Starwood CEO quits; Heinecke hits out at mergers

FIRST one out at Starwood Hotels & Resorts is its CEO Adam Aron, with new CEO of the combined Marriott/Starwood merger Arne Sorenson hinting more cuts will happen at Starwood corporate post-merger.

Aron, who was understood to be looking for a new job after Marriott scooped up its rival, is joining AMC Entertainment Holdings on January 4 and is expected to give up his seat on the Starwood board.

Sorenson, when asked about cost savings post-merger in an interview with Fox Business News on Sunday, said: “When you get to hotels there won’t be significant job impact, maybe zero job impact.

“The closer you get to the executive suite in their headquarters the more you see an overlap. I think we’ll find the biggest cost savings disproportionately at the higher end of the overhead structure.”

He is looking at cost-savings of US$200 million. As for which of the 30 brands would survive, Marriott’s Bvlgari and Ritz-Carlton, and Starwood’s St Regis, Luxury Collection and W Hotels were mentioned.

Meanwhile, Bill Heinecke, CEO of Minor International, which operates its own hotel brands but also owns The St Regis Bangkok, JW Marriott Phuket Resort & Spa and Marriott Pattaya Resort & Spa, has hit out at hotel chain consolidation when asked for his views about it.

Asked what his concerns were for the industry and consumers, Heinecke said: “I have a number of concerns, firstly what’s in this for the customer? I have read a lot about the recent acquisitions and there are many references to scale, cost-savings, competitiveness etc., but what about the customer? What’s in it for the patron?

“I can imagine that the loyalty programme offering will be more all-encompassing, but will the actual experience in each and every property across the globe be enhanced because of these titans coming together? I truly doubt it.”

He continues: “What one gains in scale one loses in agility and the ability to take care of the most important element of the business – the guest.

“Secondly, I believe that such incredible scale ultimately leads to a more formulaic and rigid experience. With so many brands and so many hotels it is virtually impossible to be truly focused on creating a personalised experience. This is something that is valued by guests and I believe that mega brands will struggle to really have their finger on the pulse of the guest experience. In addition to this, guests often prefer to be part of a smaller curated brand rather than a huge global machine,” added Heinecke.

“Thirdly, I’m not convinced that mega brands are in the interest of owners. There is certainly an argument for economies of scale, but owners will become very small fish in a very big pond. In addition, they will compete with hotels/brands within the company. I really can’t see how an owner’s interests will be best met with such a scenario. Nobody wants their business to be just another cog in the wheel.”

Asked how mega brands would affect smaller brands such as his Anantara, Heinecke said: “Actually I think it offers a certain opportunity to small and medium sized operators who still have the ability to react quickly; who are not weighed down with layers of bureaucracy and rigid guidelines… in addition, smaller operators are more in-tune with guest, staff and owner/investor requirements and can react to their ever evolving needs. This should most certainly not be underestimated.”

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