Starwood Hotels & Resorts executives deflected questions
regarding its search for a permanent CEO and a possible sale of the company
during Thursday’s second-quarter earnings call. Even so, rumors of a sale to
InterContinental Hotels Group continue to arise.
Starwood previously acknowledged
it's investigating strategic alternatives for the company while seeking a new
CEO. “Those processes are … well underway, but at this point we have nothing
specific to report,” interim CEO Adam Aron told analysts in his prepared
remarks. “We will not be commenting on either topic midstream.”
Still, multiple analysts asked for more information, citing
the release of a Financial Times
article Thursday morning that reported the two major hotel companies are in
informal talks to consolidate.
“It’s no secret that we have a strategic alternative review
in progress,” Aron said. “You’re going to see lots of information in the press.
Sometimes it’s right; sometimes it’s wrong.”
He also declined to provide a timeline for the board of
directors’ decision on a strategic alternative or a permanent CEO.
IHG, too, dodged the question during its second-quarter
earnings call.
“There are big rumors, as there have been rumors for years
around this industry,” IHG CEO Richard Solomons said. “We never comment on
rumors and speculation, as you’d imagine. … Our real focus is on organic growth
of our existing business.”
Aron told analysts Starwood’s uncertainty has not had a
strong negative impact on its ability to sign new properties. During the second
quarter, the company signed 64 new hotel management and franchise contracts.
Second-quarter occupancy rose to 72.2 percent from 70.8 percent
in the second quarter of 2014. Yet, Starwood experienced a 2.6 percent decrease
in ADR to $172.88. Much of that decline came from its international portfolio,
where the rate decreased 9.5 percent.
The ongoing decrease of demand in energy markets owing to
low oil prices affected revenue, particularly in Houston. The company also saw
a 27 percent year-over-year decrease in revenue per available room in New York
City, which Starwood attributed to oversupply.
Transient revenue in North America increased more than 6
percent in constant dollars, driven mostly by rate growth. Group revenue rose
1.4 percent, also thanks to growth. Phased renovations at key hotels in North
America negatively affected group revenue.
On corporate negotiations, Aron said it was “too early to
tell what the mood and sentiment is for 2016,” though Starwood intentionally is
prioritizing transient over group, which has slowed in recent quarters.