Marriott + Starwood Hotels: a marriage made in heaven, or hell?
Post by David Nichols, Managing Partner and Head of Invention.
Starwood, who brought you the cool chic of W Hotels and Westin’s innovative ‘Heavenly Bed’, has ‘merged’ with Marriott – that cornerstone of cookie cutter consistency, as announced by CEO Arne Sorenson here
The aim of the merger, according to Sorenson, is to stay in front of the competition in an increasingly complex and tough market. He calls out the value innovators such as AirBnB as well as the price comparison sites like Booking.com, that now infiltrate almost every hotel purchase. He also namechecks TripAdvisor giving their customers, in an instant, a thumbs up or down on every single aspect of the service experience – from the speed of toilet paper refills to the freshness of the croissants. This is indeed a challenging space to do business right now.
So, will the merger work and be a marriage made in heaven? Or, as so often happens in mergers, brand hell?
Will it work?
The announcement has not (yet) touted ‘synergies’ (i.e. cost cutting and firing people) as the raison d’etre for the merger, but clearly there will be some streamlining of back office systems; the combined numbers of the two businesses are impressive, as shown below. But this is a tough challenge to actually pull off, as mergers often seem to fail to deliver on the huge synergies promised.
But what about keeping ahead of change in the market against a backdrop of diminishing loyalty and eroding margins. The new business could tackle this challenge to it’s core business on multiple fronts:
- Give brand freedom to experiment: Marriott Starwood could create a separate global ‘Innovation Department’ to focus resources into fewer bigger global innovations, in order to ‘leapfrog’ ahead with long term game–changing innovation. In our experience, these initiatives don't get into operating business, as they don't deliver profit in the short or even medium term. We would also strongly recommend giving each operating company or brand some freedom to experiment. Each will see different issues and find different solutions. Giving teams ‘freedom to fail’ is very often the best way to succeed.
- Be more distinctive: If the merger dulls the differences between the chain brands, so that we see similarities between a Westin and a Marriott, this will undermine their offers. Audi Volkswagen found the same thing true 15 years ago when sales of Audis were slipping because people felt they were getting just a ‘VW with a bigger price tag’. A clear focus on distinctive design and engineering has led Audi to strong growth and to become a serious challenger to BMW and Mercedes. Marriott Starwood need to use their combined strength to drive more distinctiveness in each hotel brand, their defining gestures and unique experiences.
- Make it easy: The one thing that their new competitors, from AirBnB to Booking.com have done is make it easier for harassed business travellers. From access & purchase to information gathering, comparison, changes & refunds, these ‘digital’ newcomers have tapped into the decreasing time and increasing ‘on the go’ lives that their customers now have. Marriott Starwood can standardize and unify the "back office stuff" which is not brand specific to make it dramatically easier for their customers to interact with them. From reception desk to laundry pickup they have an opportunity to get ahead, if they choose to.
Time will tell if Marriott can make the merger with Starwood work. A good start has been not to promise shareholders massive savings from standardisation. But they will expect change fast and inspiring teams to innovate brilliantly is probably a harder course of action, but one that should, ultimately, pay back better.