TORONTO — When Marriott Hotels and Resorts acquired Starwood Hotels & Resorts last year, the Bethesda-based hotel company became the biggest hotel company in the world. The deal, which took more than a year to finalize made headlines around the world. At yesterday’s Icons & Innovators breakfast event, hosted by Hotelier magazine at the Sheraton Centre Hotel in Toronto, editor and publisher Rosanna Caira sat down with Arne Sorensen, CEO of Marriott International to discuss the acquisition and the challenges he faces bringing the two companies together.
Sorensen, a former lawyer and son of a Lutheran preacher, is the first non-family member to lead the organization. “It’s a huge honour to follow these folks and Marriott has a tremendous legacy which is in part driven by the family and its philosophy of taking care of people,” said Sorensen, who has been with the company for 21 years. “We know we can’t get to the customer except through our [staff] and so we have to put them first. That legacy is a great thing to tend to and to try and maintain as we grow and evolve.”
A massive undertaking for a company that now has 6,000 hotels and 30 brands around the world. “The GMs/teams around the world are responsible for taking care of their people and making sure they’re driving results. Our company culture isn’t just a soft and squishy ‘we’ll take care of each other’ one, we know that we’ll drive better results if we’re working as a team and by empowering GMs and teams you end up with a team that really maintains that culture.”
Setting its sights on Starwood
“The deal took 25 days,” said Sorensen of the Starwood acquistion. “Over the years that Starwood has existed, we’ve watched them as a competitor and, on a few occasions, have run some desktop models to see if this was something we’d be interested in acquiring but it never really worked. And they weren’t for sale.”
When Starwood came on the market formally in early 2015 and Marriott was approached by the bankers, Sorensen said once again “we weren’t interested for a mix of reasons — the biggest being it seemed like it was expensive. We could work like dogs and maybe make it successful, but we wouldn’t produce enough value for our shareholders.”
But over the course of the next three or four months,he saw the relative values of the company shift — Marriott’s value was increasing and Starwood’s was declining, which had a dramatic impact on the economic aspects of the deal.
“Also, it became clear to us that technology and the loyalty programs,particularly,are key distinguishing features and those two things came together so we sat at our boardroom table in October 2015 and said ‘you know what? We should do this’ and 23 days later we signed binding deals. It was breathtaking.”
The deal took the Canadian hotel industry by surprise. Then, in March 2016, China-based Anbang Insurance came into the picture, trumping Marriott’s offer. Sorensen and his team came back with a counter-offer which was also answered by Anbang. “I was certain we were going to lose the deal,” he said. “They would have had the company if they had delivered on their final bid.”
Sorensen said Starwood’s SPG loyalty program was singularly the biggest reason Marriott wanted the company. “We now have 100 million unique members between the two programs and they are now linked —we did that at midnight the night we closed and thankfully it worked,” he said, noting cyber-attacks on the sites peaked right at the moment it went live.
‘The other thing that was important to us was that Starwood had staked out a place in the lifestyle and luxury [aspects] of the hotel business that are most inspiring and aspirational,” he said. “We wanted to be even stronger in this part of the industry, which is emotionally so important to travellers.
Purchasing power is another advantage to bringing the two companies together, according to Sorensen. “Classic procurement, cost of systems, any shared services — all of those are places where we should be more efficient,” he said, adding that a new procurement platform is currently being rolled out. In essentially every cost line, with the exception of the compensation of our teams, should be more efficient as we go forward.”
The downside of any acquisition, of course, is that some people will have to be let go. “It’s always a tough piece of this,” said Sorensen.“We have talked about $250 million of overhead savings. Overhead savings are not just people, but it includes people. The fact of the matter is those people are almost never at property level so immediately, 95 per cent or so of the folks at Starwood are safe and are continuing their jobs.”
In fact, he said the opportunities for associates have increased, not decreased.“In Canada, where we now have 220 hotels, immediately folks have more opportunity to grow in their career and move across properties. By contrast, top-of-the-house is where the impact is mostly felt. Those, by and large, are folks that will land well and have been fairly compensated.”
So what are the things keeping the CEO of Marriott International up at night? “There are a thousand things we’re focused on,” said Sorensen, “but the things I worry about most are policy, politics and nationalism when it comes to immigration. Canada is one of the few countries in the world that seems to continue to have its arms open and I suspect there is some internal debate in Canada about that but it doesn’t seem to be as loud a debate as it is in the rest of the world.”
Travel is not the same as immigration, he emphasized.“People travelling for business or leisure are, 99 per cent of the time, simply going to see the sites/see family and we need to make sure that policy evolves in such a way to allow our business to be successful. That is a worrisome issue at the moment.”
Day to day, Sorensen and his team are laser focused on successfully merging Marriott International and Starwood Hotels & Resorts, assuring that existing properties continue to be successful while growing the brands globally.
“We going to open a new hotel every 14 hours for the next three years,” he said. “When I hear that stat I’m half excited and ecstatic and the other half exhausted.”
Check out the June issue of Hotelier for the full interview with Arne Sorensen