When IHG swallowed Kimpton, I wrote:
“I want to be an IHG Rewards Club Platinum” said no Kimpton elite member, ever.
Conventional wisdom is that Starwood is going to do a deal, and the most likely candidate is IHG. Some say Starwood could buy IHG. I could see IHG buying Starwood. IHG is the bigger hotel chain, though Starwood’s market cap is much higher (nearly $15 billion versus ~ $10 billion).
Starwood has struggled to generate growth and Wall Street isn’t happy. Fundamentally that’s why their CEO Frits van Paasschen was out in February.
- The Sheraton brand, which they’ve just announced investments in, is a mess — it doesn’t signal much about the property you’re going to visit, other than a good bed. The quality is all over the map in most of the world (although generally excellent in Asia).
- Everyone wants a lifestyle brand, and Starwood has a pioneering one in W… that’s hardly growing.
- They hadn’t introduced a new brand in about 8 years, and none of the most recent ones have been engines of growth. Their new Tribute brand is likely to add about 1% growth per year — if it meets expectations.
Westin is a consistent, quality brand. St. Regis is for the most part but theirs isn’t a segment that’s going to drive growth either.
IF Starwood is going to grow, and as a public company that’s certainly the impetus, it needs to buy someone else (but not overpay!) or get acquired.
They’ve retained mergers and acquisitions advisors. Most of the talk has been marrying Starwood and it’s strength in luxury with a chain that focuses predominantly on lower-scale hotels (like IHG, Wyndham).
My own view is that short-sightedly an IHG or Wyndham deal would excite investors but could be a real mess, with a mess of a customer-facing loyalty program integration (IHG properties have little brand consistency overall in my view) or a bifurcated program which only serves to confuse consumers and limit synergies.
As a customer I certainly would have been happier had Starwood acquired Kimpton (though that wouldn’t be a game changer for them, as it won’t be for IHG) or for that matter if Hyatt had (which had been interested, but wouldn’t pay what IHG ultimately offered).
Whatever deal does or doesn’t happen – and one imagines that a deal of some kind is more likely than not – I’d say that:
- In the near-term little will change
- Over time the surviving entity will take over and integrate the other chain into its processes.
- Consumers will make out fine if it’s Starwood that survives. Whatever chain takes over Starwood will likely lose many of its customers, though existing members will be happy to have Starwood’s footprint at which to redeem their points.