Last week, news broke that Hyatt was considering an acquisition of Starwood. CNBC reported that talks have been going on "for weeks" and that a deal could occur as early as this week. Hyatt management would run the combined company. The fact that Hyatt is smaller than Starwood in terms of market capitalization means that options for structuring the deal are limited. Whether this could ultimately derail an agreement was discussed in the report.
Hyatt, which currently has just under half the number of properties as Starwood, stands to benefit from a combination of the two companies. Currently, Hyatt (and Starwood) are smaller than major rivals such as Hilton and Marriott. While the combined company would still control fewer properties, the deal would close the size gap significantly thereby improving Hyatt's competitive standing. Also, a merger would allow Hyatt, which currently is heavily focused on North America, to immediately extend its overseas presence. A move could also diversify the Hyatt business model. Unlike some major industry players, Hyatt operates more company-owned properties. Starwood, despite having a larger network of properties than Hyatt, owns few hotels. Rather, Starwood derives most of its revenue management fees from third-party-owned properties. The combined company would be a hybrid model consisting of numerous owned properties but still managing a large number of hotels owned by others.
Perhaps you are saying that is all interesting if you are a finance geek (I am that as well as a commercial aviation geek!). How would a Hyatt-Starwood entity impact the Hyatt Gold Passport and Starwood Preferred Guest loyalty programs? Fortune took a look at that very question, examining a Hyatt-Starwood merger from the perspective of the impact on the two loyalty programs. Initially, the most likely scenario is that each program would continue to operate autonomously. Eventually, however, the programs would probably be merged into one. Ideally, the new unified program would take the best features of both predecessors.
The biggest possible concern for current SPG members is whether a future unified program would maintain the popular feature of transferring SPG points to airline frequent flyer programs. SPG is routinely listed as one of the major "flexible currency" rewards programs, so the elimination or degradation of this capability could be a major blow to the attractiveness of SPG or a successor program. One would hope the popularity would encourage management to leave this feature intact, but Fortune notes the poorly received devaluation of Hilton HHonors after Hilton's 2007 leveraged buyout.
Personally, I am intrigued by the possibility of a merger. I have only begun seeking out Starwood properties this year after becoming more familiar with the various hotel loyalty programs and associated rewards credit cards. Between stays and the Amex Starwood Preferred Guest credit card, I have begun amassing SPG points. I am also interested in Hyatt properties and the Gold Passport program after reading numerous reviews on travel blogs, but I try to keep my hotel stays to within two or three programs so I have not stayed at a Hyatt property recently. I do have some stranded Hyatt points from a Hyatt Place stay while on a business trip last year. I would love to combine these points into my SPG balance as well as possibly utilize Starwood points at numerous well-reviewed Park Hyatt and Grand Hyatt properties. However, I would rather none of that occur at the expense of gutting Starwood Preferred Guest. If this merger happens, SPG and Hyatt Gold Passport members will need keep abreast of changes to stay ahead of any devaluations to their hotel point balances.