Chinese investor group Anbang has withdrawn from the race to acquire Starwood Hotels leaving the coast clear for Marriott. Jennifer Charlton, head of supplier relations, EMEA, at American Express Global Business Travel, offers her insight into what hotel industry consolidation could mean for procurement professionals.
The pending consolidation raises pressing questions for travel procurement. What would such a merger mean for procurement professionals? How might a deal like this impact a buyer’s ability to negotiate with either brand? What would the immediate next steps be?
Even if Marriott does purchase Starwood, it will take some time before we see changes in the marketplace. Aligning and integrating back office systems, loyalty, data and business processes, and so on, takes time, as we have seen in the airline industry. It is highly likely the two companies would continue business as usual for some period – probably stretching into 2017.
If the two companies do join forces, the combined group would have many available rooms in certain key cities – and this may give them an advantage during high-demand periods. This increased leverage works both ways, though: combining the two brands may actually give a corporation bigger overall volume to negotiate with.
Ultimately, industry consolidation can make it easier to do business with the combined entity, and loyalty card users are likely to benefit from wider opportunities to earn points. Consolidation may offer the supplier a more ‘bullish’ position, but most destinations will still have enough competing brands that there will be room for meaningful negotiation: it’s not like airline industry consolidation, where a merger can give a single carrier dominance on a particular route.
When negotiating hotel rates, a higher volume of bookings usually equals better discount. This means that companies need to drive policy compliance to maximise savings. Travel managers need to take steps to influence traveller behaviour and ensure hotel bookings are made through a consistent, approved channel. This helps data consolidation, which supports programme negotiations as well as Duty of Care requirements.
Procurement professionals should remember that two-thirds of properties and hotel rooms will not be involved in the potential Starwood/ Marriott deal - there are many alternatives.
The questions raised by this potential deal are a timely reminder that, as always, when it comes to supplier procurement negotiations, companies need to have options. Buyers cannot rely too much on a single partner, as any consolidation can present risk when it comes to rates and other included benefits. Having flexibility and a range of options in your hotel programme is key.
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