CNBC announced today that Hyatt is in advanced talks to acquire Starwood, with a possible deal to be announced in the next week or two.
Hyatt Hotels is in talks to buy Starwood Hotels & Resorts in a deal that is said to be as little as a week away, sources told CNBC.
Under the cash and stock agreement, Hyatt management would retail control of the combined companies. Talks between the two companies have been going on for weeks.
Hyatt and Starwood are two popular chains with miles-and-points aficionados and have, in my opinion, above average elite benefits for their most valued customers. However, both have relatively small footprints with about 500 and 1,500 properties, respectively. They pale in comparison to the behemoths of the industry: Hilton, Marriott, and IHG all have 4,000 to 5,000+ hotels.
Does size matter? Not always. I think a major strength of Hyatt’s portfolio is that they are small enough to focus on maintaining the quality of each of their brands from budget to luxury. There will always be outliers, but I generally know what to expect at a Hyatt, and they live up to those expectations.
Starwood is larger and has more hotels that fall through the cracks, but it does have some very solid luxury brands. I’ve always been satisfied with my stays at Le Meridien, St. Regis, and Luxury Collection hotels.
Starwood had been entertaining interest from a variety of Chinese buyers, but none of them made serious offers. It looks like Hyatt is the most likely candidate at this time, and I think that’s great. As reported, Hyatt would take over management responsibility, and I already cited how impressed I am with Hyatt’s ability to manage its existing brands. If it can carry over that experience to Starwood without losing focus, it’s a win for the hotels and a win for customers.
How Would This Deal Affect Your Points and Status?
It’s important to realize that Hyatt Gold Passport wouldn’t necessarily replace Starwood Preferred Guest. For example, IHG acquired Kimpton last year, and Kimpton Karma still exists with no opportunity to transfer points or status between the two programs.
There are enough differences between Hyatt and Starwood that integrating the two under a single loyalty program would be very complicated. Just to list a few issues:
Hyatt has limited partnerships with airlines, and I discourage most people from transferring points. Starwood’s transfer program is so popular that some people never use Starpoints to stay at a Starwood hotel.
In a conversation last year with Jeff Zidell, VP of Gold Passport, he emphasized that Hyatt wants to keep the focus on its hotels. By contrast, Starwood has promotions for concerts, partnerships with two airlines, and even lets you earn points with Uber. Merging the two programs would be a culture shock.
The two companies have conflicting partnerships in other areas, including their credit card issuers (Chase vs. Amex) and Las Vegas casinos (MGM vs. Caesars) that may be difficult to unwind.
How would a merged loyalty program address these issues? Would they adopt one or the other? Would they compromise? Whatever they do would require major adjustments from one or both sides.
I’m less concerned about how a merger would affect basic elements of their respective loyalty programs. Both offer top-tier status after 25 stays, although SPG goes a little further with incremental benefits for those who stay additional nights. Both offer free breakfast, confirmed suite upgrades, cash and points awards, and reasonably good value on award stays. Any of these differences could be ironed out. For example, Hyatt has cheaper awards on average and especially at the higher end, but Starwood offers the fifth night free. Compromise is possible without destroying customer value.
It’s the large, strategic decisions that each company has made and their competing partnerships that will cause the most headaches if a merger goes forward. My bet is on Hyatt taking the lead. Why? Starwood is the company being rescued here, and one could argue that their complicated loyalty program is part of what led to its current challenges. Hyatt could provide some useful experience.