NEW YORK (AP) - Hotel behemoth Marriott International is becoming even larger, taking over rival chain Starwood in a $12.2 billion deal that will catapult it to become the world's largest hotelier by a wide margin.
The stock-and-cash deal, if completed, will add 50 percent more rooms to Marriott's portfolio and give it more unique, design-focused hotels that appeal to younger travelers.
The acquisition is likely to start another round of hotel mergers.
"This causes everybody in the business to look around and say: we don't want to be the smallest," said Bjorn Hanson, a professor at the Tisch Center for Hospitality, Tourism and Sports Management at New York University.
The latest deal would leave Marriott with 5,500 properties and more than 1.1 million rooms around the world, uniting Starwood's brands, which include Sheraton, Westin, W and St. Regis, with Marriott's two dozen brands including Marriott's Courtyard, Ritz-Carlton and Fairfield Inn.
The transaction is expected to close in the middle of 2016.
The next-largest hotel company is Hilton Worldwide with 4,500 properties and about 735,000 rooms.
"To be successful in today's marketplace, a wide distribution of brands and hotels across price points is critical," Starwood CEO Adam Aron said on a call with Wall Street analysts. "It appeals to travelers wherever they may go, leverages marketing and technology spend(ing) and strengthens frequent traveler loyalty. Today, size matters."
Marriott and Starwood - like other hotel chains - own very few individual hotels. Instead they manage or franchise their brands to hundreds of individual owners, often real estate development companies. Those individual hotel owners are responsible for setting nightly room rates. It isn't uncommon for a developer to own a Marriott, Hilton, Hyatt and Sheraton in the same city.
The merger will give Marriott 30 brands and more leverage with corporate travel departments who often look for one giant chain to house all of their employees. Frequent business travelers will also be closely watching the deal. Starwood has a beloved frequent guest program with partnerships with American Express, Delta Air Lines and Uber. Marriott has a much larger program with partnerships with Chase and United Airlines.