Starwood deal makes complete sense for Marriott, says Arne Sorenson, President

Reflecting on the mega deal of acquiring Starwood, Arne Sorenson, President and CEO, Marriott Inc. stressed that the deal made more sense for the hotel company with each passing day. Reflecting on India, he noted that India was an under-appreciated destination and needed to market itself better in the international marketplace. Excerpts from his one-on-one with Manav Thadani, Founder, Hotelivate at the recently concluded HICSA 2018.

The big acquisition

Marriott’s acquisition of Starwood received “tremendous attention” from the industry, Arne Sorenson said. He shared that Starwood had put up for sale in early 2015, and Marriott had shown no interest in the bid. The first thought of “looking hard” at the offer propped only in October that year, he detailed. “We jumped in and signed the transaction to buy Starwood three weeks later,” he revealed. He shared that Marriott would have “lost the opportunity to some other rival bidder”, had the company waited in taking over Starwood “even for a day or two.” “Fortunately, we got in there just in time,” he said.

He was convinced that it was the right strategy to acquire Starwood and the move was aimed at competing with “digital ‘disruptors’ and a global world.” “For us, it was about the size of the loyalty program and size of choices we offer to our customers, and we thought Starwood really brought powerful things in that space,” he explained.

Sharing his understanding of challenges post the buy-out, given the divergent culture of two brands, he insisted that there was “more in common” in two companies than different. “Both were manically driven to win,” he added.

Loyalty program fundamental tool against ‘disruptors’

He argued that the “power of choice” to the consumer in Marriott’s loyalty program was company’s “fundamental tool” to deal with ‘digital disruptors’. He stressed that ‘disruptors’ could not offer what Marriott could, sharing that Marriott was not letting them offer participation of people, coming through those channels, in Marriott’s loyalty program. “If you want to get those benefits as a customer, you have to remain within our ecosystem,” he asserted.  He shared that Marriott engaged in a tough round of negotiation with Expedia over the quantum of commission and the deal was “almost off”.  

Inbound in to The USA has taken a hit

Reflecting on the change in sentiments since Trump administration had taken charge, he suggested that he “thought” that President Trump understood the hotel business well. He noted that hotel industry was a job creator, all over the world, and it was one of the “great things” about the industry. “I think President Trump understands this,” he said. He insisted that Trump administration’s political stance of “America First” could be described as “overtly darkly or overtly optimistically” but its focus was “essentially inwards.” He suggested that the development was not peculiar to The USA but happening in some other parts of the world too. “Maybe, these folks are dreaming of an old time or wanting a simpler world. Depending on how this communication is used, it can feel to many that it is a sign that you are not welcome,” he substantiated. He called getting real-time statistics a “challenge”, sharing that international trips in 2017 was up by 7 percent while the USA had registered “zeroish” inbound. “It looks like the USA grew a little bit less than the rest of the world grew in international travel,” he reasoned.

He pointed towards the fact that he was the third CEO of the company in past 90 years and the only one “not with the last name Marriott.” He emphasized that Marriott company was not interested in short-term market reactions, but in “growing” so that better results could be driven equally for the company and owners.

When asked about the need for having several F&B options at Marriott hotel where some of them may not have been performing up to the owner’s expectations, he suggested that hotels needed to have a “balance” in meeting customer’s expectations and what was being offered by them. “In India, guests expect a lot more in F&B than in the United States. There are traditions here that are important,” he said, adding that he was also not in the favour of having five restaurants across all properties. He iterated that hotels could not take away all F&B offerings and still expect to “deliver a hotel experience” to its customers. “Even within our systems, we have examples where we have cut too much in an effort to drive profitability and have ended up compromising the customer experience,” he candidly admitted.

India must continue to market itself to the rest of the world

India was a “fabulous destination”, Arne Sorenson said, commenting on inbound tourism. He mentioned that India was home to multiple cultures, diverse regions, variations, and great distinctive food. He stressed that India gave a “real sense” that one was at some place different, adding that the country was “under-appreciated” as a destination around the world. “Inbound to India is way too small compared to how compelling this place is,” he said. Adding that “it was partly because India is a difficult place to come to”, he noted that it was important that India continued to market itself around the world. “The stories that can be told about India, the memories that can be taken home, are extraordinary,” he said.

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