Starwood CEO Expects to Sell By End of Year

Scott Mayerowitz recapped Starwood’s earnings call noting that Starwood CEO Adam Aron expects a sale by the end of the year.

Starwood Hotels is nearing a deal to sell the company or merge with another hotel chain, its CEO said on an earnings call Wednesday.

“This has the company’s highest attention,” interim CEO Adam Aron said. “Our clear goal is to optimize the value for our shareholders.”

…”Our progress is active and nearing conclusion,” Aron told investors Wednesday afternoon. He wouldn’t comment on any specific deal, but said: “I would be surprised if we don’t have answers to these questions by the end of this calendar year.”


Chairman’s Suite Living Room, Westin Stonebriar

This morning I noted that Hyatt was rumored to be near an agreement to acquire Starwood. It would be interesting to see Adam Aron — who created the Gold Passport program as Hyatt’s Chief Marketing Officer — ultimately sell Starwood to his former employer.

For customers this would be the best possible outcome of any of the deal combinations Starwood is rumored to have looked at. I like this better than Wyndham, IHG, or Accor. For Hyatt and Starwood it’s not as clear how well an acquisition fills strategic gaps, however.

  • Starwood’s biggest gap is in select service. That’s why the Wyndham/IHG/Accor narratives all made sense, Starwood’s luxury complements the strength of those brands. Hyatt sees future growth in select service, and would be buying a chain that’s weak there. Starwood isn’t growing, which is why the markets want a sale. A Hyatt acquisition doesn’t change that.

  • This would give Hyatt more strength in Europe. It would make them a bigger player in Asia. It doesn’t give them presence in smaller markets, and they’d still be 1/3d the size of Marriott/Hilton/IHG.

  • Hyatt would be buying a lot of similar brands rather than filling clear strategic gaps. Ultimately there’s a ton of similarities between Park Hyatt and Grand Hyatt on the one hand, St Regis and Westin on the other… Hyatt and Sheraton… Andaz and W… They will have a lot of brands that are harder to distinguish than they are now.

I just don’t see how this makes sense for Hyatt. Starwood doesn’t become a more valuable asset once Hyatt owns it, since they still have gaps in smaller markets and Starwood’s gaping hole in select service isn’t solved either. That suggests to me that if Hyatt is the winner bidder, they’ve probably overpaid.


Overwater Villa at the Park Hyatt Maldives

Still, it’s better for consumers than pretty much any other tie-up that Starwood might do. When IHG bought Kimpton I wrote “I want to be an IHG Rewards Club member, said no Kimpton guest ever.” We don’t have that problem here, although lots of questions would exist about how the chains combine.

Make no mistake, Hyatt-Starwood isn’t a net positive for consumers relative to the status quo. As a consumer I want Starwood and Hyatt competing for my business (I choose to stay at least 50 nights with each) and I want each chain’s co-brand credit card doing the same.

Nonetheless a Starwood-Hyatt tie-up would be amazing because it’s better than the world of likely alternatives being discussed for Starwood. It’s better than blowing up SPG, which would always be my worry with Wyndham or IHG.

There would be many questions to be resolved:

  • Which loyalty program survives?
  • Which benefits change? (confirmed suite upgrades, points transfers to miles especially)
  • How would points combine from one program to the other?
  • How do the hotels integrate into existing portfolios (do they keep all the brands)?
  • What do the credit card co-brand deals say about change in control?
  • Though Hyatt is said to remain in charge, which executives from Starwood remain in place?

I’ve long said that the smaller hotel programs need to be more generous than the larger ones, since you can walk down a street and wander into a Marriott, Hilton, or IHG property almost by accident while it takes work to be loyal to a niche player. Post-acquisition Hyatt would still be much smaller than those three so I don’t worry that they’d be too big not to need to be generous any longer. In fact they could create a single player large enough though that they’d on net increase competition in the upscale market segment.


Pool at the Hyatt Place Delray Beach

If this deal is announced I will be very curious to hear what Hyatt sees as the synergies created, since other than tripling their size I’m not sure how there’s greater value as a result of the combination versus leaving the two chains independent.

As for Chinese offers for Starwood, I wonder how real those, how likely a Chinese state entity is to spend $15 billion when they’re bleeding foreign reserves as they enter their own delayed Great Recession. Or is the mere possibility of Chinese offers a stalking horse to encourage Hyatt to close?

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. “Nonetheless a Starwood-Hyatt tie-up would be amazing because it’s better than the world of likely alternatives being discussed for Starwood.”

    Gary, do you and I have the same definition of “amazing”? Something that is amazing is amazing on its own merits, not because, compared to everything else, “it could be worse.”

    By your logic, domestic first class is amazing because it’s better than flying coach 😉

  2. @Dan I’m using it as a comparative, not an absolute. And there was a time where I wasn’t so jaded, where I had flown mostly coach, that I did think domestic first class was amazing!! (Of course back then the meals were better..)

  3. As a soon to be former SPG Platinum a Hyatt-Starwood merger would be excellent. My travels have taken me a bit off the Starwood trail. With this merger I would be able to reach that status again.

  4. Yeah I’m with Dan here — this is a far cry (and much more reasonable) than your initial post. It seems to me that things will only get worse if Starwood merges with another player in the industry. So, yeah, definitely not amazing by any stretch.

  5. I would think Wyndham would make the most sense in that SPG has no properties as bad as Wyndham’s and Wyndham has no properties as good as SPG’s. A match made in heaven.

  6. “As a consumer I want Starwood and Hyatt competing for my business and I want each chain’s co-brand credit card doing the same.”

    This is the statement that stood out to me. If Hyatt bought SPG, would AmEx do away with the credit card, or vice-versa (Chase getting rid of the Hyatt card)? I have both cards, so this is something that concerns me as both have strengths and different perks.

  7. I think the Chinese offers may preserve SPG as a program. Adam Aron is one of the brightest minds in the travel industry. If he says he is going for the most value to stockholders, it could be any offer that offers the most! If the Chinese really want to spend, that could be the ticket. Frequent guests could be better off with the Chinese offer, as I don’t think the Chinese would want to deter any prospective guests/income.

  8. My main concern is what happens to the airlines transfers of the SPG program. While I use a decent amount of Starpoints on Starwood stays, 80%+ go to mileage partner transfers. That’s why I put the vast majority of my spending on my SPG Amex. I’m essentially earning 1.25 miles per dollar on pretty much all of the big mileage programs that allow for outsized value redemptions. My two favorites, AA and Alaska, have no other real transfer partners so SPG is my only option. I think a bid from a Chinese investment firm is the most likely to leave the program alone.

    Though I’m interested to hear where Gary thinks the resulting co-brand credit card of a combined Hyatt/Starwood would end up. My money would be on Amex.

  9. Not sure if its me, I see everything pretty much everything is divided among the giants.
    Chase – Hyatt, Marriott/Ritz Carlton, IHG, , United Airlines, Southwest Airlines
    Citi – American Airlines, Hilton
    American Express – Delta Airlines, Hilton, SPG, (Jet Blue?)

    This would be a blow to American Express.. add to their long list of recent losses.

  10. Yes, I’d say they are on track to complete a deal. Yesterday all Starwood Vacation Network timeshare owners received an e-mail stating that Starwood would complete the spin-off of the timeshare business into a separate company, as was previously announced several months ago. But now they will immediately sell that company to Interval Leisure Group (ILG). ILG is the holding company for the Interval International timeshare exchange program who also bought Hyatt’s timeshare system a few years back. There is a press release at https://www.starwoodvacationnetwork.com/news

  11. Gary,
    Do you think this potential sale would be something that should make me consider spending down my spg points balance? Or will there be plenty of time for that once the final sale is announced? Any thoughts would be appreciated.
    Thanks,
    Scott

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