Let’s travel together.

Marriott-Starwood merger not to affect India market: say industry experts

Read Article

Rituparna ChatterjeeMumbai

The recent news of Marriott International being all set to acquire Starwood Hotels & Resorts Worldwide for US$ 12.2 billion, has caused hospitality experts in India to speculate on its impact on the Indian hospitality industry. While a few industry experts are of the opinion that this consolidation would lead to fierce competition in the market with other brands becoming more aggressive, many expressed that there would not be any disruption. Expressing the latter view was Manav Thadani, MRICS, chairman, HVS Asia Pacific, who stated, “We do not expect to see any disruption in the market. If at all, these two companies will potentially start to work together and operate more efficiently in the global hotel market.” Echoing a similar viewpoint Bharat H Malkani, president, The Federation of Hotel & Restaurant Associations of India (FHRAI) stated, “The India market is not heavily represented by either of the two groups. The India market is still primarily dominated by the organised sector in terms of large chains. These group mergers are increasingly taking place since this industry has been taking a beating for a long time and the only way forward is for larger/smaller chains to come together. The larger chains will get a higher level of sustainability in an otherwise depressed market. It is hard to tell whether this kind of merger will have a dramatic impact. However, customers having loyalty cards with either of the chains will have an advantage.”

Giving an alternative perspective was Mandeep S Lamba, MRICS, MD-India, Hotels & Hospitality Group, Jones Lang LaSalle Property Consultants India who stated, “In India, the Starwood-Marriott merger will see fierce competition with other brands becoming more aggressive to combat the combined strength of the merged entity and their ability to offer 30 brands touching every market positioning or product requirement across all geographies. While the budget and economy space is still nascent in India, the upscale and luxury sectors will have a larger impact on account of this merger. The new entity will control the largest inventory of rooms in the country and with their freshly acquired no one status, could lead to less attractive commercial terms for new hotel owners seeking operator tie ups. It will however be interesting to see how the two companies align their various brands and teams to achieve the scale while ensuring reduced costs.”

When asked whether this deal could spark industry consolidation, industry experts replied in the affirmative. Lamba stated, “This deal is a beginning of consolidation of the industry into three or four major players globally and will see similar consolidations over the next few years as global majors align to get the scale and the synergies through mergers and acquisitions. Talks of other major players actively in dialogue are already doing the rounds. This is going to be an exciting space to watch.” Adding to this, Malkani stated, “I think many property/ chain owners will now wait and watch to see if this consolidation is receiving a result. If the consolidation result is positively accepted by either the stakeholders or owners then we might see many consolidations taking place. Since the consolidation comes at a cost and if the consolidators are unable to justify the expense then we will not see a round of consolidations.”

With both brands having a huge asset base, is the buyout development price of US$ 12.2 billion between the brands justified? To this Thadani states, “I am not technically qualified to answer this but certainly if you look at the stock prices for Starwood, shareholders do not seem to be convinced that the deal has happened at a premium – much as they would have hoped for.” This deal is expected to create the world’s largest hotel company wherein the merged company will operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide.

(With inputs from Kahini Chakraborty)

Comments are closed.