Starwood Hotels & Resorts today announced a joint venture to acquire Le Meridien Hotels & Resorts, pending approval by Le Meridien's board of directors. Le Meridien, which has been in financial turmoil since 2003, has a portfolio of more than 130 properties in 56 countries.
Starwood is partnering with Lehman Brothers on the financing, not an unexpected move since the two in 2003 jointly acquired a majority of Le Meridien's senior-level debt
(BTNonline, Jan. 5, 2004). Lehman contributed $1.2 billion, while Starwood contributed $200 million.
As its financial woes mounted, Le Meridien lost a number of management contracts in key markets. In London, where it maintains its headquarters, Le Meridien in 2003 lost the management contract on the Grovenor House Hotel, which subsequently became a Marriott. In Dallas, in another example, the former Le Meridien that same year was converted to a Westin.
As a result of the proposed consolidation, travel buyers would have one less competitor in the upper upscale category with which to negotiate, thereby adding pricing pressure. Meanwhile, buyers who are Starwood clients would have a larger array of choices as part of their chainwide deals.
Starwood would add Le Meridien to its existing portfolio of brands, which includes St. Regis, Westin, Sheraton and W. Brand differentiation, however, could prove problematic. Le Meridien is positioned as a direct competitor of Westin and W and, to a lesser degree, of Sheraton. Starwood CEO Steven Heyer has made brand differentiation a key priority.