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Tying The Knot: Will The Marriott-Starwood Deal Cause NYC Hotel Closures?

They got engaged, they broke up, and now they might be back together again – but the road to the altar still isn’t clear.

The Marriott-Starwood soap opera briefly appeared to be over last week after Starwood Hotels & Resorts accepted a higher acquisition offer from Marriott following a short – lived dalliance with a consortium led by Chinese insurance company Anbang. But after Starwood initially accepted Marriott’s improved bid, this week Anbang came back with another offer of its own, raising its bid to $14 billion. Marriott, for its part, has reaffirmed its commitment to acquire Starwood for $13.6 billion, a deal due to be put to vote April 8 in stockholder meetings for both companies.

In the meantime, CrediFi analysts examined what might happen if Marriott and Starwood do end up tying the knot to become the world’s largest hotel chain – specifically what exactly their blended family might look like. We already know that if the merger goes through, Marriott and Starwood’s new family will include more than 1 million rooms in 5,500 – plus hotels in various cities, countries and hotel brands such as Starwood’s Four Points by Sheraton and Westin, and Marriott’s Autograph Collection and Ritz – Carlton.

But many of these assets are in the same markets. And, just as when two individuals marry and each already have a home and other duplicate belongings that need to be combined or sold off, the question is what will happen to these hotels if Starwood and Marriott seal the deal.

There is the possibility that they could all live together in harmony, with plenty of tourists and business travelers in the Big Apple to go around.

But it is also possible that, as has been discussed with other planned mergers such as Staples – Office Depot or Walgreens – Rite Aid, some properties will end up being shut down to reduce cannibalization. This would seem to be most likely in hospitality-dense areas like New York City. In New York state alone, Marriott has 144 hotels, while Starwood has 37, with another eight scheduled to open by 2020, according to the companies’ websites.

There is already a lot of competition from other hotels in New York – many of which are new – and that’s before taking into account alternative arrangements like Airbnb. Between 2014 and 2015 alone, 61 hotels added over 5,000 rooms in New York Cit and at least 185 hotels opened since January 2014 or are in the development and renovation pipeline, according to New York City tourism partner NYC & Company. That brings the total number of NYC hotel rooms to over 107,000.

The extra supply is reflected in falling room rates in New York during each of the first three months of this year compared with the same period a year ago, according to the Trivago price index, even though it’s still the second most expensive destination among the top 25 U.S. hotel markets.

Marriott and Starwood are among those contributing to what some say is becoming a glut of new hotels in the cit and we zoomed in to take a look at about a dozen of their hotels in the Times Square area.

Several are financed by foreign lenders, such as Nanyang Commercial Bank in Hong Kong, which in 2013 issued a $45 million loan for The Algonquin Hotel Times Square at 59 W. 44th St., a Marriott Autograph Collection property that opened in 1902 and underwent a massive renovation in 2012. And Singapore’s Oversea-Chinese Banking Corp. issued a $105 million loan last year for Starwood’s Element New York Times Square West, a Westin brand billed as eco-friendly at 311 W. 39th St.

Toronto-based Canadian Imperial Bank of Commerce originated CMBS loans for Marriott’s Courtyard New York Manhattan/Times Square at 114 W. 40th St., for $90 million, and Marriott’s Residence Inn New York Manhattan/Times Square at 1033 Avenue of the Americas, for $151 million. Both of these CMBS loans mature later this year, the Residence Inn in September and the Courtyard in December.

Some of the properties are structured as condo hotels, including Marriott’s Renaissance New York Times Square Hotel at 714 7th Ave. (also known as 2 Times Square) and Starwood’s W New York-Times Square at 1567 Broadway.

Other Marriott and Starwood hotels in the Times Square area (many of which have similar – sounding names) include Marriott’s Courtyard New York Manhattan/Times Square West at 307 W. 37th St. and Fairfield Inn & Suites New York Manhattan/Times Square at 330 W. 40th St., right next door to Starwood’s Four Points By Sheraton Midtown – Times Square, at 326 W. 40th St.

There are also brand-new Marriotts and Starwoods that either just opened or are in the pipeline.

For instance, Marriott’s 348 – room Renaissance New York Midtown Hotel, Renaissance’s new U.S. flagship, opened on 35th Street and Fashion Avenue on March 21, and boasts a “discovery portal” powered by Time Out New York, where guests can interact with a large digital platform to get an overview of neighborhood hotspots.

And Starwood is planning a dual – hotel development in Queens, including a Four Points by Sheraton hotel, with easy access to LaGuardia Airport and a joint fitness center and indoor pool.

It may look like Starwood and Marriott are in for a full house if they ever do head down the aisle, but they just might wind up with an emptying nest instead.

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Alex Veksler

Head of Content

Alex Veksler has 16 years of finance, data analysis and project management experience. He is a former vice president at Morgan Stanley, where he worked on product control of equity and fixed-income derivatives products as well as various projects involving finance and technology, such as revamping risk attribution and balance-sheet systems for profits and losses. Alex has previously worked at hedge funds, most recently as a director at Exigent Capital. He has a bachelor’s in computer science from Yeshiva University and an MBA from New York University.

Ely Razin

CEO

Ely Razin founded CrediFi in 2014 with Battery Ventures. A rare combination of seasoned corporate executive and technology entrepreneur, Ely previously served as global head of board governance for Thomson Reuters Accelus and head of business law for Thomson Reuters, after the software company he founded was acquired in 2004. The company, Expert Ease Software, developed AI-based software that automatically summarizes key deal terms for transactions in fields including capital markets, M&A and real estate. Ely began his career as a corporate and securities lawyer, and holds an LLB and MBA from York University.

Frank Muhlon

Head of Transactions

Frank Muhlon oversees CredifX, the commercial real estate financing marketplace that mines the CrediFi database at its core. Prior to joining CrediFi, Frank served as vice president of Northeast region business operations for online CRE property trading platform Ten-X, which has closed over $40 billion in transactions since its inception. He has also held key positions at Orix USA/Houlihan Lokey, Silverstein Properties and Trammell Crow Company. Frank received his master’s degree in real estate finance from New York University and his bachelor’s in finance from Rutgers University.

Charles Mctiernan

Head of Sales

Charles Mctiernan comes to CrediFi from Ned Davis Research Group and Roubini Global Economics, where he was the global head of sales. He also spent more than 10 years at Reuters America Holdings, where he held a number of senior sales leadership roles, including head of solutions sales and head of global accounts. Charles, who received his bachelor’s in economics from East Carolina University, has more than 25 years of experience in technology, data and research sales.

Amichai Levy

VP R&D

Amichai Levy is the former VP of R&D at Israeli high-tech firm Payoneer, where he developed its signature cross-border payment platform and integrated it with existing bank technology. In his prior role at Ness Technologies, Amichai was a key player in developing an electronic case filing system for Israel’s courts. He has over 20 years of experience in software engineering.

David Fajgman

Head of Finance

David Fajgman brings over 14 years of financial and managerial experience to CrediFi. Prior to joining the CrediFi team, he served as finance director of Bioness Neuromodulation Ltd., which develops and manufactures medical devices involved in neurological rehabilitation. He has previously worked in multiple finance roles at Thomson Reuters and as an accounting and consulting manager at Ernst & Young, where he was responsible for a wide range of clients, including companies listed on the Nasdaq and privately held high-tech companies. David is an Israel-licensed certified public accountant and has a bachelor’s degree in business and accounting.

Liat Bar David

Head of Human Resources

Liat Bar David has over nine years of human resources experience, primarily focused on the high-tech industry. She is a former HR business partner at semiconductor solutions provider Broadcom, where she was responsible for onboarding processes, benefits, policies, training and development, performance management and employee retention. Liat holds a bachelor’s in communication and human services and a master’s in human resources and services, both from the University of Haifa.