access, 25% point bonus on all Marriott stays, priority late check-out and One-to-one transfer of MileagePlus miles into Marriott Rewards points (extended to United’s Premier Silver members).
For Marriott Rewards Platinum Elite members, United will offer Premier Silver status which allows the member (when available): complimentary access to Economy Plus seating at check-in, complimentary Premier Upgrades on domestic flights, premier designated ticket counter check-in lines, priority security lines and priority boarding and baggage handling, one complimentary standard checked bag, and 25 percent Premier bonus award miles on United flights.
Emirates / Starwood
In November 2014, Starwood announced a second airline partnership with Emirates. The program called Your World Rewards® features key benefits that is similar to the one with Delta Air Lines. Both loyal program members will be entitled to earn additional points/miles and enjoy other benefits (where/when available including:
Emirates‘ Skywards® Gold and Platinum members will have the opportunity to upgrade their hotel experience, access SPG elite check-in, 4:00 p.m. late check-out and complimentary in-room Internet access.
SPG Platinum members gains access to Emirates Skywards elite amenities such as priority check-in and priority boarding when flying Emirates. Members also receives complimentary e-gate access for flights in and out of Dubai (this is unique to all partnerships).
With Marriott and Starwood merging, one or more of these relationships may be affected based on the terms of the agreements between the parties.
Since United Airlines partnered with Marriott from the start, their relationship will unlikely not change. Its MileagePlus members will likely gain more hotel choices from this transaction. The airline will likely review its partnership agreement to verify if it has any right to reject any SPG/airline partnerships.
Marriott and United Airlines formed a deeper partnership than the ones between SPG and Delta Air Lines / Emirates (e.g. the former provides reciprocal status benefits instead of extending access to selective passenger amenities). This will likely to be the big differentiator the airline would want to keep in its partnership for promotional purposes. If it’s available, the airline may want to request Marriott to build logic in its reservation / award systems that would give MileagePlus higher priority to access different benefits (such as upgrades).
Delta Airlines / Emirates
While no announcement has been made to various partnerships, Delta Air Lines and Emirates could be impacted by this transaction if United Airlines has the right to accept or reject other partnerships formed by SPG to maintain a competitive advantage.
Both Delta Air Lines and Emirates provide SPG members a subset of their frequent flyer program benefits instead of a status match. If the SPG program merges into the Marriott Rewards program as speculated, both airlines may decide to end the partnership instead of diluting their own passengers benefits by providing reciprocal status. This is especially important as there will be 75 million plus Marriott Rewards members potentially competing for the the same resources. Even if the same subset of benefits are given, services like priority lines to check in or board will be significantly impacted in major cities.
Technology can play a role as the systems used for loyalty and reservation by SPG and Marriott are different. Both Delta Air Lines and Emirates will have a disadvantage as they will have to build new interfaces to connect to Marriott. This may factor into the airlines’ decision to keep the partnership.
Both airlines may also choose another hotel partner such as Hilton Worldwide, Hyatt and IntercontinentalGroup to gain direct access to unique experiences and less members.
Though unlikely, there is also a scenario where SPG will be operated separately similar to how Marriott manages its Ritz Carlton brand currently. In this case, all three airlines may choose to keep their partnerships as there will be less changes.
There are many exciting changes shaking up the airline/hotel partnerships. We will post updates on how these partnerships will change in upcoming posts. Additionally, we will discuss how this news will affect airports. We will also examine how hotels and airlines can work closer together to create new unique experiences.