Starwood Hotels and Resorts late last month said it would put another 15 to 18 properties up for sale with a plan toward generating a $500 million to $1 billion return. Starwood CEO Steven Heyer said the sale of these and 28 others sold to Host Hotels & Resorts in April, all of which he characterized as having less value than the ones that remain under Starwood ownership, would fund an aggressive new multi-brand strategy and position the company with a mixed portfolio he called "asset-right."
"The market is very attractive to monetize the real estate for two reasons," said Sean Hennessey, founder and CEO of Lodging Investment Advisors."One is that the multiples paid for hotels are about as strong as they've been in recent memory, so they're getting good pricing. Second, the market is very receptive to purchasing hotels encumbered with long-term management agreements, which is what Starwood wants to achieve while maintaining its footprint and distribution of hotels throughout the system."
"What they're trying to do is really focus their energy and balance sheet on their true expertise, which is management rather than ownership," he said.
While a shift from hotel ownership to management isn't new, the aggressiveness with which Starwood is doing it is. "Hilton did the same type of thing earlier in the year and has by and large continued that process," said Hennessey. "FelCor has done it and Marriott has already effectively done it by virtue of the split between the real estate and operating company. It's a way to cash out of the ownership business, but continue the management side."
Heyer said the company this week will announce details of Project ESW, the development name for its new extended stay brand being developed by the Westin management team. The first such property will open next year in Lexington, Mass., to be followed by another in San Francisco. That offering will round out Starwood's portfolio, along with its recently announced Aloft select-service brand.
The focus of these and other Starwood brands going forward will be on the traveler experience, which will be reflected in new brand-specific styling, traveler amenities and services as well as partnerships with such lifestyle purveyors as Starbucks and Illy.
The former president and COO of Coca-Cola, at Starwood's helm for 18 months, said its strategy focuses on triggering emotional connections with guests that leave lasting memories, something it deemed more important than price. Heyer said Starwood was poised to grow even more due to strong demand and group business that is being booked at an attractive pace.
Javier Benito, executive vice president and chief marketing officer of Starwood, said that the company now is measuring revenue on a per-occupied-room basis instead of using RevPAR, the long-standing, industry-recognized growth metric. Whereas RevPAR only accounts for rate, RevPOR considers rate and such additional expenditures as food and dry cleaning, which he said often exceed room rate.
Even so, Starwood announced that it expected annual RevPAR growth of 9 percent to 11 percent, and 5 percent to 7 percent annual unit growth through 2009.
That is helping Starwood's pipeline to continue to be robust, with more than 179 new hotels slated to open by 2009. Nearly half of those will be Westins, according to Sue Brush, Westin's senior vice president, who said that 20 new Westin properties would open this year and that the brand would have 200 hotels operating by 2010, 78 more than it has open today. "Our brands are in high demand, and our pipeline is growing every quarter," said Heyer, although he maintained that Starwood was about uniqueness, not ubiquity.
Also key to Starwood's growth plans is the expansion of its global footprint. Eva Ziegler, Le Meridien's senior vice president, said Starwood's international footprint grew 45 percent after the Le Meridien acquisition last year
(BTN, Dec. 5, 2005).New services also are at the forefront of Starwood's plans. The St. Regis brand last week launched an e-butler service, enabling guests to notify a butler via e-mail with any needs they might have while away from the hotel.