The decision came after Anbang upped its offer for Starwood by nearly $370 million Friday, bringing the total to more than $14 billion.
Starwood, which owns the Sheraton and Westin hotel brands, has to pay Marriott $400 million to end the deal.
Marriott has until March 28 to make another offer. Marriott International Inc. said Friday that it still believes its deal with Starwood is superior, and is contemplating its next step. Marriott first offered to buy Starwood in November, which would have created the world's largest hotelier.
Through a series of deals, Anbang has become a fast-growing player in the U.S. hotel industry. It bought New York's Waldorf Astoria for almost $2 billion in 2014. And just this week it offered $6.5 billion deal to buy Strategic Hotels & Resorts Inc., which owns several high-end properties including the JW Marriott Essex House in New York and Hotel Del Coronado in San Diego.
The latest offer from Anbang and its partners is worth $83.67 for each share of Starwood, up from its previous offer of $81.50 per share. Starwood shareholders would get $78 in cash for each share they own plus $5.67 in stock for a spinoff of a vacation business.
Shares of Starwood Hotels & Resorts Worldwide Inc., based in Stamford, Connecticut, rose $3.41, or 4.5 percent, to $79.81. Shares of Marriott, based in Bethesda, Maryland, rose $1.52, or 2.1 percent, to $73.32.