Merger Mania…and the Significance for Sales

As of this month, the only remaining obstacle to the Marriott/Starwood merger is approval by China’s Ministry of Commerce, which is expected to be cleared within the next 60 days. Earlier this summer, AccorHotels finalized its purchase of Fairmont Raffles Hotels International (FRHI). In January, Commune Hotels & Resorts and Destination Hotels completed a merger. At the same time, rumors abound about the possibility of a takeover of IHG.

What do these hotel company mergers mean for salesmanship in hospitality? What are the implications of consolidation for sales and salespeople?

HSMAI’s Sales Advisory Board recently discussed those questions, and more, agreeing that there are three key areas of significance for sales post-merger: talent, market share, and loyal customers.

Talent

After “Marrwood” comes to be (the merger of Marriott & Starwood), I expect there to be a flood of above-property talent that becomes available. Some very experienced and qualified people are going to be on the market. Is there capacity within the hotel industry to pick them up and quickly get them fully employed? Or will we lose some of our best and most experienced sales people to third party intermediaries, OTAs, destination management companies, airlines, and car rental companies – where they can sell the same or similar products to their same customers?
For those sales people who find themselves displaced, it will be very important to think about what role they really want. Is it going to the property-level? Is it moving to a new product or market or company type?
For less experienced and on-property sales people, now more than ever they will have to be on their “A-Game” and show their value. They will soon likely be competing for opportunities (in their company and with their customers) against a whole new class of sales professionals.
For those companies and properties looking to absorb some of the talent out there, make sure the new hires are in it for the long haul, not as just a temporary gig until they find something better. This might be especially relevant for example for a former national sales person who’s being considered for an on-property position.
The potential impact on the next generation of sales people could be significant. Will there be a push-down effect where, as higher level and more experienced folks start to get absorbed into the workforce, there are fewer opportunities for less experienced sales people who might get pushed out altogether?
Sales leaders will need to be on the ball with a plan for up-and-comers who are the future of the discipline in the hotel industry. How will we cultivate them and develop them if there aren’t enough positions for them?
For the most proactive brands and management companies among us, it is conceivable that another “layer” of sales professional can emerge from this consolidation. Certain independent management companies today have established their own “National Sales” (for lack of a better term) organization. These sales groups supplement the efforts of the flag GSO’s while maintaining the flexibility to sell on behalf of independent properties as well. Going forward, as more experienced sales professionals may be displaced for the reasons previously stated, it is conceivable that this “layer” can grow as it absorbs potentially displaced higher-level salespeople.

Market Share

With a David & Goliath industry landscape, smaller hotel companies will have to continue to carve out their niche – and be very clear about what is unique to them. Own as much in your own back yard as you possibly can.
In the longer term, consolidation may be a positive. More sales people selling one company can be a good thing…in one market it is possible to have more people with more talent than ever before.
Depending on who ends up being made available, you might be able to get instant market expertise and instant relationships with customers. There could be major competition for those top talents, especially those who specialize in fields like pharmaceutical, oil & gas, and automotive.
With fewer companies and less competition, will rates rise?
Be clear on what the mergers mean for your comp set and measurement of your market share. STR has published revised rules that everyone should be preparing for. (See “Additional Resources” below for more details.)
Especially once Marriott and Starwood merge, there will be a lot of big boxes under the same umbrella in a number of markets. Does this mean that they are in a better position than ever before to tie up large customers with multi-year contracts? Perhaps they will be moving customers around different brands and experiences while keeping them in the same family?

Loyal Customers

Loyal Starwood travelers may not be interested in becoming Marriott travelers…they could be looking for another brand. Or, they might convert since the merger opens up a lot of new destinations for them to use their points in places they didn’t have access to before.
Let’s learn from the airlines. When combining loyalty programs, suddenly there are a lot of top loyalty earners, used to being the big fish, who are now one of many. Expect a reset of tiers in loyalty programs to accommodate a much bigger population. We should also expect a potential defection from those who have been “demoted” and are looking for better recognition and rewards.
Some corporate accounts that had a high number of premium loyalty members may have some bad news coming if tiers are reset. They might also hear that they have to increase their room night commitments. If they come to pass, these scenarios would be frustrating for corporate accounts and present an opportunity for others to pick them up as new clients. The challenge is to prepare for how your company will respond. For instance, can you offer to match their status if they jump over to you?

Additional Resources:

About HSMAI’s Sales Advisory Board

HSMAI’s Sales Advisory Board leverages insights, emerging trends, and industry innovations to fuel sales for hotels. Members include:

CHAIR: Ed Skapinok, Vice President of Sales & Marketing, Hostmark Hospitality Group
C. Becker, Principal, Titan Group of New York, LLC
Brian Burton, CHSE,CRME, Vice President Revenue Strategy & Optimization, White Lodging
Michelle Crosby, CMP, CTA, DMCP, National Sales Manager, Allied PRA Dallas/Fort Worth
Katie Davin, CHSE, Associate Professor, Johnson & Wales University-Providence
Lisa Giaimo, VP of Sales & Marketing, OTO Development LLC
Melissa Kouvelas, Senior Manager, Worldwide Sales, Best Western Hotels & Resorts
Cindy Novotny, CHSE, Managing Partner, Master Connection Associates
Mary Patton, Director, Groups and Meetings, InterContinental Hotels Group
Joel Pyser, Senior Vice President, Sales, Newmarket, an Amadeus Company
Larry Silman, Director of Strategic Sales, Americas, IDeaS – A SAS COMPANY
Michael Smith, Vice President, Sales And Marketing, JHM Hotels
Jim Vandevender, Chief Development Officer , The Knowland Group
Christine Wight, Director of Resort Sales, Angel Fire Resort
Tony Yeung, Principal, ZS Associates