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Online Travel Mergers and Acquisitions 2015

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Report on online travel M&A Deals that happened in 2015.
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Online Travel Mergers and Acquisitions 2015

  1. 1. Online Travel Mergers and Acquisitions 2015 Presented by Travelabs I came up with the report covering most important online travel M&A deals in the end of 2014. It was nothing more than a collection of media citations, but it got some attention from online travel people. Therefore, I decided to make it a tradition and to cover deals happening each year, so welcome to the 1st release of the series. Report consists of spreadsheet with summary of all travel tech M&A’s that happened in 2015 + more detailed coverage (online media citations) of Expedia deals (plus Marriott – Starwood deal as a “bonus”). We’ve decided to take deeper look into Expedia M&A’s because we can surely say that it is the “company of the year” in terms of deals that it made. Travelocity and Orbitz acquisitions have turned US OTA market into competition of two juggernauts. HomeAway acquisition was Expedia’s solid move in vacation rentals being 2nd largest M&A deal in travel technology sector (the largest one happened in 2014 with SAP acquisition of Concur for $8.3 bln.). It will be interesting to see where these deals will lead Expedia and travel tech in 2016. Feel free to use the report for your own research activities. Feedback is welcome at valentin@travelabs.org. Subscribe to out travel startups newsletter to get more info and insights on online travel world in your email inbox. Valentin Dombrovsky, Chief Alchemist, Chief Envisioning Officer at Travelabs
  2. 2. 2 Prague, January 19, 2016 – Travel Massive Workshop “Tips and Tricks to Build a Successful Travel Startup. Tickets starting at 650 czk ($27) Travel is the industry, which is associated with lots of excitement and tons of new experiences. It's also the industry with huge amount of money in it, so why not do a travel startup? You might give a try, but you should be aware on the obstacles that you'll have on your way. Doing startup is hard - doing travel startup might be even harder. So, before taking travel startup journey, take advice from those who has already tried it. And of course, if you're already on the way, it's never too late to learn some new stuff on this exciting travel startups workshop held by Valentin Dombrovsky, Chief Alchemist at Travelabs. You'll learn a bit about travel startup chemistry and will hear few words on the following topics: 1. Online travel landscape - find your niche. 2. You've got an idea, now what? (Or why you shouldn't do a travel startup) 3. B2C and B2B startups - where's the biggest potential? 4. Disrupting the market - understanding key opportunities. 5. Travel startup product - how to help customers in solving their problems? 6. Going mobile - when you should do it? 7. Growth hacking and business development - some words on travel startup growth.
  3. 3. 3 Acquirer Acquisition Valuation ($ mln.) Month Note More info Tripadvisor IENS (+Seatme) 10 January Valuation info taken from media Source Zomato UrbanSpoon 52 January Source TravelClick TVTrip - January Source SilverRail Linkon - January SR acquired 75% Source TravelStart Satisfly - January Source OAG FlightView - January Source Europcar Ubeeqo - Europcar acquired majority stake + provided $4 mln. Investment Source Expedia Travelocity 280 January Page 5 KKR TheTrainLine - January Source Sabre Abacus 411 May Sabre owned 35 % of Abacus and acquired remaining 65 % Source Tripadvisor Zetrip/Rove - February Source Expedia Orbitz 1600 February Page 9 Priceline Rocketmiles 20 March Valuation info taken from media Source Ola TaxiForSure 200 March Source Rainmaker Group Revcaster - March Source Blablacar Carpooling - April Source Zomato Maple POS - April Source Accor (Accor Hotels) Fastbooking - April Source Makemytrip Mygola - April Source Zomato Nextable - April Source Amadeus AirIT - April Source Priceline Pricematch - May Source Tripadvisor Dimmi - May Source Apple Metaio - May Source Siteminder Globekey - June Source Rakuten Voyagin - June Source Amadeus Navitaire 830 July Source Travelport Mobile Travel Technologies 55 July Source
  4. 4. 4 Acquirer Acquisition Price ($ mln.) Month Note More info Amadeus Itesso - July Source SITA Delair - July Source Newmarket (owned by Amadeus Hotel Systems Pro - August Source Ixigo Square Hoot Hikes (Rutogo) - August Source Amadeus Pyton - September Source Priceline AS Digital - September Source Airbnb Vamo - September Source Secret Escapes Travista - October Source Travelport TraviAustria - October Source Palisis TourCMS - October Source Travelclick ZDirect - October Source Homeaway Dwellable 18 October Source Expedia Homeaway 3900 November Page 12 Sabre Trust International 154 November Source SITA Type22 - December Source Flight Centre StudentUniverse 28 December Source Onetwotrip Corner - December Source BONUS Marriott Starwood 12200 November Page 16 See this spreadsheet in Google Docs
  5. 5. 5 Expedia Buys Travelocity for $ 280 mln. Before the deal: “Big news in online travel agency land as two of the industry’s giants sign a “strategic marketing agreement” which will see Expedia run the technology behind the scenes at Travelocity. <…> Expedia CEO Dara Khosrowshahi says: “Over the years, Travelocity has become one of the most recognized travel brands in the US and Canada. Going forward, this agreement will enable Travelocity to focus on further building its brand while at the same time providing consumers with an enhanced suite of travel products and services. “This announcement stands as a true testament to the advanced capabilities that our significant technology investments over the past several years enabled us to build. We believe volume generated through the agreement will add further scale to Expedia’s global supply and customer service capabilities.” Travelocity Global president and CEO Carl Sparks adds: “In staying true to our core values of meeting the needs of both consumers and travel suppliers, we have elected to evolve and strengthen our business model in the US and Canada by working with Expedia, Inc. to offer a top-notch booking platform and a more robust supply of travel options, allowing us to focus increased resources on building our competitive strengths in marketing and retailing.” The agreement will perhaps set off alarm bells around the industry that this is the first step towards some kind of larger deal between the pair”. Source: Expedia agrees to power Travelocity websites in US and Canada, Tnooz, August 2013 The deal: “Sabre has finally offloaded its interest in consumer-facing businesses by selling Travelocity to Expedia for $280 million in cash. The acquisition will not come as a huge surprise to many (not least because a deal was rumoured last week) given that Expedia has effectively been powering Travelocity for the best part of 18 months. <…> Sabre CEO and president, Tom Klein, says: “Our primary focus at Sabre is to provide mission-critical software solutions to our global airline, hospitality, and travel agency customers – and to help them support their customers every day. “We have had a long and fruitful partnership with Expedia, most recently by partnering to strengthen the Travelocity business, so our decision to divest Travelocity is a logical next step for us both.”
  6. 6. 6 <…> Dara Khosrowshahi, president and CEO of Expedia Inc, adds: “Travelocity is one of the most recognized travel brands in North America, offering thousands of travel destinations to more than 20 million travelers per month. “The strategic marketing agreement we’ve had in place has been a marriage of Travelocity’s strong brand with our best-in-class booking platform, supply base, and customer service. “Evolving this relationship strengthens the Expedia Inc. family’s ability to continue to innovate and deliver the very best travel experiences to the widest set of travelers, all over the world.” The decision to sell off the Travelocity brand ends a 19-year parenting role for Sabre with what was its first significant play in the consumer online travel arena”. Source: Expedia buys Travelocity for $280 mln. Tnooz, January 2015 “Expedia Inc. confirms it will retain the Travelocity brand, which will complement brands such as Expedia, Hotels.com, Hotwire, Venere etc. It would have been foolish not to keep the Travelocity brand because the whole value proposition is to tap into the allegiances of Travelocity loyalists. Travelocity services 20 million travelers a month, according to the new chief of the Travelocity brand, Expedia Inc. CEO Dara Khosrowshahi. “The Travelocity team will be part of the Brand Expedia group within the Expedia, Inc. family allowing it to tap into Brand Expedia’s scale and expertise while still maintaining a strong independent brand,” says Expedia Inc. spokesperson Sarah Waffle Gavin”. And what of Travelocity’s remaining employees? Travelocity had roughly 3,000 people on the payroll globally as recently as a couple of years ago, but the Travelocity workforce has been whittled to around 50 employees in North America with many based in the Dallas area. “The Travelocity business will continue to be run from Dallas and key leadership roles will continue to be based there,” Waffle Gavin says. “Everyone will continue to work from the Sabre office until we complete our transition activities, including working with Travelocity leaders to identify a permanent location for the Travelocity team. That search has already begun and we are scouting new locations as well as evaluating the Hotels.com office. There is no plan to move the team or leadership to Bellevue.” Source: Expedia Acquires Travelocity for $280 Million. Skift, January 2015 After deal: “We absolutely intend to run the Travelocity business as a strong, independent North American brand,” said Sarah Waffle Gavin, Expedia Inc. spokesperson. Several Expedians, including David Doctorow, Expedia’s chief marketing officer, met with Travelocity staff in Southlake, Texas on January 23. Doctorow joked that when he meets people and
  7. 7. 7 tells them he works for Expedia, they often tell him that they love the Roaming Gnome, which is actually the Travelocity mascot. <...> Expedia is already making changes in Travelocity’s leadership. Travelocity president Roshan Mendis is staying with Travelocity parent Sabre in a new role, and Travelocity chief marketing officer Brad Wilson heads to Expedia as general manager of Travelocity. Wilson reports to John Morrey, general manager of Expedia.com. It is believed that there may be some realignments in which portions of the Travelocity business will remain under Wilson’s purview, and which won’t under the new ownership structure. <…> Gavin says the Roaming Gnome will continue to be central to Travelocity marketing “as long as the Travelocity team wants it to.” One source says where Expedia can really help Travelocity the most is in search engine marketing, which has long been a weakness. Gavin seems to back that theme, saying there has been a lack of investment in Travelocity over the years. “We have a strong online marketing organization,” Gavin says, adding that Travelocity can benefit from a lot of these efficiencies and tools”. Source: What Happens to the Travelocity Brand Under Expedia Ownership? Skift, January 2015 “Tnooz: What has been one of the biggest surprises during the transition? Brad Wilson [General Manager at Travelocity]: To measure customer satisfaction, we measure net promoter score (NPS), sort of the big piece for making sure we get it right. Prior to the acquisition, I was always out on speaker circuit saying, “Compared to all the US retail travel brands, Travelocity is number one in NPS. We blow everyone away.” We thought our NPS was in the, say, mid-40s. But after the acquisition, we started measuring NPS the way that Expedia does, which is I believe a more proper way, but it fell into the mid-20s, so we were actually in the middle of the pack. We would measure NPS right at the point of booking and Expedia would standardize NPS after the trip experience itself…. So, the idea there is that there is a lot that we don’t control on that trip experience. We don’t run the hotels or the planes, obviously. But we should be able to influence customer satisfaction better…. NPS is a very key figure for us and we’re going to boost it. <…> Tnooz: Travelocity might approach customer acquisition in its own way, compared to the others? Wilson: Yes. We have been a completely separate group, completely separate retail group, separate marketing group, a merchandising group that is globalized, but carved off.
  8. 8. 8 So while we coordinate with the other sister brands and our brands within the family, I should say, we absolutely market. <…> Tnooz: What else will differentiate Travelocity and other travel brands? Wilson: Absolutely nothing. No, I’m just kidding. It is important to note, that before the acquisition, we built this legacy around service…. It is important to note that as we come into the family and examine the customers across all the brands there is very little cross-pollination, actually, between the groups … In fact, it is very consistent with what we all know within the category for cross-shopping, so it is relatively small. Now, what differentiates us from us from Hotels.com versus Expedia.com, has already been around service, as you know, we pioneered the Travelocity guarantee, 7 or 8 years back. So, now we are looking to stand up and prioritize something new for next year that can help carry forward that legacy. When we measure it from a brand equity perspective, we still carry this legacy of stellar service. Regarding service, many things we do is still largely the same today. But we are going to relaunch or reinvigorate around this concept of service…. We’ll have more to say about that in 2016. <…> Tnooz: When Dara does his calls he often talks about the success of the loyalty program at hotels.com. Orbitz also has a well regarded loyalty program, and now that’s part of the family. Is there anything coming on loyalty for Travelocity? Wilson: I had anticipated this question coming up. Yeah. We are looking at it…. Prior to the acquisition, we were absolutely engineered around launching a new loyalty offering, to take some meaningful market share and add value to the existing customers we had. Now, since the acquisition, we are rethinking it, so that we are not just grabbing market share from our family brands…. I think we will probably have something to say on this next year”. Source: What’s next for Travelocity. Tnooz, November 2015
  9. 9. 9 Expedia Buys Orbitz for $ 1.6 bln. Before the deal: “In recent weeks, Orbitz Worldwide executives and attorneys have been working on a major transaction, according to a source who spoke on the condition of anonymity. An Orbitz spokesperson says: “The company’s policy is not to comment on rumors and speculation about potential transactions and market activity.” Though it is unclear the scale and type of a likely deal, Tnooz has talked to a number of industry insiders, primarily analysts at funds that are significant shareholders or at investment banks that cover Orbitz and its competitors, to pull together a list of possible options for Orbitz. For reference, Orbitz has been trading at about $8 a share, implying a market capitalization of about $900 million. It also owns the Ebookers, HotelClub and Cheaptickets brands. <…> The consensus of experts Tnooz spoke with was that neither Expedia nor Priceline would want Orbitz because they instead prefer to invest in new markets and verticals. Evidence includes Expedia’s recent purchase of Wotif andPriceline’s recent purchase of OpenTable. That said, Expedia’s marketing partnership, in which in essence it took control of Travelocity‘s consumer site, demonstrates how either of the large legacy OTAs might find cost savings by adding Orbitz’s sales and sourcing teams or its customer base, according to one investment bank analyst. Of the two, Priceline is weaker in its domestic US market share, and thus could benefit more from picking up Orbitz. It’s also the stronger in having the reserves to make an acquisition, say two industry insiders. <…> FBR Capital Markets analyst Jake Fuller declined to participate in the above speculation. But in an interview, he said: “Broadly speaking, if Orbitz is considering its options, that would make some sense, because it is among the smaller players in an increasingly competitive landscape. There’s been a pickup of M&A activity in the online travel space that has led to consolidation. Plus the US and European market is maturing. That creates a difficult environment for smaller players to make inroads…. If, say, multiple companies are selling the same $100 a night room, the companies that can reach more consumers more cost-effectively through paid search and TV marketing will win more times than not. Orbitz has definitely done a good job, especially with the use of new loyalty programs to increase repeat business and average transaction size, but it has a difficult task.” Source: What path will lonely Orbitz take next? Tnooz, January 2015
  10. 10. 10 “Throughout January 2015, Orbitz received inquiries from 11 additional financial sponsors regarding a potential acquisition of Orbitz. It chose three to participate in the sale process because, essentially, the seriousness of their proposals. On January 12, another strategic buyer came forward. Additional industry offers were made. Expedia’s initial offer was for $10.50 a share. But on January 30, an unnamed potential strategic acquirer made a matching offer. Negotiations led to a final counterbid from Expedia of $12 a share. The interloper’s offer forced Expedia to pay about $179.5 million more than it had intended for Orbitz. Expedia’s final offer was also 48% over the $8.11 closing price per share of our common stock on January 5, the last trading day prior to the publication of Tnooz’s story on a possible strategic transaction involving the company”. Source: How the Orbitz Expedia deal came together, Tnooz, March 2015 The deal: “Expedia Inc has agreed a deal to buy Orbitz Worldwide in a transaction for $12 per share in cash. The acquisition represents an enterprise value of $1.6 billion, a statement says, with a premium of around 29% “over the volume weighted average share price” up to February 11 this year. <…> In a recent earnings call, Expedia stated its intention to replicate the success of its Hotels.com loyalty scheme and the acquisition of OWW will help in this ambition. Still, North America’s online travel agency ecosystem has gone from being a four-horse race just a month ago to now being dominated by two major players, in what is shaping up be to the battle of our time: Priceline versus Expedia. Dara Khosrowshahi, president and CEO of Expedia Inc, says: “We are attracted to the Orbitz Worldwide business because of its strong brands and impressive team. This acquisition will allow us to deliver best-in-class experiences to an even wider set of travelers all over the world. <…> Further details on the deal were provided during an analysts call when chief financial officer Mark Okerstrom said the deal would add ‘well recognised brands’ to the Expedia family to compete for consumer attention. He added that Orbitz was ‘nicely profitable’ with its $12 billion in gross bookings and that there would be benefits in bringing it under Expedia’s ownership including $75 million in synergies.
  11. 11. 11 During the call Orbitz was described as a ‘very well managed with a strong technology team and a business that has been built on some unique assets.’ The Orbitz partner network and Orbucks loyalty programme were also singled out as highlights of the deal with the former being ahead of Expedia and the latter described as ‘very interesting.’” Source: Expedia to buy Orbitz in cash deal worth $1.6 billion. Tnooz, February 2015 “Expedia Inc. completed its acquisition Orbitz Worldwide and its roughly seven brands for some $1.3 billion, capping a three-year period in which the Bellevue, Washington-based online travel agency made six major acquisitions. Meanwhile, Orbitz Worldwide, or OWW, delisted its stock from Nasdaq. In addition to adding Orbitz Worldwide to its portfolio today, in 2015 Expedia also acquired Travelocity for $280 million and became the 75 percent shareholder of its AirAsia joint venture, picking up an additional 25 percent of the enterprise for $86.3 million. There were two major deals in 2014 as Expedia acquired Wotif in Australia for $658 million and Auto Escape Group for $85 million. One of Expedia’s most significant purchases was taking a majority stake in hotel metasearch site Trivago in 2013 $632 million, countering the Priceline Group’s acquisition of Kayak”. Source: Expedia’s Acquisitions: Orbitz Buy Caps Off 3 Years of Major Deals. Tnooz, September 2015 More info: How the Expedia-Orbitz deal could have happened five years ago. Tnooz, February 2015 Orbitz increases revenue and room nights, awaits Expedia deal go ahead. Tnooz, May 2015 Expedia-Orbitz deal gets a high profile naysayer. Tnooz, August 2015 Heat on Expedia-Orbitz deal continues but business as usual at Orbitz. Tnooz, August 2015 TripAdvisor Is a Key Focus of the Expedia-Orbitz Merger Investigation. Skift, September 2015 US watchdog approves Expedia merger with Orbitz. Tnooz, September 2015
  12. 12. 12 Expedia Buys HomeAway for $ 3.9 bln. Before deal: “Expedia Inc.’s initial bid for HomeAway was $35 per share on October 8 and Expedia temporarily walked away from the negotiations four days later when HomeAway countered that it wanted a number in the $40s. After nearly a month of back and forth talks, the two sides agreed on an imputed value of $38.31 in the $3.9 billion cash and stock deal with HomeAway’s board of directors unanimously approving the deal on the afternoon of November 4 and the two sides announcing the agreement after the stock market close later that afternoon as HomeAway published its third quarter earnings. <…> One of the big takeaways from the SEC filing is that HomeAway concluded it faced substantial risks as a standalone business considering its push to get to 100 percent online booking from vacation rental owners and managers, and the introduction of a travelers’ service fee. An acquisition, such as the one concluded with Expedia, would mitigate some of that risk because of all of its technical and financial resources. Although five companies other than Expedia expressed an interest in investing in HomeAway or proposed an alternative transaction, only one, Expedia, made a full-blown acquisition proposal. That may say something about HomeAway’s prospects, the very competitive marketplace in the vacation rental space and the broader sharing economy”. Source: The Inside Story Behind Expedia’s Purchase of HomeAway, Skift, November 2015 Deal: “So it wasn’t the Priceline Group after all – Expedia has announced its intention to buy vacation rental brand HomeAway for $3.9 billion. It is the second biggest deal in travel tech in this decade, but it still a fair distance behind the $8.3 billion that SAP paid to buy Concur in September 2014. The HomeAway acquisition is a combination of cash and stock, the pair announced after their respective shares finished trading today in the US. <…> HomeAway CEO Brian Sharples says: “We could not be more excited about joining the Expedia family of leading travel brands and what this move means for our very bright future. “We’re eager to benefit from Expedia’s distribution, technology and expertise, which will allow us to provide an even better product and service experience for our owners, property managers and travelers. “In this way, I believe our combination with Expedia will turbocharge our growth and industry leadership for many years to come.”
  13. 13. 13 <…> Khosrowshahi says: “With our expertise in powering global transactional platforms and our industry-leading technology capabilities, we look forward to partnering with them to accelerate their shift from a classified marketplace to an online, transactional model to create even better experiences for HomeAway’s global traveler audience and the owners and managers of its 1.2 million properties around the world.” Source: Expedia acquires HomeAway for $3.9 billion. Tnooz, November 2015 After deal: “We’ve now been on a path and are sticking to the principle of properties being instantly bookable and verifiable, and no consumer fees,” [Priceline CEO Darren] Huston said. “Now we’re so far along the path that buying something that doesn’t fit that model just didn’t fit us.” <…> Skift: Can you comment on Expedia’s strategy versus your strategy? You just mentioned, “We didn’t have to pay $4 billion dollars” like Expedia did for HomeAway. It seems like you’ve slowed down on the whole acquisition thing; it seems to be head-down on things such as Booking Suite. Huston: I can’t speak for Expedia, as anyone would say. It feels a little bit more like they’re following a consolidation play of, “Let’s buy things and strip off the back office and slap on a website onto the same back office.” That’s an interesting strategy; it’s definitely not what we’re doing. We’re assembling a collection of specialty stores which are best of breed at what they do. They’re brands that have differentiated value propositions. It’s like filling the shelves in a store. We’re trying to pick the things that consumers really love and want to buy, and become long-term franchises. We don’t force synergy; we don’t have any common supply back room. We don’t buy our demand in a common pool. That’s our bet, our bet is more on the entrepreneur and the ability to … Skift: So Expedia Inc. spent all this money on a common technology platform, but you don’t see that as an advantage? Huston: No, there are some advantages in terms of the operations of the business. In a way, I might have played a similar set of cards from where they stood, but where we stand we have, let’s call it, the luxury of having leading brands in each of their categories that consumers love. We’re getting more and more direct business, and we’ve got an amazing team that executes organically extremely well. I like playing up that hand better than going in and buying companies that aren’t doing very well, and stripping out all the workforce and slapping them on to a … That’s a reasonable strategy, but our approaches are very different. In a way, that’s good for the industry, that you have two large companies taking very different approaches to building our business franchises”. Source: Interview: Priceline CEO on Why He Didn’t Spend $4 Billion to Acquire HomeAway. Skift, November, 2015
  14. 14. 14 “Expedia’s marketing muscle (it spent an eye-watering $2.8 billion in 2014) can ensure that the concept of vacation rentals can move front and centre into the minds of its customers, thus giving huge air time to properties alongside existing forms of accommodation. <…> It is also a significant rearguard action against the rise of Airbnb, a brand with enough buzz and growth around it that it has to be considered a major player in its own right in the accommodation mix. Perhaps there is a grain of truth in the notion that Expedia Inc simply took a punt on snapping up the cheaper brand in order to get its hands on a different intermediary for accommodation – but, still, the purchase vindicated everything that many have predicted for years: hotels have a significant challenge, and intermediaries need to get a piece of the action”. Source: Pivotal moments 2015 – When Expedia bought HomeAway. Tnooz, December 2015
  15. 15. 15 Bonus: Marriott Buying Starwood for $12.2 bln. Note: Although it’s not a travel tech deal in its core – still, it was an important deal for travel industry as a whole. Hotels consolidate in order to make business in the era of online players’ consolidation more effectively. Travel industry was always a space for lots of “coopetition” where each partner tries to win attention of the customer and to offer him its own direct service. That’s why we’ve decided to include this deal in the coverage. “Marriott has ended weeks of speculation and splashed out $12.2 billion to buy rival hotel group Starwood. The mainstream and business media coverage will no doubt be dominated by the fact the acquisition has created the largest hotel company on the planet. The pair will have a combined presence in over 100 countries, with 30 brands running more than 5,500 properties worldwide. Those properties will equate to 1.1 million rooms on a global basis – an increasingly important metric it appears given the new kids on the block in the hospitality sector such as Airbnb are touting their portfolios based on unit volumes in any given location. <…> But the fact that the deal has been struck between two enormous existing companies, both with a global presence,rather than a predicted deal for Starwood from newbies on the market such as the emerging Chinese players, shows how crucial it appears to be that consolidation happens in the hospitality sector as the landscape reaches a critical moment. There will no doubt be plenty of reasons for the deal, but one important theme will be the how the distribution and marketing of hotels are going through a seismic shift in recent years. Led by the online travel agency duopolies in the US, Priceline Group and Expedia Inc, hotels are arguably finding their strategies to showcase hotels through intermediaries are vastly different than just two years ago. With negotiating power strengthened amongst OTAs, there is no reason, some argue, as to why hotel brands cannot do the same”. Source: Marriott buys Starwood for $12.2 billion – more behind the headlines. Tnooz, November 2015 “Skift: What’s the value of the Marriott-Starwood merger for hotel owners? [Marriott CEO] Arne Sorenson: The combination of the two companies will bring us that much more power and economies of scale for the owners of our hotels, who will have a cheaper per reservation cost. Think about cheaper revenue management, think about more powerful procurement. All of those things should drive better results for our owners, and by driving better performance for our owners, it makes it that much more compelling for our owners to choose these brands as opposed to other brands.
  16. 16. 16 The second piece is obviously Starwood has not grown their brands as quickly as we’ve grown ours. I think that’s based of our approach and our team, but I think by taking the best of theirs and the best of ours, we should be able to accelerate both of the brands”. Source: Interview: Marriott CEO Says He’s Banking on Economies of Scale. Skift, November 2015. “Scale is becoming increasingly important in the hospitality business as Airbnb siphons off travelers and online booking services eat into room revenues. Marriott’s planned acquisition, the largest takeover of a hotel company since Blackstone Group LP bought Hilton for $26 billion in 2007, indicates the industry’s business model is under pressure, with companies being pushed to consolidate in an effort to cut costs and attract customers. “The reality is that all these groups need to become bigger and stronger to be able to fight against the newcomers,” said Andre Juillard, a Paris-based analyst with Kepler Cheuvreux SA. “We’ve been expecting consolidation for a while. We can see more deals coming to market.” Source: Marriott’s Starwood Buy Is Likely Signal of More Industry Consolidation. Skift, November 2015

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