Patriot, Starwood Act On REIT Regulatory Change
<B> Patriot, Starwood Act On REIT Regulatory Change</B>
By Maria P. Vallejo
Patriot American will announce this week its new corporate structure on the heels of a restructuring of Starwood Hotels & Resorts, which now faces some neglected operational duties.
In the midst of juggling their financial and restructuring loads, Patriot and Starwood also must maintain their preferred corporate customers' satisfaction, and travel buyers are awaiting the impact of this balancing act.
Starwood, based in White Plains, N.Y., announced late last month its consolidation into a c-corporation after Congress' June ruling outlawed paired-share real estate investment trusts. Likewise, Dallas-based Patriot American is expected to undergo a similar structural change that will either spin-off or sell Interstate Hotels, sources close to the deals said.
Patriot is expected to mirror Starwood's decision to make its REIT a subsidiary; adopt a new dividend policy and authorize up to a $1 billion Starwood share repurchase. Severing Interstate Hotels from the company follows the conversion of several of its hotels to Wyndham International brands, Patriot's hotel company.
As Patriot focuses its attention on brands falling under Wyndham International, Starwood is rechanneling its energy on melding together its two hotel companies, Sheraton and Westin, under one roof.
<B>Adjusting the Structure</B>
Even before Congress ended the existence of paired-share REITs, Starwood executives toiled away at creating options for adjusting their unique structure. Following the ruling, they fixated on completing the mandated restructuring project, but neglected critical operational decisions relating to the Sheraton-Westin merger.
"The management of this company had things to do that prevented them from focusing on these important operational parts and these details," said analyst Bjorn Hanson, global hospitality industry leader at New York-based PricewaterhouseCoopers.
With the consolidation, the management structure must be realigned, placing more responsibilities on Starwood's plate. However, company officials have postponed naming a national corporate sales and marketing executive, and have put off creating a singular group/meetings program.
Some analysts said that attempts at completing these goals while restructuring the company could have resulted in rash decisions negatively impacting the travel buyer. "These are much more complicated, important decisions. Sometimes doing little, as counter-intuitive as it may be, might be the right thing to do rather than doing a bunch of things at once," Hanson said.
While whispers of concern drifted through the travel and meeting buyer community, some corporate customers showed no sign of fear. Negotiations are carrying on this year seamlessly because many companies are maintaining a high comfort level by working with the same Sheraton and Westin contacts , some corporate travel managers said.
"We haven't noticed any difference in the level of what we need and what we've had happen," said Joyce Bembry, manager of global business travel of Dupont Sourcing in Wilmington, Del.
Bembry, like most travel managers, is working with a familiar national sales office representative and receiving request for proposal information from the property level. Therefore, the empty leadership position goes virtually unnoticed, said hospitality consultant Carol Salcito, president of Management Alternatives Inc. in Norwalk, Conn.
Long time Sheraton preferred customer, Philips Electronics, encountered initial difficulties this negotiating season when there was confusion about the firm's Starwood sales contact. Despite this temporary glitch, the company is confident in Starwood's ability to deliver a satisfactory product, said Robert Brunner, Philips' corporate travel manager.
"The unfilled position hasn't impacted us at all," Brunner said. "We've had excellent representatives from both chains. It was very transparent.