Marriott’s CEO Was Surprised to Beat the Chinese to Buy Starwood

When Marriott acquired Starwood hotels they beat out Hyatt, which may have offered a more financially attractive package but whose complicated stock structure (the Pritzker family has outsized voting rights) created complications, and Chinese conglomerate Anbang Insurance.

Arne Sorenson, CEO of Marriott, says he was surprised that they won the bidding and were able to make the deal.

Initially we thought it was too expensive. It got cheaper for us over the course of the year. In early ’16 Chinese surface…that’s when Anbag comes in… it costs us a little bit more, but we still to my surprise came out on top.

Sorenson also reports that Bill Marriott “held himself back for three or four days” — and “was worried that without grounding [Marriott] would say ‘why on earth would you take this risk’?” In fact his Chairman’s first reaction was “you know Arne you don’t have to do this” because of the work it would entail.

It was the Starwood database Marriott was running that was breached in one of the biggest corporate data hacks in history. And it was the Starwood acquisition that led to the creation of Marriott Bonvoy, whose accompany IT issues have certainly proven challenging for many customers.

It’s proven a huge challenge, and the jury is still out on the deal. But Sorenson may have been insufficiently acquainted with the Winner’s Curse.

Where there are multiple bidders valuing a common item, in this case a company, the winner tends to be the one that overpays. Generally speaking each bidder has the same information about what they’re buying, so the one willing to outbid the others is likely paying too much.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. if they just waited for Anbang to collapse, they could’ve bought SPG at a huge discount

  2. The Winner’s Curse only works if all else is equal for the bidders. A certain asset or group of assets may fit better into one portfolio than another, and therefore add more value to what already exists. But yah, they probably overpaid.

  3. Let’s not forget it was the Chinese Government sanctioned hack of SPG. They wanted an insiders view before bidding. They gave up on the bid; the data stolen was worth so much more.
    Their (stolen)data integration was seamless.

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