Who should get Starwood’s brands
03 AUGUST 2015 8:19 AM
Most rumors point to another company acquiring or merging with Starwood Hotels & Resorts. Here’s a better solution: Carve up the company so a number of other hotel companies can scoop up the pieces.
The future of Starwood Hotels & Resorts Worldwide has been one of the most talked-about topics in the hotel industry. With the company in the midst of a review of strategic and financial alternatives, every turn of the rumor mill seems to involve the Connecticut-based company. Companies from China to Europe to the United States are supposedly chasing the deal.
I don’t believe one company is going to be the winner in the Starwood sweepstakes. My instinct tells me there will be multiple winners as the company won’t be sold as one unit. I’m with Barry Sternlicht, the erstwhile leader of Starwood Hotels who oversees the unrelated little REIT called Starwood Capital Group. Sternlicht said during June’s New York University International Hospitality Industry Investment Conference that he thought the price tag for Starwood Hotels & Resorts would be too high for him to seriously consider acquiring it.
Meanwhile, current Starwood Hotels interim CEO Adam Aron continues to follow a script that says the company is in the midst of its review process and some of the media reports are right, some of them are wrong. My hunch is that he is fielding calls from multiple suitors and it’s only a matter of time—I suspect it will happen by the end of this year—that the company will be dismantled and parsed out to hunters who are quietly salivating over the prospects.
The rumors being bandied about have every company that has positive cash flow eyeballing Starwood Hotels. It sure would be tidy if the latest rumor that the reported merger between top China hotel companies Plateno Group and Jing Jang Hotels will acquire Starwood were true. But that’s too easy. There’s got to be more to it than that, doesn’t there?
That’s where Sternlicht comes into play.
Before leaving as Starwood Hotels’ leader 10 years ago, he built a company of extraordinary proportions. He started with the acquisitions of a $120-million REIT based in Phoenix called Starwood Lodging Trust and won a titanic battle against then Hilton Hotels Corporation (prior to it acquiring Promus Hotels Corporation) to buy ITT Sheraton Corporation for about $1 billion. The tale goes deeper than that as Sternlicht’s shrewd move eventually reshaped the way REITs conducted business, but that’s a story for another day. Following the deal, Sternlicht had the audacity to focus on the bed—he launched Westin’s Heavenly Bed in 1999 and soon after introduced the world to the W brand. Both actions proved to be major trendsetters for the hotel industry.
With that as the backdrop, here’s one way to look at the future of Starwood Hotels & Resorts Worldwide. It might be completely wrong, but what’s one more log on the rumor fire?
Sternlicht takes luxury: Sternlicht avenges his harsh departure and acquires the W, Luxury Collection, St. Regis and Aloft brands. The first three are easy: Sternlicht likes to play in the luxury sandbox and those brands are upper end to the max. Aloft fits only because during the NYU conference Sternlicht sounded downright ticked off over what the brand had become: “My version of Aloft was a different product than what came out from (Frits van Paasschen’s) administration,” he said at the time.
Westin, Element land in Rockville: CEO Steve Joyce has longed for an upper-upscale brand to pair with the 5,000 midscale and economy hotels in Choice Hotels International’s system. I have to believe the affable and straight-talking Joyce would be dancing in the streets if he successfully lands Westin for the Rockville, Maryland-based company. Element comes along because it’s joined at the hip with Westin, and the few existing properties might be a nice addition to Choice’s growing Cambria brand.
Sheraton goes to China: Frankly, the Sheraton brand is revered in Asia and would be a most suitable acquisition for the Plateno-Jin Jang entity. That acquisition would give the new company a strong foothold in the U.S. and Europe, something it surely desires. By most accounts, Sheraton’s current brand-wide refresh is long overdue and owners might welcome the potential for a cash infusion from a new global player.
Four Points heads west: I have to hand it to Greg Mount, who took over as CEO of Red Lion Hotels in January 2014. He said at the time that he was going to expand the company and would give it a presence east of the Mississippi River. He has backed up that mission with action and the company is on the move. Acquiring the 20-year-old Four Points brand and folding it into Red Lion would be a coup for Red Lion’s Mounties. Whether Red Lion would have the financial wherewithal to make the deal is a big question, but if it can, this marriage would be perfect.
Le Meridien finds a home in Paris or Minneapolis: It might make more sense for Accor to buy the brand that started in France in 1972, but somehow it just doesn’t seem to be CEO Sebastien Bazin’s style to make a move like this, although it would give Accor a little more presence in the U.S., which it really needs. If Accor passes, the road could lead to Carlson Rezidor Hotel Group. The Minneapolis-based company has the most internationally diverse leadership of all American-based companies, and the upper-upscale Le Meridien would be a great match with the company’s progressive Radisson Blu brand.
All of this is speculation. Whatever happens to Starwood is going to happen sooner than later, and a breakup of the company could fetch higher returns for investors because each brand fills a niche for other companies that would love to engage in acquisition talks. If there’s no other reason to think these projections are viable, “returns for investors” are the most common words out of any publicly held company’s CEO.
What do you think about these ideas? Let me know in the comments below, shoot me an email at email@example.com or find me on Twitter @jeffhigley1.
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