Starwood Bidding War Grabs Investors, Business Travelers
NEW YORK – The bidding war over the Starwood hotel chain is being closely watched by investors and frequent business travelers. For the leisure crowd, however, who owns their hotel makes very little difference.
Starwood said Monday it has accepted a sweetened $14.41 billion bid from Marriott, just days after a Chinese insurance company appeared to steal it away from the hotel chain with an offer valued at $14.15 billion.
Shares of Starwood Hotels and Resorts Worldwide, which traded at $60 in early February, were at $83.80 in morning trading Monday. Marriott shares are up 23 percent in the same time frame.
The buyout would create the world’s biggest hotel company and give Marriott a stable of tony properties run by Starwood, like the St. Regis New York. Until shareholders of both companies vote on April 8, there could still be a counteroffer from China’s Anbang or a bid from another suitor.
Unlike the merger of airlines or office supply stores, this deal should have minimal impact on nightly hotel rates for most travelers.
Marriott and Starwood – like other hotel chains – own very few individual hotels. Instead they manage or franchise their brands to hundreds of individual owners, often real estate development companies. Those individual hotel owners are responsible for setting nightly room rates. It isn’t uncommon for a developer to own a Marriott, Hilton, Hyatt and Sheraton in the same city.
Frequent business travelers, however, have more on the line.
Road warriors try to stay loyal to one hotel chain, airline and car rental company because they are rewarded with more upgrades and points. Guests who stay typically 50 nights a year with the same hotel chain get free breakfast, late check-out and often nicer rooms.
For Marriott loyalists, this merger would add nearly 1,300 extra hotels for them to stay at. That includes many high-end resorts to use their loyal points at after countless nights on the road for work. Starwood, based in Stamford, Connecticut, owns Sheraton, Westin and St. Regis.
Starwood over the weekend became the first U.S. hotel operator to gain access to Cuba, just as President Barack Obama arrived to Cuba for the first visit by a sitting U.S. president in almost 90 years.
The revised deal would give Starwood shareholders $21 in cash and 0.80 shares of Marriott International Inc. Class A stock for each Starwood share. Starwood shareholders are also expected to get Interval Leisure Group stock valued at $5.83 per share. Taken together, that would value Starwood stock at $85.36 per share, or about $14.41 billion.
Anbang’s offer is for $83.83 for each Starwood share, or approximately $14.15 billion.
Marriott has more than 4,400 properties in 87 countries and territories, under brands such as Ritz-Carlton, Residence Inn and Marriott. While Starwood fans would gain access to more hotels, they are hesitant about the deal.
Having Anbang buy Starwood would keep their much-beloved hotel chain independent of Marriott. Smaller hotel chains like Starwood and Hyatt have had to fight harder to win over business travelers and therefore offer more benefits to their most-frequent guests.
Marriott does treat its top-tier platinum guests to nicer rooms but rarely gives them suites. Both programs offer free breakfast to platinum members, except Marriott doesn’t do so at its Courtyard and Ritz Carlton hotels or at resorts. Late checkout isn’t guaranteed, just offered “subject to availability.”
Anbang made a dramatic entry into the U.S. two years ago when it bought the famed Waldorf Astoria of York for almost $2 billion. Days before it contested Marriott for control of Starwood, it laid down $6.5 billion to acquire Strategic Hotels & Resorts Inc., which owns several high-end properties including the JW Marriott Essex House in New York and Hotel Del Coronado in San Diego.
Marriott said Monday that it is confident that it can achieve $250 million in annual cost savings within two years of closing on the Starwood transaction. That’s $50 million more than it estimated in November, when it gave its initial offer to Starwood.
Marriott and Starwood still anticipate the deal closing around midyear, assuming it receives the necessary approvals.
Shares of Starwood gained $3.23, or 4 percent, to $83.80 in morning trading. Shares of Marriott, based in Bethesda, Maryland, shed 85 cents to $72.32.
The Associated Press