Marriott To Take Full Control Of Design Hotels

Filed Under: Hotels, Marriott

Marriott intends to increase its ownership stake in Design Hotels to 100%, so what are the implications of that for guests?

Marriott increasing stake in Design Hotels to 100%

In 2011, Starwood purchased a 72% stake in Design Hotels, a German company that markets independent luxury hotels. Marriott acquired Starwood in 2016, so at that point Marriott became the majority shareholder of Design Hotels.

Since then Marriott has increased its stake in Design Hotels to 95%. Design Hotels has now reported that Marriott has made a formal request to acquire the outstanding 5% of shares, which would mean Marriott would be the 100% owner of Design Hotels.

German law permits a company that owns a 90% or more share to initiate a process to obtain remaining shares, so that’s what’s going on here. Marriott hopes for the deal to be concluded within three months, through a cash offer to the existing minority shareholders.

Here’s what a Design Hotels spokesperson said about this development:

“As the merger squeeze-out is a corporate organisational development and we do not plan changes to the way we operate the business, there is no impact to the senior leadership team.

Our 330-plus members will remain part of our global and unrivalled community of independent, design-driven hotels that function as social hubs and spaces for purposeful experiences. Having Marriott International as the future sole owner, Design Hotels members can expect additional benefits and opportunities to obtain a greater and more selective reach and to take advantage of new programs and practices in size and scale.”

Rooms Hotel Kazbegi, a Design Hotels property

What is Design Hotels, anyway?

Marriott has so many brands, so perhaps it’s worth stepping back and explaining what Design Hotels is. Design Hotels consists of 300+ boutique and luxury independent hotels in 50+ countries.

The key thing to understand is that these properties aren’t actually managed by Design Hotels, but rather Design Hotels is more of a marketing company than anything else. Presumably Design Hotels is being paid some fee in exchange for marketing these properties, and creating a collection of boutique properties.

But all of the hotels are independent, so this isn’t like your typical Sheraton or St. Regis that’s managed by Marriott.

Design Hotels is ultimately a marketing company to begin with, and has a further marketing partnership with Marriott Bonvoy, whereby Marriott markets some of these properties through its website, to increase visibility. For these eligible properties:

  • Bonvoy members can earn and redeem points for stays, and earn elite qualifying nights
  • Bonvoy elite members can receive limited elite perks, like a welcome gift, a room upgrade subject to availability, early check-in and late check-out subject to availability, etc.; however, perks aren’t nearly as robust as when staying at a Marriott managed property

Papaya Playa Project, a Design Hotels property

What are the implications of this for Marriott Bonvoy?

If Marriott does indeed take a 100% stake in Design Hotels, what would the implications be for the group, and for Bonvoy members? Well, personally I’d say literally nothing:

  • Marriott already owns a 95% stake, so it’s not like it didn’t already have a controlling stake in making decisions
  • The company of Design Hotels as such doesn’t own any properties, but it’s just a marketing company, meaning the company has no control over individual hotels
  • Only 120+ of 300+ Design Hotels properties choose to participate in the Marriott Bonvoy partnership, and I don’t see that changing significantly; if the hotels wanted to partner with Marriott they would have already
  • I suppose Marriott could give hotels an ultimatum to partner with Bonvoy or leave the group, but that would be counterproductive, because many hotels would probably just end their affiliation with Design Hotels
  • I wouldn’t expect elite perks at these properties to be enhanced, because again, these properties are independent by design, and don’t want to offer perks like free breakfast

So if Marriott does take full control of Design Hotels, personally I think there are virtually no implications. It’s not like Marriott increasing its stake in a marketing company from 95% to 100% will change things for the 300+ individual hotels.

The Old Clare Hotel, a Design Hotels property

Bottom line

Marriott intends to increase its stake in Design Hotels from 95% to 100%. I’m writing about this because I’ve received several reader questions along the lines of “does this mean all Design Hotels properties will partner with Marriott, and elite members will get free breakfast?”

Unfortunately the answer is likely to be no. I don’t see any major implications here when it comes to the actual cooperation between Marriott and individual Design Hotels properties.

Are you anticipating any changes with Marriott taking full control of Design Hotels?

Comments
  1. This is a good thing. I had a reservation with a Design Hotel in Athens this past summer, that obviously needed to be canceled. While Marriott was being incredibly generous and flexible regarding refunds, there was fine print that applied specifically to Design Hotels (and a few other “sub-brands”) that initially denied me a refund. (It took a good deal of fighting, but I did get my money back.) Hopefully now that fine print will go away.

  2. Once again you fail to understand Marriott’s business. You wrote: “… typical Sheraton or St. Regis that’s managed by Marriott.”

    The typical Sheraton or St. Regis is NOT managed by Marriott. The vast majority of hotels across all Marriott brands are NOT managed by Marriott in North America. Internally, Marriott only really manages Ritz-Carlton and a small minority of other upscale brands in its portfolio.

  3. I think the questions is whether the Design Hotels will be moved onto Marriott’s reservation system. I understand a number of these hotels ended up leaving the Marriott partnership as they needed to effectively manage both their Design and Marriott reservation systems. Costs and complication increased, and they didn’t see value.

    With 100% stake, Marriott should just move them onto their own platform, even if some aren’t available through the Marriott partnership.

  4. I can just see the Bonvoy email – Great News Bonvoy member, we now are the 100 percent owner of Design Hotels and as a result Bonvoy members get absolutely nothing no matter how loyal the member. It’s not like you actually expected anything anyway – after all, we’re BONVOY. If we wanted a quality loyalty program we’d have used the Starwood model.

  5. My company moved our corporate travellers to the Design in Mexico City Polanco. What a shit show! After an uproar we were back at the Intercontinental.
    This was pre-covid so I have no idea what it is like now

  6. What benefits do these customers bring, they’re loyal to Marriott not the individual properties. Why would they give away freebies to Marriott elites? Most have a good reputation and following among repeat guests or word of mouth.

    Bulgari managers have told me in Bali and Milan, they don’t want guests earning or redeeming Marriott points. Many of these hotels see themselves as in a class of their own above Marriott and competing with mandarin, peninsula, four seasons, belmond, relais & chateaux…

  7. A word of caution. Design Hotels appear to cater for a very special group of guests. I have had a few experiences with them which, from my point of view, were not very positive.

    They often offer features that some people might find interesting (e.g. works of art in the rooms or very original arrangements in the room layout) at the price of not offering items that most of us would consider standard features of any hotel room.

    I suggest that people wanting to make a reservation in a “Design hotel” try to find out in advance what the room they will be booking offers. I wish I had done it more often. I wish I had asked, for instance, about the size of the bed, the availability of a safe, the availability of electric plugs near the working tables, or whether there was any division between the sleeping room and the bathroom.

  8. The ones I’m familiar with were mostly run down Best Western like motels that instantly transformed into chic hotels with tiny rooms and limited service. Why Marriott would even be interested is a mystery…. Maybe Motel 6 is next on their radar.

  9. I might add that one of the Design hotels I have come across is the one in the main picture of this post (40 km outside Reykjavik, in the middle of nowhere, which might be one of its attractions). Its rooms were tiny and the dining area very spartan. In fact, the hotel is the conversion of a building previously used by the staff of the nearby power station.

    Another one was in Reykjavik itself. We had booked six nights, but we only stayed one. The room was tiny. There was no cupboard, but just three shelves and a bar with the space for three or four hangers. But its main feature was the total absence of any division between the sleeping area and the bathroom. There was only a glass cabin around the toilet !

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