One Unhappy Hotel Left Starwood Overnight

Major hotel chains don’t actually own a vast majority of the properties under their “flag.” Instead the hotels are owned by investment companies, and the major hotel chains simply have management contracts for them, where they get a percent of revenue as their fee for operating and marketing the hotel.

The major hotel chains are going for an even more asset-light strategy than before, given that several of the hotels actually owned by the major hotel chains (which represent a small percentage of their overall portfolios) have been sold over the past few years.

The fact that the hotel chains don’t own individual hotels is another reason they’re coming up with so many new brands. Now that Marriott’s takeover of Starwood is complete, the combined ~30 brands have more than 5,700 hotels and 1.1 million hotel rooms. That’s great news for Marriott, since they’re collecting a management fee on a lot of hotels.

marriott-brands

However, the companies that own the individual hotels largely don’t share the excitement. For example, a hotel that belonged to Starwood had the competitive advantage of appealing to Starwood loyalists over Marriott properties, while soon that advantage won’t exist anymore.

In May I wrote about how some Starwood hotels were suing regarding a breach of contract, given that they allegedly had clauses preventing Starwood from operating other hotels within a certain radius. I guess Starwood got away with it because technically it’s not Starwood operating those hotels, but rather Marriott.

However, it looks like some hotels are actually taking action based on their displeasure. Specifically, the Aloft South Beach left Starwood as of yesterday, just hours before the deal with Marriott closed. Per the hotel’s Facebook page:

starwood-aloft-south-beach

 

Going to aloftsouthbeach.com now redirects to The Gates Hotel South Beach, which is a DoubleTree property. So it seems like they’ve left Starwood for Hilton.

gates-hotel

Not surprisingly, the rooms advertised on the hotel’s website still look an awful lot like they belong in an Aloft. 😉

aloft-room

Bottom line

It’ll be interesting to see if this is just an isolated incident, or if we see more hotels leave Marriott and Starwood shortly. In situations where a Starwood hotel is very close to a Marriott hotel (or vice versa), I could certainly see why hotel owners would be unhappy.

Typically hotel management contracts are long term, though I wonder if there’s a clause that now allows hotels to exit their contract. You’d think there would be, but…

Do you think we’ll see more hotels leave Marriott and/or Starwood over their displeasure with the merger?

(Tip of the hat to @smithieuk)

Comments

  1. A lot depends on whether this was a franchise or a managed property. It’s the one aspect you didn’t discuss. And for the big chains, there are far more franchise than managed properties. And they’re very different contracts. If it as managed, the “buy-out” would be very high. Most management contracts are 25+ years and buy-outs can range in the millions. Franchise agreements, however, run from between 5-10 years. And the buy-outs are much lower since the chains, Marriott, Hilton etc, don’t manage the building and the collections of franchise fees are much lower than management fees.
    I do expect to see quite a few hotels Starwood properties to move away from Marriott and into other brands, especially Hilton.

  2. The former Aloft South Beach is located within a mile of a ton of Marriott properties (AC Miami Beach, Courtyard Cadillac, Winter Haven Autograph, Ritz Carlton, Edition, etc) in addition to the many existing Starwood properties. Fewer Hilton properties in the area..

  3. Marriott-Starwood has a ton of upper upscale and luxury category properties all over South Florida, including multiple Ritz Carltons. This one leaving is barely an “aloft”, which is probably the bottom half of the 30 brands in the new entity. All one can say to them is – Bye Felicia.

  4. A lame knee jerk reaction to the merger. As a businessman having been in that industry moving to a Hilton Branded property at a time when it’s own existence as a “stand alone” chain is in question not too sure about that one, The Aloft is a nice “brand” similar to Andaz, funky to us older traveler but pleasant

    Historically speaking these type of moves don’t always play out as a wise move.

  5. I have a reservation at this property in a couple of weeks. I received an email yesterday from SPG stating the hotel was no longer a Starwood property and wouldn’t receive any SPG benefits. However, they’re nice enough to let me keep my reservation at the confirmed pre paid rate.

    So, I emailed executive customer service as the email instructs if I have questions. I’m spending 4 nights and don’t receive any points or credits for my stay? I would think they would give something to SPG members as a customer service gesture.

    I asked them for the points that I would receive for this stay or let me cancel the res and re book. It’s currently cheaper on Hilton’s website. Or finally, allow me to have this res converted to a Hilton res so I can get points and benefits, as I have status with them too.

    It seems pretty crappy not to get anything for a 4 night stay. If that was the case I would of booked a less expensive hotel through Priceline.

    Has anyone been in this situation? Or has a pending res at this location?

  6. The Hilton website was already showing this changeover last week. It said starting sometime in October they were accepting reservations as a Hilton.

  7. Do we have any evidence that this change was due to the merger, or was this already in the works? Given the large # of Marriott/Starwood properties in the near vicinity and Hilton’s relative lack of properties there, the switch makes sense.

    Flag changes, while not common, aren’t all that uncommon either.

    FWIW, the Intercontinental in Tampa switched over to being a Starwood hotel about a month ago, knowing full well that the merger was going to happen.

  8. Two Club Carlson Radisson Blu hotels in Paris changed to SPG April 1st. They are now “Tribute” hotels. SPG doesn’t seem too proud of them though, as there is nothing outside that says SPG, only a small sign on the check in desk welcoming SPG members. I wouldn’t want to advertise that either. The one we stayed in last month, Le Dokans, was horrible. I just gave it a one star rating on Trip Advisor.

    We had reserved it with Club Carlson points, and since we don’t have any status with SPG, other than having the Business cc, they must have given us their worst room. The room was so small that the only place to open a suitcase was on the bed. They kept the “air conditioning” in the mid 80s. and the wiring was so old my wife’s hot rollers wouldn’t even get warm. Finally, the woman at the check in desk was very rude, both to us and to others we heard her speak to on the phone.

    ‘Tribute’ is certainly not the right name for this property. I can’t imagine a Marriott property being this bad. Not having had much experience with SPG properties, my future expectations for SPG just took a huge hit. 😉

  9. That hotel only joined SPG within the last two years (roughly) as well. I stayed there last January and it wasn’t all that great. Not bad, but not all that great.

  10. Interesting point Ben – thank you. Especially when we recall that the St. Regis Monarch Beach bolted this past summer as well, perhaps because of the Ritz Carlton right down the street? Okay, that’s number two out of 5,700

  11. Nice clickbait headline (and obviously it worked, because I am here typing this), but your evidence that this flag-change had anything to with the merger is…what, exactly?

  12. @Rick M — Unless you booked the room as “advance purchase” [pay up front, no cancellation allowed], why can’t you just cancel and rebook on the Hilton website at the lower rate? In fact, I am not even sure they can force you to honor the initial reservation even if it were AP since they are no longer the same hotel! It seems to me that the obvious solution is simply to cancel and rebook.

    I tend to avoid AP rates precisely because of the potential for this type of unforeseen events…

  13. @Rick m — But they changed the rules of the game, so you no longer have to abide by the original rules either. I am not sure how much this means to you but this is a fight that you’d win if you wanted to get out of honoring the AP.

  14. @Bob.
    How the heck is the title of this article click bait. The title is “One Unhappy Hotel Left Starwood Overnight”. The article is about 1 hotel that left starwoods yesterday. Am I missing something over here?!?!?

  15. @Joe: There’s nothing publicly released which states the hotel left Starriot/Marriwood due to the merger. There are a ton of reasons why a hotel changes (or loses) its flag, and such things happen regularly in the industry, in absence of chain mergers.

  16. Just received an email from the Four Points by Sheraton Sydney Darling Harbour promoting the latest hotel upgrade/renovation — what caught my eye is the note that the hotel will be leaving SPG as of Dec. 1, 2016. Another one bites the dust!

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