A fight for control of the Starwood hotel chain is under way following a USD 14 billion buyout offer today from a consortium led by China's Anbang Insurance Group.
Anbang, which remains largely unknown to most Americans, has quickly positioned itself to become a player in the US hotel industry, acquiring marquee properties.
It made a splash in the fall of 2014 when it bought New York's Waldorf Astoria for almost USD 2 billion. And just days ago, it cut a USD 6.5 billion deal for Strategic Hotels & Resorts Inc., which owns tony properties like The Westin St. Francis in San Francisco, JW Marriott Essex House in New York and Hotel Del Coronado in San Diego. Strategic also owned five different Four Seasons hotels, two Ritz Carltons and six other luxury properties.
Now it is going toe-to-toe with US hotel giant Marriott International Inc., which said late last year that it would buy Starwood, the owner of Sheraton, Westin and St. Regis hotels, in a deal worth USD 12.2 billion. That acquisition would create the world's largest hotel chain with 5,500 properties and more than 1.1 million rooms around the world.
Such scale would give the combined company pricing power when negotiating commissions with online travel agencies such as Expedia and Priceline, as well as help it land more corporate travel contracts.
The next-largest hotel company is Hilton Worldwide with 4,500 properties and about 735,000 rooms.
Starwood essentially put itself up for sale last April. The company has struggled to grow as fast as its rivals, particularly in "limited service hotels," smaller properties which don't have restaurants or banquet halls.
They are often located on the side of the highway, near airports or in suburban office parks. The deal with Marriott would help fill in many of those blank spots on the map where Marriott often has its Courtyard and Fairfield Inn brands.
However, outside the US Starwood has been very active in growing its brand, especially in luxury hotels and in untapped markets such as China, India and the Middle East. For instance, after New York, the city with the most Starwood hotels is Dubai.
Marriott and Starwood - like other hotel chains - own very few individual hotels. Instead they manage or franchise their brands to hundreds of individual owners, often real estate development companies. Those individual hotel owners are responsible for setting nightly room rates. It isn't uncommon for a developer to own a Marriott, Hilton, Hyatt and Sheraton in the same city. That's how Strategic, for instance, owned hotels under the Westin, JW Marriott, Ritz Carlton, Four Seasons and InterContinental brands.
Starwood Hotels & Resorts Worldwide Inc. Said today that it still favours the Marriott deal, but that it's looking at the latest bid.