For Starwood the excitement is in “hitting” their disposal targets. His company would continue to divest many of its assets worth $1 billion through the year. One particular segment is the timeshare unit. The disposal has attracted huge demand, especially from “foreign” wealth funds the Connecticut hotelier noted. These sovereign investors included earlier aspirants to own the brand, Anbang and a few other of similar size.
Speaking on Marriott revised offering, CEO Sorenson states that there was major financial re-strategizing. Marriott increased its offering clear in its re-worked strategic option. The company found that the transaction was now even better, than the previous round. The more they spoke and worked with Starwood, the avenues synergic growth become increasingly evident (Yu 2016). The company leveraged the stronger stock price it held, the week prior to its renewed proposal to Starwood to increase its offer. CEO Sorenson, during an Investor Meeting post the deal, noted that transaction would ‘create strong value’ for shareholders.
According to him, the ‘cost synergies’ of creating the single largest hospitality company was the ‘least strategic’ aspect of the deal, the Key Strategic Perspective, he emphasized was the individual loyalty programs of Starwood and Marriott Reward. The difference in average RevPAR Index – at 9.4 points – between Starwood and Marriott is expected to capture more shares from Starwood’s loyal customer group towards Marriott’s wider offering of 4,500 hotels. Starwood customer reward programs enjoy higher user base than Marriott’s.
The strategic lines for the two companies are as follows, according to Sorenson’s media conference-
Index performance of Starwood portfolio is to increase from its current one point for $10 million annual fees. Marriott’s is $20 million annually.
Marriott International would focus on delivering incremental business
Sales force are to be aligned at same level of resources against customer’s needs
Goal is to increase market share. Going from competitors to merged entities would allow the company the option to convert market share favourably.
Combining individual capacities, better terms can be leveraged.
Margin improvement is expected to be significantly higher for both managed as well as franchised hotels.
Development pipeline to be hugely impacted by key input – ‘revenue lift cost synergy’
Synergies of customer satisfaction levels that are possible are the real driver of the deal for Sorenson.