Hotel rivals join B2B fray

May 2, 2000: 3:16 p.m. ET

Marriott, Hyatt form new e-commerce, supplies-purchasing venture

NEW YORK (CNNfn) - Marriott International Inc. and Hyatt Corp. on Tuesday entered the business-to-business electronic commerce fray when the rival hotel chains announced plans to form a new company to provide the hotel industry with supplies online.

Together, Marriott (MAR: Research, Estimates) and privately held Hyatt spend roughly $5 billion per year on the goods and services they need to operate their combined 1,800 hotels, executives said.

By combining those procurement efforts, the two companies are aiming to reduce their costs by taking advantage of economies of scale.

"Marriott and the industry are embracing the 'new economy' by finding faster, more efficient ways to serve our customers," said Marriott's chairman and chief executive, J.W. Marriott Jr.

The two founding companies also hope to get other hotel chains to join the venture, which has yet to be named and is expected to begin operating later this year. As a whole, the industry spends roughly $50 billion per year procuring supplies for day-to-day operations, executives said.

"This venture has the potential to provide tremendous value to our hotels, their owners and to the operations of other industry participants," said Scott Miller, president of Hyatt Hotels Corp. "It is a powerful example of how e-commerce provides opportunities to improve business performance in today's fast-paced environment."

The venture represents just the latest effort in a string of moves within the industry in which rivals have also combined their procurement operations in order to cut costs and squeeze savings from supply chain management.

In February, the Big Three automakers teamed up on an online exchange through which they will purchase roughly $250 billion in supplies from a range of vendors.

Similarly, last month four of the largest aerospace and defense firms - Boeing, Lockheed Martin, Raytheon, and British Aeronautics - said they are nearing an agreement on a Web-based marketplace for the sale of parts and components in that industry.

Marriott and Hyatt said they intend to migrate their existing procurement businesses, each with ongoing contracts and customers, to the new company when it is launched.

The new company initially focused its efforts on the North American market, but expects to enter other geographic markets over time.

Both founders are providing interim management to the new company. Dennis Baker, executive vice president of Marriott International and general manager of Marriott's procurement business, will be the chief operating officer of the new company. An executive search firm has begun to identify candidates for the chief executive officer position.

Marriott shares were up 11/16, or 2 percent, at 33-11/16 in afternoon New York Stock Exchange trade.