Starwood CEO sees hotel M&A accelerating after Marriott deal

Bloomberg

The battle for Starwood Hotels & Resorts Worldwide Inc. may be over, but the company’s chief executive officer says it’s just the beginning for lodging-industry mergers.
“Clearly the Marriott-Starwood transaction has created a lot of chatter about further consolidation,” Starwood CEO Tom Mangas said on a conference call with analysts in which he and Marriott International Inc. CEO Arne Sorenson discussed the outcome of a three-week bidding war for Starwood. The deal, solidified after Thursday’s surprise exit of rival bidder Anbang Insurance Group Co., will drive cost savings and revenue growth, Mangas said.
The hotel industry is consolidating following a drop in lodging stocks last year and signs of slowing revenue growth for the industry, he added. Hyatt Hotels Corp. had been in talks to acquire Starwood last year before Marriott swooped in. Closely held Carlson is exploring strategic options for its hotel group, whose brands include Radisson, according to a person with knowledge of the matter. U.K.-based InterContinental Hotels Group Plc, owner of its namesake brand along with Holiday Inn and Kimpton, held talks with financial advisers about whether to sell itself or combine with a competitor, people with knowledge of the matter said in
November.

‘Increased Pressure’
“Competitors will observe and see how it goes and decide how critical it is for them to play,” Mangas said on the call Friday. “To the extent that we execute well, I think they’ll feel increased pressure for consolidation in what’s an extremely fragmented market worldwide.”
The global hotel industry remains highly fragmented, creating opportunity for expansion through acquisitions as well as development. While the company resulting from Marriott’s purchase of Starwood will be No. 1 worldwide, with 1.1 million rooms in 5,700 properties, that remains a small part of the global lodging market. The enlarged Marriott will control only about 15 percent of the hotel rooms in the U.S., Sorenson said on Friday’s call.
“Even though we’re the largest, we’ll still have a tiny market share worldwide, which creates significant opportunity for us,” Starwood’s Mangas said.

No Remorse
Sorenson said his company has “zero buyer’s remorse” about the Starwood purchase and is “thrilled and enthused” to be acquiring the company, even at the higher price it agreed to once Anbang emerged as a competing bidder. He said Marriott never communicated with Anbang, relying on Starwood to keep it informed, and he hopes to meet Anbang Chairman Wu Xiaohui someday.