A carefully orchestrated spin campaign (including some paid partnerships with major travel bloggers) has meant that much of the news coverage surrounding the new Marriott-Starwood merger has focused on its effect on loyalty program members. But there are deeper ramifications than that.
One aspect of the consequence of consolidation has been relatively unexplored: What the merger will do to room rates.
The new merged company will be the largest hotel chain in the world, with more than 5,700 properties and 1.1 million rooms. One company now controls 1 out of every 15 hotel rooms on the planet.
Warns the Economist: "A report by CWT Solutions Group, a business-travel consultancy, shows just how dominant the company will become in certain markets. In Minneapolis, Marriott controls about 30% of corporate hotel spending; with Starwood added to its portfolio that will rise to a half. In Mexico City Marriott’s share will climb from about 20% to 48%. In Philadelphia and Los Angeles, it will control 46% of the market."
“With daily room rates and occupancy levels at all-time highs in many major markets, basic economics dictate that less competition will only lead to even higher prices and more challenging negotiations, especially in markets with limited options for corporate travellers,” the report states. That will make it harder for companies to negotiate room rates and could put a crimp in travel budgets beginning around 2018."
Look out, leisure travelers. If what happened with the airlines is any guide, you're in for a squeeze.