SEATTLE • Marriott International is buying Starwood Hotels and Resorts Worldwide for US$12.2 billion (S$17.4 billion) to create the world's largest hotel company, beating other suitors, which reportedly included Hyatt Hotels.
Marriott is paying US$2 a share in cash and 0.92 of its own stock for Stamford, Connecticut-based Starwood, the companies said in a statement yesterday.
The new group will operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide.
"This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace," said Mr Arne Sorenson, Marriott's president and chief executive officer.
"Greater scale should offer a wider choice of brands to consumers, improve economics to owners and franchisees, increase unit growth and enhance long-term value to shareholders."
The deal is the largest takeover of a hotel company since Blackstone Group bought Hilton for US$26 billion in 2007.
Starwood has been exploring options, including a sale, since the February departure of long-time head Frits van Paasschen amid criticism he failed to increase the number of properties carrying Starwood's brands quickly enough.
Starwood hired Lazard to advise it in April. Chief executive officer Adam Aron has been leading Starwood on an interim basis.
At least three Chinese companies were pursuing bids for Starwood, according to a person with knowledge of the matter in October. CNBC reported on Oct 28 that Hyatt was holding takeover talks with Starwood.
"The economies of scale really matter in the lodging business because higher volumes on the reservation system can drive business to less-occupied properties on a given night," said Mr James Corl, a managing director at real estate private equity firm Siguler Guff and Co.
"Reservation-system scale drives both occupancy and rate, and that helps cash flow and operating margins."
The hotel industry in the US is in its sixth year of recovery from the recession and is facing supply surges in cities including New York and Seattle.
In the Americas, revenue per available room - a measure of profitability used by the lodging industry - increased 6.6 per cent this year through September, according to STR Global.
It rose 7.6 per cent in Europe and 2.9 per cent in the Middle East and Africa, while it fell 0.2 per cent in the Asia-Pacific region, the lodging-research company said.