The M&A Train Keeps Rolling

It seems like just yesterday we were talking about Expedia’s $3.9 Billion acquisition of HomeAway. Well today there is a new belle of the ball: Marriott’s $12.2 Billion acquisition of Starwood.

As I am sure most of you reading this prefer vacation rentals to hotels, maybe it is worth flagging why this is big news.

The brands involved

Marriott is a household name, but some of you may be less familiar with Starwood. However, you no doubt are familiar with some of its bigger brands like Sheraton, Westin, W, and the St. Regis. Bringing all of Marriott’s brands together with all of Starwood’s brands under one roof creates a hotel behemoth with a breadth and global reach rarely seen. Both companies have done a good job, better than most, of letting the brands speak for themselves in the hotel space. Yes, “Marriott” and “Starwood” are the companies behind them, but a traveler always booked a “Courtyard by Marriott” or a “Sheraton” hotel room. The companies benefited from their scale, but without sacrificing the meaning of their brands. How the combined group will now do this on an even larger scale will be interesting to watch.

Rewards

As a member of both companies rewards programs, and having been Platinum at multiple points in each, I have a selfish interest in this one. Will our points in each program be worth more or less? Will the combination of the programs and their respective members dilute the benefits, and make it ever harder to travel using the points? Or will the near doubling of properties on which we can use these points make both programs richer? I certainly hope for the latter, but broader trends in travel, and especially with what airlines have been doing with their programs, makes me less optimistic.

There can only be…

In our globalized world we continue to see the proliferation and creation of smaller companies. The notable trend in this is not the creation of new and smaller companies, however, but rather how they all end up under the same roofs in the end. As with the voracious acquisition appetites of Expedia and Priceline rolling OTAs under their respective companies (e.g., Travelocity, Orbitz), this is the latest signal that the truism is just as applicable to hotels. And this is a trend that has been building pace for a while. By 2012, the 6 largest hotel brands accounted for 70% of global hotel rooms. Well, with this deal that number is now down to 5. What will that number be by 2020? I can’t say for sure, but it certainly seems more likely that it will be something less than 5 rather than something larger.

And the $haring Economy?

Perhaps the most notable part of this deal is its price: $12.2 Billion. And maybe it is just because my perspective is biased, but it is not even interesting in its own right. Rather, the interesting part comes in that it is almost exactly HALF ofAirbnb’s latest valuation of $25.5 Billion. Just let that sink in. The company that owns Sheraton, Westin, The St. Regis, The W, and more is worth less than half that of the company started in 2008 that allows people to rent out spare rooms for extra cash. Sure, some will argue the gap is meaningless since one is currently publicly traded and the other comes from private financing, but that is still a huge gap. Something is only worth what someone else is willing to pay for it. By definition there are people willing to pay for a stake in Airbnb at a $25.5 Billion valuation. By the same token, Starwood’s Board of Directors is willing to sell it for less than half that.

Conclusion

So what does this deal mean for the future of travel? Is it the latest, largest, and loudest signal yet that the sharing economy is coming for traditional travel? Or is it a just as obvious sign that the gap between public and private valuations is currently untenable? As a great man once hedged: “I, I think maybe it’s both.”

Relax. It’s rented.

Originally published at www.linkedin.com.