Size doesn't matter? And yet, it does!
Marriott and Starwood get into bed. A marriage in heaven for some, the birth of a giant breed that will leave more than just a footprint for others.
When it comes to merger and acquisitions it is usually of two rather different and each other complementing establishments. Or the two are so similar that they are in fierce competition with each other, then the bigger swallows the smaller.
In case of Marriott and Starwood it is neither of the above. They are both very accomplished, well rounded and well settled hotel giants, each one in its own right and yet their board of directors decided, subject to shareholders approval, to merge expecting an array of synergies and financial benefits. As a hotelier we always keep our guests and teams in focus. So the first question coming to my mind was: “What will be the benefit for their esteemed guests and their valued employees?” Indeed, a customers’ choice of over 5'000 hotels and 30 different brands sounds terrific. But are a 1'000 hotels and ten brands not enough for the millennials, who are said to be anything but loyal? Can the training and development opportunities for the new “Marwood" associates be even better now than before? Or will eventually John Smith become employee number 725’439 in hotel 4’885?
As hospitality professionals we may be wondering what, in these days, is going through the heads of the top executives at IHG, Hilton or Accor. Some may take the news lightly, others for sure don't, but all of them know, in one way or the other they will be affected and will need to react. When IT or Pharma giants merge, we take it for granted. But now it happened in our hospitality industry for the first time at such level, but be sure, not for the last time.
Who will be next?
While this time it was a purely American affair between a rather traditional and a slightly (life-)stylisher group, we may well get ready for a more exotic and dynamic combination in the future. Whether this will be another beast such as a “Hil-jiang" or a rather boutiquy “Shangri-nski” does not matter. Be assured, however, that there are more compelling reasons for many medium to big players to merge than the ones we have seen today.
The real opportunities: Adapt and get stronger.
People in the hotel industry are very used to seize opportunities. Those who don’t, are not surviving for long. There is no doubt in anybody’s mind that such an event is changing the landscape of global hospitality. When a few years back dinosaurs started to appear, others had to adapt. And they did. Many of them better than the giants themselves. Evolution is adaptation. And, remember, dinosaurs are history.
Charles Darwin taught us long ago: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.” The bigger the players get, the more important get market niches. Specialisation on products, services, markets and on marketing is required. Let’s face it, with todays global access to the market through the internet and possibly some help from the experts even little Davids have a chance to fight Goliath.
Whether or not the new Marriott will achieve its forecasted yearly cost savings of 200M on operational and G&A expenses remains to be seen. Fact is, the new beast will be attractive for its stakeholders and new investors and hotel owners who will, for one reason or the other, be tempted to join Goliath.
On the other hand Starwood will continue its capital recycling program and sell many assets. There is, and there will continue to be, a lot of movements on the hotel investment landscape. As this industry lives from its individual and personalized services, there is no doubt in my mind that also smaller chains yet individual hotels have their right of existence as long as they are on top of the game and Darwin’s theory.
I know most women will agree: Yes, size matters! In hospitality we have plenty of proofs why a combination of best practices and innovation - call it technique - will continue to be the strongest challengers to the industry's dinosaurs. So let this marriage of the giants not become a threat, but an opportunity to improve adaptation in this post giant merger environment.