As reported by multiple news agencies to include Hospitality and Catering News, Starwood Hotels & Resorts hired financial advisors, Lazard, for assistance in exploring both financial and strategic alternatives to boost shareholder value. One possibility is the sale of the hotel. Although the first earnings report was disappointing, shares increased following the announcement.
Change and Opportunity
According to Bruce W. Duncan, chairman with Starwood, there is a lot of change but also opportunity within the industry so at this time, all options will be considered. However, Duncan said that Starwood Hotels & Resorts was not in a big hurry because opportunities need to be thoroughly investigated so that ultimately, shareholders, business partners, and associates get the best deal possible.
Duncan went on to confirm that the financial and strategic review just began so as far as timing or the outcome, there is no assurance. As part of Starwood Hotels & Resorts are number of brands to include W Hotels, St. Regis, and Sheraton. When pressed for details, the company refused to provide additional information until the review is finalized.
The Starwood Capital Group was founded in 1995 by CEO Barry Sternlicht who has remained at the helm for a decade. In an interview with Bloomberg Television, he said that leveraged buyout was not anticipated. Sternlicht added that because this is not something that can be leveraged even by a private equity player, a significant amount of capital must be put out.
Sternlicht admitted that the hotel has not performed well so unless the price of stock improves someone will make a move. While not confirmed, he hinted that perhaps the hotel would be purchased by a sovereign wealth fund. Specific to yield for commercial property compared to other vehicles, if bonds are the alternative then a deal looks appealing.
Worldwide, year-over-year earnings per share in the first quarter increased 5.2 percent although they declined from $.71 to $.58 in 2014. In comparison, rival Hilton Worldwide Holdings saw a year-over-year increase of 25 percent, a 6.6 percent increase during the first quarter of 2015 from the same time last year.
As reported by Nasdaq, earlier this year CEO Frits van Paasschen and the board came to a mutual decision that he would leave the company. However, there were rumblings that things behind the scene were not going well. Currently, the company is looking for a replacement but until that time, director Adam Aron is acting CEO.
Starwood Hotels & Resorts operates 1,236 hotels around the globe, which breaks down to 356,392 rooms. By working with the financial advisor, Starwood will be able to determine the best course of action. With the company going through a leadership transition period, the potential for the company to sell comes as no surprise to many.
In a statement from Aron, important steps are being taken to speed up growth and shareholder value. He added that the recent launch of Tribute Portfolio, the tenth brand, was just one of many key initiatives in the near future while trying to expand the hotels footprint. Of course, better service to the guests of Starwood Hotels & Resorts remains a priority.