Marriott-Starwood Merger Not So Smooth for Hotel Owners

by John Harper

While we’ve seen sparse complaints from hotel guests about the integration of the world’s two largest hotel chains, Marriott and Starwood, things apparently aren’t going so well for some hotel owners.

Investors in some Starwood franchises have started complaining of revenue problems they claim are related to merger consolidation, per the Washington Business Journal.

Struggles at the Westin Beverly Hills, W Los Angeles, and Westin Boston Waterfront were the subject of recent earnings calls for the real estate investment groups that hold the properties.

Frequent Starwood guests and elites have reason to pay attention. Of course, ongoing revenue problems could result in service cutbacks or even closures, if not resurrected. It’s the second consecutive quarter some owners have voiced complaints.

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Westin Starwood Merger Problems

The Westin Boston Waterfront saw revenue per room drop over 9 percent. Ownership is blaming the drop on sales teams caught up in the Westin-Starwood merger. Image by Westin Boston Waterfront.

The two real estate investment firms highlighted by the Business Journal control a variety of Westin properties coast-to-coast. One Westin, the Boston Waterfront, blamed sales team integration for a 9.4 percent drop in revenue per available room.

“When Marriott reorganized the group sales team, there were major integration issues that forced legacy Starwood sales teams to freeze their efforts,” said Jay Johnson, CEO at Real Estate Investment Corporation Diamondrock, which owns the Westin Boston Waterfront property.

Similarly, Pebblebrook real estate investment trust CEO Jon Bortz told investors on the company’s second quarter earnings call that the Westin Gaslamp District in San Diego saw revenue per available room drop over 11 percent, which he blamed on stagnant sales teams left dangling in the merger.

Westin Starwood Marriott merger problems revenue

The Westin San Diego Gaslamp Quarter. Image by Westin Gaslamp Quarter.

Marriott International attempted to sequester the problems, claiming the two real estate investment firms were experiencing isolated problems.

The hotel conglomerate has long maintained an intent to expand Starwood branded hotels, including Aloft, W and Westin hotels.

This is the second consecutive quarter Bortz has complained of problems, the Business Journal reported.

Starwood loyalists, stay tuned.

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4 comments
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4 comments

John August 6, 2018 - 3:02 pm

This is some unfortunate clickbait. The hotels can say their revenue drops are for whatever reason, blaming (scapegoating) the Marriott merger without a shred of evidence. And the reporting of it adds fuel to conspiracy theorists fire…again without any evidence.

Reply
John Harper August 6, 2018 - 3:14 pm

Hi John,

Thanks for your comment.

Perhaps some confusion here. Both CEOs said, in their own words, that problems with integrated sales teams were to blame.

I’m certainly not a hotel management consultant, but this is the second quarter in which we have heard similar things from executives at real estate holdings companies.

Not sure what conspiracy is going to be spun out of CEOs talking during quarterly earnings calls.
-John

Reply
Rupert August 6, 2018 - 11:00 pm

Sure, we are relying on the CEOs words, but these are well respected companies with a very good track record of managing these properties. Pebblebrooks has done plenty of hotel turnarounds, buying struggling hotels, improve them and keep or sell.
Besides, these types of huge corporate integrations of companies with different cultures are very difficult to manage. I’ve done post-merger integration consulting and seen plenty of companies slip up and see sales drop temporarily, especially in relationship sales like this. I’d not be surprised if their group & convention business has caused the drop.
Bottom line, good post and interesting insights. Will be interesting to see how quickly they can get this resolved…

Reply
Michael Freeland October 7, 2018 - 7:40 pm

The secondart issue in Marriott service is their insistance on racing to the bottom with outsourced overseas call centers. A Have an ongoing issue with Marriott now, and the Customer Service is horrific – they on’t know which web page issues are temporary, and what to do about them. I spoke to one sharp CS manager; prior to that, three call center employees that were cluelesss. The only thing i can think of to do is to start disputing charges for hotel stays. Then they will respond immediately

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