Marriott CEO speaks out on possible Starwood deal
Arne Sorenson laid out four options for company with acquisition by Marriott ‘unlikely’
Marriott International CEO Arne Sorenson outlined four possible options for the future of Starwood Hotels & Resorts at Arabian Hotel Investment Conference in Dubai.
His comments were aired in an on-stage interview at AHIC during which Sorenson set out four possible scenarios for Starwood.
This followed Starwood’s announcement during its Q1 earnings call on April 29, that it would “explore the full range of strategic and financial alternatives available”.
Sorenson said: “Either Marriott or Hilton acquires them, they acquire someone else equally strong, they receive a buyer from Middle East or Asia who wants a platform or it is ‘steady as it goes’, and they sell off real estate or get a new CEO. They are all potentially likely outcomes except perhaps the first one”.
Starwood’s first-quarter revenue fell 2.9% to $1.42 billion, compared with a 10% growth at competitor, Hilton Worldwide.
During Marriott’s Q1 earnings call, also on April 29, Sorenson had stated, “For obvious reasons we won’t talk about that”, referring to a potential Starwood acquisition.
He said that while Marriott has made several acquisitions over the past five years, including AC Hotels, Gaylord, Protea and Delta, which have been $100mn - $200mn transactions, Starwood is a different case.
“There are quite profound differences between the deals that we’ve done and that hypothetical transaction,” he said.
Hotelier Middle East interviewed Sorenson following his session at AHIC, and he revealed that the company’s number one priority in the Middle East region is “growth”.
“We have 164 hotels today, we have 79 signings in the pipelines, so that’s about 50% growth.
“The development team is working on signing additional deals this year so we’ll be signing another 5000 rooms, which will be around 20 – 25 hotels.
“Lots of discussions are underway so we’ll go through those 79 to a bigger number by the year’s end. As the destination grows, the economies grow and the Emirates, Saudi Arabia, Egypt and Nigeria, these are all key markets with great potential.
“We need to continue to get our distribution broad and to be part of as much of this growth as we can.”
In response to Sorenson’s comments at AHIC, Neil George, senior vice president, acquisitions & development AMEA at Starwood Hotels & Resorts Worldwide told Hotelier Middle East: “I don’t think he said anything new or unexpected.
“As we’ve said before, our Board has initiated a strategic review and no option is off the table so we will look at every single option and Arne laid out the four options that would be available to us or to any other company for that matter.
“We’ve appointed Lazard Ltd to work with us and explore all the options and once that exercise is completed we’ll have something to talk about.”
Regarding the option of Starwood acquiring another company, George said: “In 2005 we acquired Le Meridien, so it’s not something we haven’t done.
“We’re looking at all kinds of options. I think those kinds of things come with the right opportunities and the right brands and they make a lot of sense.
“We look at that on a continual basis; it’s not something we’ll look at just because of the announcement. We evaluate options all the time in Africa and the Middle East.”
In its earnings call, Starwood interim CEO Adam Aron stated: “We will need to drive both top line revenue growth but also better manage the cost side of our business.
“In doing so, Starwood could become a leaner, more nimble company; one that’s less bureaucratic and one that can make decisions faster.”
Aron added that the company will reaffirm its commitment to sell at least $800 million in hotel assets in 2015 on top of the $200mn - $250mn in hotel asset value, including in the SVO spinoff as well as reaffirming its $3 billion goal in cumulative asset sales through the end of 2016.
At AHIC, Starwood announced it will double its Middle East portfolio with plans to open 50 hotels by 2019, 50% of which will be in the mid-market segment.