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As the travel and hospitality industry adapts to the digital age, legacy companies are looking to get ahead of the threat that new, digitally native entrants pose. Most notably, Marriott International and Starwood Hotels have finalized their $13.6 billion merger after competing against each other for years. This could be a significant advantage for the traditional hotel companies, particularly as Airbnb ramps up a new round of funding that values the company at $30 billion.
The Marriott-Starwood merger gives the combined company more power to compete in the hospitality industry. With two massive audiences, Marriott and Starwood are merging their loyalty programs in order to cut costs related to operating them separately, as well as widen the new entity's addressable market, reports Skift. Travelers that were part of one loyalty program now have more rewards options via the other considering the global reach of both companies. Combined, Marriott and Starwood now operate over 5,500 hotels and list 1.1 million rooms around the world. Merging the loyalty programs could help drive up customer retention when travelers are presented with more options and places to redeem rewards.
But Airbnb still looms large as a significant threat to traditional hotels. The popular home-sharing site is on the cusp of closing a $555 million funding round, which just signed on Google Capital as a backer. Notably, the $30 billion valuation is about the same as the value of Hilton and Hyatt combined. The company also boasts 1.5 million available listings, more than Starwood and Marriott after the merger. New capital could help it expand even further and continue trialing new digital tools. The company has been focused heavily on providing services and amenities that traditional hotels offer, including local travel guides and personalized trip recommendations. Should Airbnb use part of its new funding to expand these services, it could compete more directly with hotels for guests, and if its additional lodging services are successful, it will likely be able to onboard laggards who have so far only considered hotels.
Marriott-Starwood will have to focus on digital offerings as the hospitality industry competes with new entrants. While combining its loyalty programs could potentially help drive up customer retention and bookings revenue, the newly-merged companies should focus on new technology that engages travelers beyond the actual booking. For example, the Hilton hotel chain is using beacons to provide travelers with recommendations for activities and amenities available at its resorts, reports Mobile Commerce Daily. This tool engages travelers with the company past the point of booking and can drive up loyalty. Adopting a tool like this could also help Marriott-Starwood more directly compete against Airbnb's own travel guide tools. As the hospitality industry increasingly turns to digital, traditional hotel chains will have to adopt omnichannel tools and e-commerce capabilities that keep the threat of digital-natives like Airbnb at bay.
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