Arne Sorenson is a man in demand. At this year’s Americas Lodging Investment Summit (ALIS) in January, it was nearly impossible for him to weave through a crowd without stopping to shake hands with almost every person he passed. Many of those interactions were to offer a simple congrats, as there may have been no bigger news story in the hotel space in 2016 than Marriott International’s acquisition of Starwood Hotels & Resorts.
Now that the deal has closed, Marriott isn’t taking time for a victory lap. The company is focused not just on the integration of the Starwood brands, but on how the combined company can seize further opportunities in the hotel industry. At ALIS, Marriott constructed a pop-up hotel innovation lab where it showcased some new initiatives under consideration for the Aloft and Element brands, including updated room designs, a revitalized F&B program for Aloft, and tech-centric beverage concepts for Element. In the lab, Marriott was able to crowdsource real-time feedback from ALIS’s more than 3,000 attendees. LODGING popped by that innovation lab to touch base with Sorenson and check in on how Marriott was doing four months to the day after the Starwood deal closed. It was just the start of a long conversation about the Starwood deal, Marriott’s plans for the future, and functioning in our ever-changing political climate. Here’s what Sorenson had to say.
Now that the dust has had some time to settle, how goes the process of integrating the Marriott and Starwood brands? It’s going really well. We’re looking at the merger from the perspectives of three different communities—the associates, the hotel guests, and the owners. On the associate side, we’ve made tremendous progress. I think that people are viewing the merged companies as simply a bigger company able to deliver more opportunities for growth, so that’s positive. We moved very quickly in the last quarter of 2016 to really put the leadership structure of the combined organization in place, and while that’s not totally complete, we’ve made really profound progress. From a guest perspective, we announced on day one the linking of the loyalty programs, including matching and redemption across both portfolios. I think that has been a huge home run for Starwood Preferred Guests (SPG), as well as Marriott Rewards members. And with the owners, I think we have a very supportive group, which is making the process move quickly. We’re working with them and their teams to ensure we’re delivering efficiencies across portfolios that will drive results in sales, loyalty, and profit margins.
Speaking of the owners, how is integrating all the new Starwood owners into the system going? The new owners are really philosophically aligned with the transaction. They understand why we did it. They understand why it is strategically compelling and they want it to be successful. At the same time, I think each owner is thinking, “I want to know what the impact will be on my hotel.” Of course, we have been very transparent with them. Before the transaction even closed we were talking to them about our rationale and areas of focus. Then, immediately after the transaction closed, we talked to groups of owners so we could get their input.
Now that everyone has been brought into the fold, what improvements are Starwood franchisees going to see? What about existing Marriott franchisees? There are top line improvements and bottom line improvements. On the top line, it’s really about loyalty and how we can take the SPG and Marriott Rewards programs—each of which were very strong on their own—and build something that is even stronger and gives our company a higher share of wallet. Behind loyalty would be the sales force. How do we get the sales force calling on more customers with the same resources so that we can drive top line? The other piece, of course, is around margins. I think that owners in both of the legacy Starwood and legacy Marriot portfolios will benefit from the increased scale and consolidation of resources. That is, having one email program, one reservations platform, and, ultimately, one loyalty program. These are all places that we can save on spending and implement lower-cost programs. I think we’ll begin to see the impact of these benefits this year.
Marriott has acquired a number of brands over the past few years—AC, Protea, Delta, to name a few. Was the thinking behind the Starwood deal similar to those acquisitions? The deals that we closed previous to Starwood are very different. Starwood is a wholly different and much bigger animal. Those other deals you mentioned all had a significant geographic bent to them. So, AC was the first of those three. We were very weak in Spain; we had some hotels but we did not have the level of distribution that we wanted. When AC became available, it was about 80 hotels in Spain, another 10 or so in Italy, and about 10 more throughout the rest of Europe. So we decided to jump at the opportunity. It turned out we were probably too early for Spain, because the economy declined in the country shortly after we acquired the brand. Overall, however, it was a really positive deal. We decided that AC had global application, which we had not considered initially. Now, there are nearly 100 AC hotels in the United States and the Americas pipeline. In fact, the Americas piece of AC is now as big as the business we bought originally. Protea, in many respects, is the same. We didn’t have a single hotel in sub-Saharan Africa. Protea was the biggest operator in South Africa and when it became available we thought, “This is a platform of true hotel operators, true human talent. We can bring it in and we can have the kind of expertise we want to open hotels that were already in our pipeline and make sure our brands align with that market.”