US Virgin Islands Hotel & Tourism Association

The global hotel and resort industry is in for a surprising game changer in the hospitality and travel industry.

The Merger of Marriott and Starwood is certainly making top news today. Earlier rumors about Hyatt taking over Starwood are now out.

It’s Marriott International, Inc. and Starwood Hotels & Resorts Worldwide, Inc. announcing today that the boards of directors of both companies have unanimously approved a definitive merger agreement under which the companies will create the world’s largest hotel company.

The transaction combines Starwood’s leading lifestyle brands and international footprint with Marriott’s strong presence in the luxury and select-service tiers, as well as the convention and resort segment, creating a more comprehensive portfolio. The merged company will offer broader choice for guests, greater opportunities for associates and should unlock additional value for Marriott and Starwood shareholders. Combined, the companies operate or franchise more than 5,500 hotels with 1.1 million rooms worldwide. The combined company’s pro forma fee revenue for the 12 months ended Sept. 30 totals over $2.7 billion.

Arne Sorenson, President and Chief Executive Officer of Marriott International, said, “The driving force behind this transaction is growth. This is an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace. This greater scale should offer a wider choice of brands to consumers, improve economics to owners and franchisees, increase unit growth and enhance long-term value to shareholders. Today is the start of an incredible journey for our two companies. We expect to benefit from the best talent from both companies as we position ourselves for the future. I know we’ll do great things together as The World’s Favorite Travel Company.”

J.W. Marriott, Jr., Executive Chairman and Chairman of the Board of Marriott International, said: “We have competed with Starwood for decades and we have also admired them. I’m excited we will add great new hotels to our system and for the incredible opportunities for Starwood and Marriott associates. I’m delighted to welcome Starwood to the Marriott family.”

One-time transaction costs for the merger are expected to total approximately $100 to $150 million. Transition costs are expected to be incurred over the next two years. They cannot be estimated at this time, but are expected to be meaningful.

Marriott will assume Starwood’s recourse debt at the closing of the transaction. Marriott remains committed to maintaining an investment grade credit rating and to continue managing the balance sheet prudently after the merger. Marriott expects to maintain our 3.0x to 3.25x adjusted debt to adjusted EBITDAR target.

Arne Sorenson will remain President and Chief Executive Officer of Marriott International following the merger and Marriott’s headquarters will remain in Bethesda, Maryland. Marriott’s Board of Directors following the closing will increase from 11 to 14 members with the expected addition of three members of the Starwood Board of Directors. The transaction is subject to Marriott International and Starwood Hotels & Resorts Worldwide shareholder approvals, completion of Starwood’s planned disposition of its timeshare business, regulatory approvals and the satisfaction of other customary closing conditions. Assuming receipt of the necessary approvals, the parties expect the transaction to close in mid-2016.