Hospitality mega-merger set to create world’s largest hotel group

Deal would create a powerhouse that operates or franchises more than 5,500 hotels

Marriott's takeover of Starwood will create a powerhouse that operates or franchises more than 5,500 hotels. (Reuters)

Marriott International has agreed to buy Starwood Hotels & Resorts Worldwide for $12.2bn (£8bn), in a move that will create the world’s largest hotels chain with 1.1 million rooms.

In one of the largest merger deals the hospitality sector has seen, the agreement would create a powerhouse that operates or franchises more than 5,500 hotels. Under the terms of the deal, shareholders in Connecticut-based Starwood would receive 0.92 shares of Maryland-headquartered Marriott, and $2 in cash for each share of their common stock.

It would give Starwood shareholders around 37 per cent of the combined company. “This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace,” said Arne Sorenson, the chief executive of Marriott, who will lead the combined group. “This greater scale should offer a wider choice of brands to consumers.”

Marriott operates 63 hotels in the UK, with its global brands including Ritz-Carlton and Bulgari. Starwood, which is behind the W Hotels and Le Méridien brands, has 11 hotels in Britain.

The deal comes some seven months after Starwood said its board was exploring a sale of the business. A number of hotel companies are also facing growing competition from newer, internet-based rivals such as Airbnb. Bruce Duncan, chairman of the board at Starwood, said yesterday that it “spoke to a wide range of interested parties”.

Last month, the Chicago-headquartered Hyatt Hotels Corporation was linked with a takeover, and there was also speculation about a tie-up with InterContinental Hotels Group. However, Mr Duncan hailed the “undeniable logic” of the Marriott tie-up.

It will see Starwood’s lifestyle brands and international footprint, which includes a number of hotels in Asia, merge with Marriott’s presence in the luxury sector.

Mr Sorenson told The Independent: “Opportunities like these don’t grow on trees.”

He and Mr Duncan said the merged company would offer broader choice for guests, greater opportunities for associates and should unlock additional value for Marriott and Starwood shareholders.

Wouter Geerts, a travel analyst at the research company Euromonitor International, said the news was a surprise, particularly because there were strong indications of a Hyatt deal with Starwood. “The planned acquisition will make the combined company the uncontested top hotel player,” he added.

Assuming that it receives the appropriate shareholder backing, the deal is expected to close by mid-2016.

According to Euromonitor, the largest acquisition deal in hotel history was Blackstone’s acquisition of Hilton Hotels for $26bn in 2007, although that was an external investor buying the hotel company, not a competitor.