By Sourish Bhattacharyya
THE U.S. financial media is agog with speculation that Starwood is up for either a merger or an acquisition. The buzz got louder and louder after the leading hospitality brand with significant Indian interests appointed the international banker, Lazard, to guide it through what the global travel intelligence website, Skift.com, describes as a process that will consider a gamut of options, from mergers and acquisitions to buyouts and other financial manoeuvres.
On a day when Starwood Hotels & Resorts Worldwide announced its first-quarter financial results, which showed a drop in both its revenues and earnings per share, its chairman, Bruce W. Duncan, announced unambiguously: ’No option is off the table, and we will take the time we need to thoroughly evaluate our opportunities and achieve the best result for our shareholders, business partners, and associates.’
Late Thursday night, the financial media was abuzz with speculation that Starwood may soon get an offer from Hilton Hotels or a sovereign welfare fund; a piecemeal sale of Starwood assets was also indicated as a possibility.
Starwood, whose former chief executive, Frits van Paasschen, had quit in February reportedly after differences with the board, saw its shares climbing by 8 per cent after Duncan’s announcement on Wednesday (early Thursday IST). They were trading up to $87.53, boosting the company’s market capitalisation to nearly $13.9 billion.
Duncan’s declaration at once brought back memories of the $26.7-billion acquisition of Hilton Hotels by the New York City-based Blackstone Group in 2007. Blackstone then went on to hive off Hilton into a separate company in 2013.
Across the Atlantic, Starwood’s announcement buoyed the stock of InterContinental Hotels Group Plc (IHG), which owns the Holiday Inn and Crowne Plaza brands, which registered its highest intra-day spike (5.8 per cent) since the shares were first traded in 2003.
Reporting this development, Bloomberg’s writer, Dalia Fahmy, noted the groundswell in favour of a merger between IHG and Starwood. ’The logic for a tie-up ’ is quite clear,’ Fahmy quoted Wyn Ellis, an analyst at Numis Securities, as saying. ’It would be a neat fit in terms of brand profile and geographic coverage.’
Starwood Hotels, Ellis said, owns high-end hotel chains such as W, St Regis and The Luxury Collection (the brand with which ITC’s luxury hotels are all tied up). InterContinental, which is focused on the mid-scale segment, would restore balance to the Starwood portfolio ’ if you recall, van Paasschen was reported to be under fire because Starwood, under his leadership, had failed to make much progress in the mid-market.
A marriage with IHG would also help Starwood gain better access to China, where IHG has more than 240 hotels, Ellis said in comments reported by Bloomberg’s Fahmy. Starwood’s interim CEO, Adam Aron, has expressed his concern about the company’s three mid-scale brands ’ Aloft, Element and Four Points ’ saying they were ’significantly subscale to our competitors’.
To address its below-par presence in the mid-market, Starwood has just fast-tracked the rollout of the Tribute Portfolio. ’Admittedly this is still a void for Starwood,’ Aron said, referring to the mid-market, according to Skift.com. ’The Tribute Portfolio,’ Aron continued, ’allows us to address the four-star upper upscale independent hotel markets and now gives Starwood a credible horse’ in the competition with Marriott’s Autograph Collection.
The Starwood brand, Sheraton, also came under the scanner after Aron said it ’needs to be significantly reinvigorated with a boost that can only come from top-notch marketing.’ Skift.com reported that Aron emphasised Sheraton accounted for 40 per cent of Starwood’s global footprint. ’We have some terrific Sheraton properties around the world and we have some hotels that need more focus on the fundamentals of delivering service quality to our guests,’ Aron said, using diplomatic corporate-speak to indicate they were sub-standard.
Starwood said it would announce the specifics of its plan for Sheraton in June-end, and would implement it during the second half of 2015.
Sourish Bhattacharyya is Consulting Editor, BW Hotelier.
THE U.S. financial media is agog with speculation that Starwood is up for either a merger or an acquisition. The buzz got louder and louder after the leading hospitality brand with significant Indian interests appointed the international banker, Lazard, to guide it through what the global travel intelligence website, Skift.com, describes as a process that will consider a gamut of options, from mergers and acquisitions to buyouts and other financial manoeuvres.
On a day when Starwood Hotels & Resorts Worldwide announced its first-quarter financial results, which showed a drop in both its revenues and earnings per share, its chairman, Bruce W. Duncan, announced unambiguously: ’No option is off the table, and we will take the time we need to thoroughly evaluate our opportunities and achieve the best result for our shareholders, business partners, and associates.’
Late Thursday night, the financial media was abuzz with speculation that Starwood may soon get an offer from Hilton Hotels or a sovereign welfare fund; a piecemeal sale of Starwood assets was also indicated as a possibility.
Starwood, whose former chief executive, Frits van Paasschen, had quit in February reportedly after differences with the board, saw its shares climbing by 8 per cent after Duncan’s announcement on Wednesday (early Thursday IST). They were trading up to $87.53, boosting the company’s market capitalisation to nearly $13.9 billion.
Duncan’s declaration at once brought back memories of the $26.7-billion acquisition of Hilton Hotels by the New York City-based Blackstone Group in 2007. Blackstone then went on to hive off Hilton into a separate company in 2013.
Across the Atlantic, Starwood’s announcement buoyed the stock of InterContinental Hotels Group Plc (IHG), which owns the Holiday Inn and Crowne Plaza brands, which registered its highest intra-day spike (5.8 per cent) since the shares were first traded in 2003.
Reporting this development, Bloomberg’s writer, Dalia Fahmy, noted the groundswell in favour of a merger between IHG and Starwood. ’The logic for a tie-up ’ is quite clear,’ Fahmy quoted Wyn Ellis, an analyst at Numis Securities, as saying. ’It would be a neat fit in terms of brand profile and geographic coverage.’
Starwood Hotels, Ellis said, owns high-end hotel chains such as W, St Regis and The Luxury Collection (the brand with which ITC’s luxury hotels are all tied up). InterContinental, which is focused on the mid-scale segment, would restore balance to the Starwood portfolio ’ if you recall, van Paasschen was reported to be under fire because Starwood, under his leadership, had failed to make much progress in the mid-market.
A marriage with IHG would also help Starwood gain better access to China, where IHG has more than 240 hotels, Ellis said in comments reported by Bloomberg’s Fahmy. Starwood’s interim CEO, Adam Aron, has expressed his concern about the company’s three mid-scale brands ’ Aloft, Element and Four Points ’ saying they were ’significantly subscale to our competitors’.
To address its below-par presence in the mid-market, Starwood has just fast-tracked the rollout of the Tribute Portfolio. ’Admittedly this is still a void for Starwood,’ Aron said, referring to the mid-market, according to Skift.com. ’The Tribute Portfolio,’ Aron continued, ’allows us to address the four-star upper upscale independent hotel markets and now gives Starwood a credible horse’ in the competition with Marriott’s Autograph Collection.
The Starwood brand, Sheraton, also came under the scanner after Aron said it ’needs to be significantly reinvigorated with a boost that can only come from top-notch marketing.’ Skift.com reported that Aron emphasised Sheraton accounted for 40 per cent of Starwood’s global footprint. ’We have some terrific Sheraton properties around the world and we have some hotels that need more focus on the fundamentals of delivering service quality to our guests,’ Aron said, using diplomatic corporate-speak to indicate they were sub-standard.
Starwood said it would announce the specifics of its plan for Sheraton in June-end, and would implement it during the second half of 2015.
Sourish Bhattacharyya is Consulting Editor, BW Hotelier.
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