Did Airbnb just spook the big hotels into a merger?

17 November 2015 2:04 pm

The big news today is that Marriott International has made a $12.2 billion bid for Starwood Hotels and Resorts Worldwide. Starwood, whose brands include Westin, W and Sheraton, had been on the market since April.

The deal creates the world’s largest hotel company, with more than 5,500 owned or franchised hotels with 1.1 million rooms around the world.

What’s driving it is the threat from Airibnb which has been pinching their customers.

Airbnb was valued at $25.5 billion in its latest financing round earlier this year, more than double Starwood’s market value of about $12.2 billion. Airbnb in July poached Laurence Tosi from Blackstone to be its chief financial officer in a move seen as a prelude to an initial public offering.

“The scale of this merger was done to fight the OTAs — the online travel agents — and also the potential threat of Airbnb,” Barry Sternlicht, who founded Starwood Hotels and ran it for a decade before leaving in 2005, said in an interview on Bloomberg Television. “We’re going to see global consolidation. This probably won’t be the last deal.”

Competing with an asset light company like Airbnb is a problem for hotels: they have to employ lots of staff and own or lease extensive properties and provide many services. Instead, all Airbnb does is process payments, it’s money for jam.

At the same time, some of Uber’s Asian competitors are looking at mergers to beat Uber at its own game

What’s clear is that asset light companies are starting to have an impact on the business landscape. This is just the start. In 10 years time, we won't recognise it.