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  • The American Motel: How the Starwood Hotels & Resorts and Marriott

    International Merger can Impact Franchisors and Franchisees

    Abstract: The law can impact virtually every aspect of hotel operations. From franchise

    relationships to bankruptcy, the law can have a significant impact on the growth, development, and long-term operations of a hotel. On September 23, 2016 Starwood Hotels & Resorts and Marriott International merged to create the worlds largest hotel chain. As the new Marriott seeks to eliminate brands and reduce guest confusion, the

    Property Improvement Plan will become a powerful tool in the goal of creating the new Marriott International.

    Joshua Z. White J.D. University of Oregon September 1, 2016

  • The American Motel Table Of Contents

    Be Our Guest: Welcome To The American Motel.........................................................................................1

    As An Attorney: How Does A Hotel Impact Me?......................................................................................2The Three Very Expensive Words That a Hotel Owner Never Wants to Hear: Property Improvement Plan..............................................................................................................................................................3PILLOW FIGHT: Hotel refresh plans launch the bed wars................................................................5The Lodging Industry In The United States..........................................................................................................7

    Who Controls the Hotel Market............................................................................................................................7Bon Voyage: Competition from Hotels is not the Only Threat to Hotels ......................... 8

    Consolidation: Marriott and Starwood say I Do! I now pronounce you Hotel & Hotel?......................................................................................................................................................................................................10

    Operating Segments Of The Combined Marriott International..................................................14If anyone opposes this marriage, let them speak now, or forever hold their peace..15

    The Chinese Government Delays the Marriott Deal...........................................................................15Some Hotel Owners Were Not Happy: The Injunction To Block The Marriott Merger...16

    Is There Room In There Room In The Hotel Industry For Future Consolidation?......................18Conclusion............................................................................................................................................................................19Appendix...............................................................................................................................................................................20

    Table 1 The Most Common and Largest Hotel Operators in the World........................20Table 2 Primary Cruise Line Operator...................................................................................................20Table 3: The newly combined Marriott International.....................................................................21

    About the Author Joshua Z. White is an LL.M. student at the University of Oregon. He completed his J.D. at Mercer University and his B.S. at Tennessee Technological University. Prior to law school, Josh taught elementary school in Georgia and the United Arab Emirates. During college and while teaching, Josh continued to work in various hotels and has experience with Wyndham Worldwide, Carlson-Rezidor Hotel Group, and Marriott International. The hotel has always been a source of fascination and interest for Josh, with his grandfather going so far as predicting that he would one day grow up to own a Holiday Inn.

  • 1

    Be Our Guest: Welcome To The American Motel1

    Every day around the world there are people busy at work in invisible cities,

    cities that are almost never seen to those working outside of the hotel industry.

    Meanwhile in the more visible part of the city, there are employees checking guests in,

    cleaning, serving, and making sure that everything runs smoothly. When visitors to

    these invisible cities lay their heads down at night, rarely, if ever do they have an idea

    of how much work has gone into making their stay as enjoyable as possible.

    While there are many hotel brands and companies that exist around the world,

    there is one company that stands out. Marriott International is the worlds largest hotel

    company and remains one of the few major hotel companies still controlled by the

    founding family. The Marriott Family has had some form of direct or indirect control

    and management over the company since it started as an A&W Root Beer Stand in

    1926.2

    When the first Marriott Motor Lodge opened in 1957, history was written by the

    sheer determination of J.W. Bill Marriott, JR.3 The day that the first Marriott Motor

    Lodge opened; Bill Marriott received an unexpected phone call from Walt Disney

    wanting to know if the Marriotts would be interested in operating the hotel at the new

    Disney Land Resort. Bill Marriott declined, saying he didnt know if they would be able

    1 With respect to the words hotel and motel the technical difference is that a hotel has interior corridors while a motel is property that has doors that open to the outside. 2 On April 1, 2012 the Marriott family patriarch, Bill Marriott Jr. stepped down as the Chairman and CEO of Marriott International. It marked the first time that Marriott was not under direct daily operational control of the Marriott family. Today, many of the decisions made by Arne Sorenson, a hand selected pick of Bill Marriott Jr. to lead the company are still heavily influenced and guided by the Marriott family. 3 J.W. Bill Marriott, JR. & Kathi Ann Brown, Without Reservations: How A Family Root Beer Stand Grew Into A Global Hotel Company (Luxury Custom Publishing 2012)

  • 2

    to make the first one work.4 Bill Marriott JR. evidently figured out how to make it work

    and swiftly grew Marriotts hotel business into a hotel titan. It was Bill Marriott JRs

    willingness to take chances and risks combined with his successful understanding of

    the colossal inner workings of an invisible city that helped grow Marriott into the

    success it is today.

    In every large hotel hidden from the eyes and ears of guests exists an invisible city. Behind doors, below ground, a maze of corridors connects kitchens to loading docks, housekeeping to the laundry, accounting to the communications center. An around the clock army of cooks, housekeepers, engineers, waiters, dishwashers, electricians, and other specialists bustles along these hallways, each member responsible for making his or her part of hotel operations run smoothly.5

    Unlike many real cities that shut down at 6 PM and are closed on holidays, the

    invisible city within a hotel never closes. Even further behind the scenes of that

    invisible city is another level of work that is always changing and always working. The

    massive networks and complicated structures of the business associations within the

    hotel industry and the franchisor/franchisee relationship could not be done without the

    work of attorneys.

    As An Attorney: How Does A Hotel Impact Me?

    Attorneys are involved in hotel functions from the earliest stages of planning,

    construction, opening, and day-to-day operations. The complicated nature of the

    franchise model in the hotel industry means that an attorney will always have a job.

    Attorneys who represent hotels may also be asked to review matters pertaining to

    environmental law, international law, immigration law, construction law, tort law,

    4 J.W. Marriott, JR. & Kathi Ann Brown, The Spirit To Serve: Marriotts Way, Harper Collins, 1st ed. 1997. 5 J.W. Marriott, JR. & Kathi Ann Brown, The Spirit To Serve: Marriotts Way, at XVII, 1st ed. 1997.

  • 3

    criminal law, intellectual property law, and almost every other area of law

    conceivable. Since a hotel never closes, hotel attorneys usually have an opportunity

    for work at any time if they represent a hotel or its owners as clients. As an added

    benefit, there are hotels around the world, giving the hotel attorney the opportunity to

    experience the finest of the hotel(s) he may represent, whether that hotel is in Paris or

    Bora Bora, or places most people will never see such as Iran6 or North Korea.7

    The Three Very Expensive Words That a Hotel Owner Never Wants to Hear:

    Property Improvement Plan

    There are three words that can cause anxiety for a hotel owner Property

    Improvement Plan. (PIP) PIPs, [SIC] are used when a hotel is not meeting branding

    standards.8 The PIP is one of the most powerful apparatuses that a hotel franchisor

    has in its arsenal of control.

    A good hotelier will always have a running PIP in place to guarantee that their

    hotel is in the best condition possible. A true hotelier knows and understands the value

    of a PIP and sets daily, weekly, monthly, even yearly goals to meet on the property

    level. It is when that PIP goes from a property level to a PIP mandated by a franchisor

    where things can quickly turn nasty.9

    6 Press Release, Iran Cultural Heritage and Tourism Investment Group Co. & AccorHotels Group, Signature of Managemen