I’m not sure why, but considering the volume of Twitter comment, a lot of people were caught by surprise by Marriott International announcement last week that it was laying off 163 people at the former Starwood Hotels & Resorts Worldwide headquarters in Stamford, Connecticut.
Really, it should be no surprise at all. And it’s only the public tip of the iceberg that’s involved in merging two massive luxury cruise liners like the SS Marriott and SS Starwood.
Marriott management justified, at least in part, the company’s mind-boggling $13.6-billion acquisition of Starwood earlier this year by claiming the combined company could realize up to $250 million in so-called annual corporate cost synergies. And as we all know, those kinds of savings typically center on reduced headcount, and lower payroll and administrative costs.
According to published reports, the layoffs that take effect at the end of the year will include some administrative workers and specialists in supply chain, design and brand management, but most of the downsizing will focus on managers, directors and senior vice presidents. When two companies come together, it’s the executives at the acquiring company that typically retain their titles, at the expense of those in the company that was purchased.
At least for now, more than 700 people work at the Stamford office. While more cuts are likely, Marriott will need to maintain some presence in Connecticut due to terms of a $5-million loan and other tax incentives, which Starwood received from the state in return for boosting the job count at its headquarters office.
There should be fewer layoffs at the property or regional levels and in some operations and sales jobs. People are still needed to operate and support individual properties. It’s more likely that additional layoffs will be centered on positions such as marketing, social media, public relations and other functions that can be assumed somewhat by Marriott’s existing team.
Undoubtedly, many of the executives and even marketing and PR people with good reputations will land on their feet, either eventually somewhere within the new Marriott organization or in other companies in the industry. The hotel business, especially in the United States, is on the brink of a surge in new supply, and new hotels create lots of jobs at development companies, management companies and even on the property level.
Also, the hotel industry was built on a foundation of entrepreneurship, and my guess is some of the now-former Starwood VPs and directors will feel burned out with corporate life and will consider striking out on their own. For decades, that’s how scores of new development and management companies were founded, as well as a few new chains and hotel concepts.
Corporate maneuvers within the hotel industry are likely to continue, and any changes mean opportunities for experienced and successful executives. For months, rumors have swirled about other possible combinations, although nothing has materialized yet. And soon, Hilton Worldwide Holdings will split into three separate companies: the existing Hilton as a franchisor and management company; Park Hotels & Resorts, a real estate investment trust to own hotels; and Hilton Grand Vacations, a timeshare company. These changes, too, could create opportunities for Starwood personnel cast adrift.
Some people in the industry mourn the loss of Starwood, a company with a flame that burned brightly during most of the years since its founding in 1998. Barry Sternlicht started and built the company on out-of-the-box, unorthodox innovation that had profound effects on the entire business. Some examples of that innovative flair were Westin Hotels’ Heavenly Bed and the launch of W Hotels.
Many wonder whether that legacy of innovation will die within the walls of Marriott, a company long considered to be more conservative and cautious than Starwood and some other hotel brand companies.
But in recent years—probably coinciding with Arne Sorenson becoming CEO in 2012—it’s been Marriott that has pulled ahead in innovative ideas and approaches. For example, the company is a leader in all industries, not just hotels, in the power of content marketing as a promotional tool.
And in recent years, Starwood has become stagnant and much less of a laboratory for new, cutting-edge ideas. Put another way, innovation at Starwood left the building with Barry Sternlicht and left Stamford when former CEO Frits van Paasschen was fired in early 2015.
Just last week, I heard of a new promotion for Starwood’s hotels in Hawaii aimed at capitalizing on the desires for experiences among leisure guests. Not a bad concept, except for the name of the promotion: “luxploration,” a term meant to combine consumer cravings for luxury and experience. Sounds more like a scene from “Mad Men” than from a company supposed to be on the edge of everything new.
Meanwhile, Marriott is fully engaged in developing innovations for its company and hotels. Earlier this year, the company converted a 446-room Marriott in downtown Charlotte, North Carolina, into a property to test new facilities, services and amenities. Taking a cue from social media sites, the hotel includes “like” buttons at various facilities throughout the property where guests are invited to tap the buttons to give a virtual thumbs-up to ideas they like.
Starwood, too, has an innovation lab in New York City that Marriott will likely maintain, at least for now. But clearly the future of hotel innovation lies at Marriott’s headquarters.
Email Ed Watkins or find him on Twitter.
Ed Watkins, former editor-at-large for HNN, is a freelance writer with 40 years’ experience covering the business of the hotel industry.
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